US Billionaire Indicted In Biggest Ever Tax Fraud Case Involving Bermuda and Nevis Trusts And Shell Companies.

Source: Robert 'Bob' Brockman has been indicted for tax evasion.
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WASHINGTON, DC–October 15th,2020 — 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.

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.

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.  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 Brockman, 79, carried out the fraud by using a family charitable trust and several offshore firms based in Bermuda and 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 Brockman used code names and encrypted emails to secretly manage the investments.

US Attorney David Anderson told reporters that 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.

Like many wealthy Americans, Brockman set up offshore trusts that on paper were overseen by independent directors, Bermudian court records show.

Prosecutors are investigating whether he maintained control over the entities, according to the court records. They also want to know how the assets were used and whether Brockman should have paid taxes on them, according to people familiar with the matter.

Investigators are trying to determine whether Brockman’s reliance on secrecy indicated criminal intent to conceal control of assets on which he may have owed taxes to the IRS.

“The reason to do trusts for tax purposes is to divest yourself of ownership or control, and thereby you’re not taxable on it,” said Bruce Zagaris, a tax attorney in Washington who isn’t involved in the Brockman case.

“But if you violate those rules by actually controlling it, the IRS is going to say you’re taxable.”

Brockman, a onetime IBM salesman who goes by Bob, founded his own software company, Universal Computer Services Inc., 50 years ago. It merged with a larger rival, Reynolds & Reynolds, and is now a $1 billion concern based in Dayton, Ohio.

Although he’s the chief executive officer of Reynolds & Reynolds, it’s his offshore investments that are the primary focus of tax authorities, according to the people familiar with the matter.

Brockman’s obsession with detail and secrecy is outlined in the account filed in Bermudian court. It says Brockman regarded himself as the de facto trustee of his offshore holdings who controlled all aspects of how they were managed.

For example, Brockman issued to-do lists to underlings who were required to submit undated resignation letters that the boss could invoke at will.

Indicative of his penchant for privacy, Brockman adopted code names and used phones that left no trace of his calls, according to the filing. The IRS was known as “The House” and he was “John Barnes.” Later, after he and his advisers began communicating through the web domain, Brockman was identified as “Permit” and Tamine as “Redfish.” Another trustee was referred to as “Snapper” and “Chum.”

“Robert T. Brockman is a private individual who values his privacy, which is every person’s right,” said his lawyer. “A desire to safeguard one’s privacy does not mean that a person has something to hide, or that he may have engaged in criminal conduct.”

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.

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.

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.


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