Billionaire Robert Smith Reaches $140 Million Settlement With DOJ Over Tax Problems

Robert Brockman

A Houston tech executive was charged Thursday with hiding $2 billion in income from the IRS in what federal prosecutors called the largest tax evasion case in USA history.

Prosecutors claimed that Brockman used a family charitable trust and offshore firms based in Bermuda and Nevis, as well as bank accounts in Bermuda, Switzerland and the British Virgin Islands (BVI), over a 20-year period to hide income from private-equity investments from the Internal Revenue Service (IRS), the United States tax authority.

He also used the shell companies to hide his ownership in private equity investments, prosecutors said.

The indictment charges Brockman with crimes including money laundering, evidence tampering and destruction of evidence.

In one News conference, Anderson, a USA attorney in San Francisco, said Smith signed a non-prosecution agreement, where he acknowledged his involvement in the plot and agreed to cooperate with investigators.

Along with the tax offenses, the indictment alleges that Brockman engaged in a fraudulent scheme to obtain approximately $67.8 million in the software company's debt securities. Bloomberg said Smith, who heads up the private-equity firm Vista Equity Partners, was cooperating with investigators and would admit misconduct but would not be prosecuted. The 79-year-old was charged with money laundering, conspiracy, wire fraud, and tax evasion, amongst other charges, in a 39-count indictment.

Brockman pleaded not guilty to all charges and was released on a $1 million bond.

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"We look forward to defending him against these charges", Brockman's lawyer, Catherine Kennelly, said in a statement.

Brockman, a resident of Houston and Pitkin County, Colo., is chairman and CEO of Reynolds and Reynolds, a 4,300-employee company near Dayton, Ohio, that sells accounting, sales and management software to auto dealerships.

Smith, 57, who is worth more than $5 billion according to Forbes magazine, drew tears of joy previous year when he promised the 400-member graduating class of historically Black Morehouse College in Atlanta that he would pay off all of their student loans. Instead, Smith admitted a violation of federal law and agreed to pay $139 million in owed taxes and penalties. The elaborate scheme was uncovered in part by fellow billionaire Robert F. Smith, who agreed to cooperate with the federal government to bring down Brockman.

"These allegations should disgust every American taxpayer as well because the law applies to all of us when it comes to taxes and paying our fair share", Mr. Vista Equity Partners declined to comment. He also took Brockman's advice that he work with a Houston lawyer to structure his own foreign entity, Belize-based Excelsior Trust, and paid the attorney about $800,000 to create a false paper trail involving related entities from 2000 to 2014.

As part of the alleged scheme, Brockman directed untaxed capital gains income to secret bank accounts in Bermuda and Switzerland. The historically Black institution in Atlanta said the donation amounted to $34 million.

In Datto's S-1 Securities and Exchange Commission filing, the company gave a stern warning to investors about Vista Equity, which will own 72.2 percent of its stock after the IPO. He has agreed to cooperate with ongoing federal investigations, to forfeit tax breaks on $182 million in charitable contributions, and to pay nearly $140 million in fines.

He spent millions of it to buy and renovate a vacation home in Sonoma, Calif., to purchase two ski properties and a piece of commercial property in France and to make improvements to a residence in Colorado, the statement said. "That's the message we intend to send".

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