Thursday, October 22, 2020

Texas billionaire Robert Brockman charged in $2 billion tax evasion case

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Robert Brockman, the Houston billionaire and CEO of a software company, has been charged with taking $2 billion through a scheme to evade taxes, hide assets, and launder money, in what federal prosecutors say is the biggest case of its kind.

Brockman, 79, was charged in a 39-count indictment that includes charges of money laundering, conspiracy, wire fraud, and tax evasion. The 42-page indictment, unsealed Thursday morning, alleges that in the late 1990s, Brockman formed companies on the British Virgin Islands and later used them to conceal assets from the IRS.

Federal prosecutors have not moved to hold him in pretrial detention, but argued that Brockman’s access to a private jet in Houston makes him a flight risk. At a court hearing Thursday morning, U.S. Magistrate Judge Nathaniel Cousins ordered Brockman to remain released but imposed a $1 million bond over defense objections.

The indictment covers a 20-year period. It was secured thanks in part to the help of Robert F. Smith, another billionaire who was also being investigated for allegedly evading taxes on a massive scale, though Anderson would not detail what sparked the investigation. Smith avoided criminal charges by agreeing to help with Brockman’s prosecution.

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Among the explosive allegations in the indictment is a reference to an infamous 2013 incident when he arranged to donate $250 million to Centre College in Danville, Kentucky, which Brockman offered then inexplicably pulled weeks later. He facilitated the donation, along with related demands, through an uncharged co-conspirator in the case, the complaint alleges.

Prosecutors say he used code words on encrypted emails as part of an elaborate scheme to hide assets overseas. His code name was “Permit,” for instance, while others used nom de plumes like “Redfish,” “King,” “Bonefish,” “Snapper,” or “Steelhead.”

“Complexity will not hide crime from law enforcement,” U.S. Attorney Dave Anderson said at a Thursday news conference announcing the charges. “We will not hesitate to prosecute the smartest guys in the room.”

Brockman’s net worth is estimated at more than $1 billion. He made much of his fortune selling software to automotive company, and is the CEO of the auto software company Reynolds and Reynolds.

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Brockman is alleged to have conspired with a person described only as Individual 1, who was put in charge of St. John’s Trust Company, described as a Bermudian entity owned by Brockman but designed to have no ties to him. Though Individual 1 is not named, he appears to be Evatt Tamine, an Australian attorney who served as director of St. John’s until September 2018, when his home was raided by IRS agents, according to published reports.

Brockman is also accused of taking steps to cover his tracks, for instance by directing Individual 1 to use a “Evidence Eliminator” on Individual 1’s computer, the indictment says.

In 2013, Brockman allegedly talked with Individual 1 though encrypted emails, directing the person to threaten to “pull the plug” on his Centre College donation if his demands weren’t met. A week later, he cancelled the donation and told Individual 1 what to say to the college.

Brockman’s case is tied to that of another American billionaire, Smith, who agreed to cooperate with federal prosecutors against Brockman. Smith will not be charged with a crime in exchange for his assistance, Anderson said.

Smith has agreed to pay $139 million in owed taxes and penalties, and admitted a violation of federal law. Smith used his ill-gotten gains for ski properties in the French alps, a vacation home in Sonoma, but also for charitable causes, like a Colorado charity for wounded veterans and impoverished youth, prosecutors said.

“Although Smith willfully and knowingly violated the law, Smith has accepted responsibility and agreed to provide complete and truthful cooperation,” Anderson said.

The charges include an estimated $60 million worth of fraud to his investors, and related money laundering, assistant U.S. Attorney Michael Pitman said in court Thursday. He added that Brockman owns a Bombardier Global 6000 jet that’s hangared in Houston, and prosecutors are worried he will try to flee.

But Brockman’s attorney, Neal Stephens, said Brockman has been aware of the IRS investigation for four years yet made no attempt to hide from the law. He highlighted Brockman’s military career during the 1950s and 60s, his business background, 50-year marriage, recent bout with cancer, and other service — including as a life trustee for Centre College — as reasons to keep him released without the cash bond.

“He’s not a flight risk, and he’s certainly not a danger to the community,” Stephens said, later adding, “We deny and refute all the allegations and are looking forward to litigating this.”

Cousins imposed the cash bond after noting Brockman’s “financial ability” and potential motive to leave the United States. He is required to surrender his passport until his case is resolved.

At the news conference Thursday morning, Chief Jim Lee of the IRS said he was “incredibly irritated” and “disgusted” with the nature of the charges, so much so that he flew into San Francisco from Colorado.

“These allegations should disgust every American taxpayer as well, because the law applies to all of it when it comes to tax and paying our fair share,” Lee said.

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