Federal prosecutors have charged Texan billionaire Robert Brockman with a $ 2 billion tax evasion scheme in what they consider to be the biggest case of its kind against an American.
Department of Justice officials told a press conference on Thursday that Brockman, 79, was hiding capital gains income over 20 years through a network of offshore entities in Bermuda and Nevis and secret bank accounts in Bermuda and Switzerland. Prosecutors said the CEO of a private equity firm that had contributed to the projects would cooperate with the investigation.
The 39-count unsealed indictment on Thursday charges Brockman, the CEO of Ohio-based software company Reynolds and Reynolds Co., with tax evasion, wire fraud, money laundering and others offenses.
Prosecutors also announced that Robert Smith, billionaire founder and chairman of Vista Equity Partners, will cooperate with the investigation and pay $ 139 million to settle his own tax investigation. Smith, 57, stunned a senior class last year when he promised to write off student loan debt for the entire graduating class at Morehouse, a historically all-male college.
“The complexity will not hide the crime from the police. Sophistication is not a defense against federal criminal charges, ”said David L. Anderson, US District Attorney for the Northern District of California. We won’t hesitate to go after the smartest guys in the room. ”
“The allegation of $ 2 billion tax evasion is the biggest tax burden ever on an individual in the United States,” Anderson said.
Brockman appeared in federal court in Houston via Zoom on Thursday. He pleaded not guilty to all counts and was released on $ 1 million bail, said Abraham Simmons, spokesman for the Northern District of California.
“Mr. Brockman has pleaded not guilty and we look forward to defending him against these charges,” his lawyer, Kathryn Keneally, said in an email.
Prosecutors said Brockman used emails encrypted with code names, including Permit, Snapper, Redfish and Steelhead, to commit the fraud and ordered the evidence to be manipulated or destroyed.
Brockman, a resident of Houston and Pitkin County, Colorado, is president and CEO of Reynolds and Reynolds, a 4,300-employee company near Dayton, Ohio that sells accounting, sales, and management software to dealerships automobiles. The software helps set up websites including live chats with potential clients, find loans and calculate client payments, manage payroll, and pay bills.
Reynolds & Reynolds released a statement saying the allegations were not part of Brockman’s work with the company and that the company would not be believed to have participated in any wrongdoing.
In 2013, a charitable trust created by Brockman’s late father withdrew a pledged $ 250 million donation to Center College, a small liberal arts school in Danville, Ky., Where Brockman attended class and was previously chairman of the board.
At the time, the school said it was due to an “important event in the financial markets” that had failed. A spokesperson for Reynolds and Reynolds said in 2013 that the event was a proposed refinancing deal involving Vista Equity Partners, Smith’s company.
According to the indictment, Brockman gave an anonymous person detailed instructions regarding the proposed college gift, including talking points, and ordered the person to threaten to stand down if his demands were not satisfied. In August, he asked the person to cancel the gift.
Prosecutors say Smith used about $ 2.5 million in untaxed funds to buy and upgrade a vacation home in Sonoma, California; buy two ski properties in France; and spend $ 13 million to buy property and fund charitable activities at his Colorado property.
Anderson applauded Smith for his intervention, despite the gravity of his crimes, which occurred from 2000 to mid-2015.
“Smith’s agreement to cooperate put him on the path to indictment,” he said.
In 2019, Smith told the graduating class at Morehouse College that he would pay off the student loan debt for the entire class, saying he expected graduates to “pay off.” The estimated cost was $ 40 million.
Forbes ranks Smith at # 461 on his billionaire list, with a net worth of over $ 5 billion.
He founded the tech investment firm Vista in 2000 and Forbes reports that it now has more than $ 50 billion in assets and is “one of the most successful private equity firms with 22% annualized returns since inception ”. Vista has offices in San Francisco and Oakland.
Vista did not immediately respond to a request for comment.