Houston tech mogul Robert Brockman charged in record U.S. tax evasion scheme
By Sarah N. Lynch
WASHINGTON (Reuters) - Houston technology executive Robert Brockman has been charged in the biggest tax evasion case in U.S. history after fellow billionaire Robert Smith turned against him to avoid prosecution himself, the Justice Department said on Thursday.
Brockman, the 79-year-old chief executive of Ohio-based Reynolds and Reynolds Co, hid $2 billion in income from the Internal Revenue Service over two decades, using a web of off-shore companies in Bermuda and St. Kitts and Nevis, according to an indictment unsealed on Thursday.
Reynolds and Reynolds provides software used by auto dealerships to help manage their business.
The indictment alleges Brockman appointed nominees to manage the off-shore entities for him as a means of hiding his involvement, saying he even went so far as to establish a proprietary encrypted email system and use code words such as "Permit," "Red fish" and "Snapper" to communicate.
At a press conference in San Francisco, U.S. Attorney David Anderson said Brockman was also charged in a securities fraud scheme, after he bought and sold debt securities in his own company, "breaking a promise to investors that he would not buy or sell his own company's debt."
The debt was purchased thanks to inside information Brockman possessed, Anderson added.
He faces seven counts of tax evasion, six counts of failing to file reports disclosing foreign bank accounts, and numerous other counts including wire fraud, money laundering and evidence tampering.
“Mr. Brockman has pled not guilty, and we look forward to defending him against these charges," Brockman's attorney Kathryn Keneally said in an emailed statement.
A spokesman for Smith could not be reached immediately for comment.
Anderson said Smith, who helped secure the charges against Brockman and famously announced at last year's Morehouse College commencement that he would pay off the college debt of 2019 graduates, accepted responsibility for his own crimes in the tax evasion scheme.
Brockman and Smith have a business relationship dating back to the late 1990s, according to documents filed in connection with Smith's non-prosecution agreement.
Brockman, who is referred to as "Individual A," became an investor in Smith's private equity fund in 2000, first with a $300 million commitment, and later increasing it to $1 billion.
As part of his non-prosecution agreement, Smith admitted to using a nominee trustee and corporate manager to hide his control in four off-shore companies. Some of his untaxed income was used to buy a vacation home in Sonoma, California, and ski properties in the Alps, and to fund charitable causes, Anderson said.
He will pay $139 million in taxes and penalties, and will abandon a $182 protective refund claim and pay interest as part of the deal.
"Although Smith willfully and knowingly violated the law, Smith has accepted responsibility and agreed to provide complete and truthful cooperation," Anderson said.
Smith founded private equity firm Vista Equity Partners and he is listed by Forbes as being the nation's wealthiest Black investor.
(Reporting by Sarah N. Lynch; Additional reporting by Karen Freifeld in New York; Editing by Tom Brown)
Robert Brockman: US tycoon charged over historic tax fraud scheme
A US software tycoon has been charged over the biggest alleged tax evasion scheme in American history.
Robert Brockman, chief executive of Reynolds and Reynolds, is alleged to have hidden $2bn (£1.5bn) in income from tax authorities over two decades, using a network of offshore companies.
He was also charged over an alleged fraud scheme involving debt securities.
Mr Brockman appeared by teleconference at a federal court in Houston, Texas, and pleaded not guilty to the charges.
Prosecutors said they were alerted to his alleged activities by fellow billionaire Robert Smith, who they say testified against him to avoid prosecution himself. Mr Smith shot to fame last year after giving a speech at Morehouse College's graduation ceremony, promising to pay all student debt for 2019 graduates.
In a statement, the US Justice Department alleged that Mr Brockman, 79, carried out the fraud by using a family charitable trust and several offshore firms based in Bermuda and St. Kitts and Nevis. These were allegedly used to hide income from his investments in private equity funds, managed by a firm in San Francisco, California.
As part of the scheme, prosecutors said Mr Brockman used code names and encrypted emails to secretly manage the investments.
US Attorney David Anderson told reporters that Mr Brockman had also been charged for buying and selling debt securities in his own company, breaking a promise to investors. The debt was allegedly bought with the help of inside information he possessed.
The software tycoon faces 39 charges in all, including tax evasion, wire fraud and money laundering.
Meanwhile Robert Smith has admitted to his role in the tax evasion scheme as part of a non-prosecution agreement.
Prosecutors said Mr Smith admitted to using a nominee trustee and corporate manager to his involvement in four offshore firms.
As part of the agreement, he will pay more than $139m in penalties and taxes. He will also abandon $182m protective refund claims, which were filed partly for charitable contributions.
Mr Smith is a founder of Vista Equity Partners in San Francisco, and is the richest African-American investor in the US, according to Forbes.
No comments:
Post a Comment
comment message form