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36 IELR 248 (2020)
Tax Enforcement

handle is hein.journals/ielr36 and id is 397 raw text is: I N T E R N A T I 0 N A L E? N F 0 R C E M E N T R F 1- { R '1 I R I. TAX ENFORCEMENT CEO of Multibillion-Dollar Software Company Indicted for Largest-Ever Tax Evasion as Private Equity CEO Makes NPA to Cooperate in the Case By Bruce Zagaris On October 15, 2020, a federal grand jury in San Francisco, California, returned a 39 count indictment,' charging Robert T. Brockman, the Chief Executive Officer (CEO) of an Ohio -based software company with hiding $2 billion dollars in income in what the Internal Revenue Service and U.S. Attorney David L. Anderson characterized as the largest tax evasion case in U.S. history.2 On the same day the Justice Department (DOJ) announced that Robert F. Smith, the Chairman and CEO of a San-Francisco based private equity company, entered into a Non-Prosecution Agreement (NPA) with DOJ for his involvement from 2000 through 2015 in an illegal scheme to conceal income and evade millions in taxes by using an offshore trust structure and offshore bank accounts.3 Smith worked with Brockman and will cooperate through his NPA in the prosecution of Brockman. Brockman Indictment The indictment charges that Brockman, a resident of Houston, Texas, and Pitkin County, Colorado, used various offshore entities based in Bermuda and Nevis to hide from the IRS income earned on his investments in private equity funds that were managed by a San Francisco- based investment firm. Brockman allegedly directed untaxed capital gains income to secret bank accounts in Bermuda and Switzerland. In addition, the indictment alleges that to execute the fraud, between 1999 and 2019, Brockman backdated records and used encrypted and coded communications to communicate with a co- conspirator among other alleged actions. The indictment alleges that, in addition to the tax crimes, Brockman engaged during 2008 and 2010 in a fraudulent scheme to obtain approximately $67.8 million in the software company's debt securities. Brockman's CEO agreement restricted him from buying any of the software company's debt securities without prior notice, full disclosure, and amendments to the associated credit agreements. The indictment charges that Brockman used a third-party to circumvent those obligations, to acquire the debt securities, and to hide from the sellers important economic information. The indictment also alleges that Brockman employed material, non-public information about the software company to decide about buying the debt. Brockman also allegedly convinced another person to alter, destroy, and mutilate documents and computer evidence with the intent to impair the use of such evidence in a grand jury investigation. Brockman's goal was to conceal from the I.R.S. capital gains income that he had earned as a result of his investments in funds managed by Vista Equity Partners, whose billionaire chief executive is Robert F. Smith.4 Brockman is chairman and CEO of Reynolds and Reynolds, a 4,300- employee company near Dayton, Ohio. It sells accounting, sales, and management software to auto dealerships. The software assists in establishing websites, including live chats with potential customers, finding loans, calculating customer payments, and managing payroll and pay bills.' The indictment charges Brockman with conspiracy, in violation of 18 U.S.C. § 371; seven counts of tax evasion, in violation of 26 U.S.C. § 7201; six counts of failing to file foreign bank account reports, in violation of 31 U.S.C. §§ 5314 and 5322(b); 0 counts of wire fraud affecting a financial institution, in violation of 18 U.S.C. § 1343; two counts of concealment United States v. Robert T. Brockman., U.S. Dist. Court, N.D. Cal., CASE NO. 3:20-cr-00371 WHA Indictment, Oct. 1, 2020 htws:lwww.justice. govusao-ndcdpress- release/file/1327926/download. 2 U.S. Department of Justice, CEO of Multibillion- Dollar Software Company Indicted for Decades- Long Tax Evasion and Wire Fraud Schemes, Press Rel., Oct. 15, 2020; Michael Levenson, U.S. Brings 'Largest Ever Tax Charge' Against Toch Fxpcutivp N Y TnMS Oct 1 5 ?.0?0 U.S. Department of Justice, Private Equity CEO Enters Into Non-Prosecution Agreement on International Tax Fraud Scheme and Agrees to Pay $39 Million, to Abandon $182 Million in Charitable Contribution Deductions, and to Cooperate with Government Investigations, DOJ Press Rel. Tax 20-1102, Oct. 15, 2020. 4 Levenson, supra. s The Associated Press, Tech billionaire charged in 'largest ever' tax fraud for hiding $2 billion from IRS NBC News Octnher 16 ?0?0 248 t

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