Robert T. Brockman, head of the largest private dealership management system company in the U.S., was charged with using a web of Caribbean entities to evade taxes in what may be the largest prosecution of its kind in U.S. history.
Brockman, 79, is accused of using a family charitable trust based in Bermuda and other offshore entities to hide assets from the Internal Revenue Service while failing to pay taxes, according to an indictment unsealed Thursday in federal court in San Francisco. Brockman was also charged with money laundering and other crimes.
Brockman is CEO of Reynolds and Reynolds Co. of Dayton, Ohio, a DMS provider to dealerships and manufacturers in the U.S., Canada and Europe.
Like many wealthy Americans, Brockman set up offshore trusts that on paper were overseen by independent directors. However, the indictment charges that he conspired over two decades to secretly maintain “complete” control over trust assets while failing to pay capital gains and income taxes.
The 39-count indictment also charges Brockman with wire fraud, evidence tampering and destruction of evidence. Brockman used code names and encrypted emails to secretly manage the trusts, according to the indictment. Prosecutors received help from Robert Smith, the CEO of Vista Equity Partners, who set up his private equity fund two decades ago with a $1 billion investment from Brockman’s trust structure.
Brockman earned about $2 billion in capital gains made through his Vista investments, according to the indictment.
The $2 billion in tax fraud, “is the largest ever tax charge against an individual in the United States,” David Anderson, U.S. Attorney for Northern District of California, said in a press conference.
Smith, 57, avoided prosecution by agreeing to cooperate against Brockman. He also admitted he failed to pay $30 million in taxes, and will pay $140 million in back taxes, fines, and penalties, according to people familiar with the matter.
Brockman created false paper trails to secretly purchase a luxury yacht now known as Albula and to spend $30 million on properties called the “Frying Pan Canon Ranch” and the “Mountain Queen” vacation home in Pitkin County, Colo., prosecutors said. His offshore investments are at the heart of the charges against him.
Brockman’s investment in the first private equity fund set up by Smith came from an entity held as part of the A. Eugene Brockman Charitable Trust, which was named for Brockman’s late father. Brockman is a beneficiary of the trust.
Smith faced a related four-year criminal tax inquiry involving about $200 million that moved through Brockman-linked offshore structures.
Smith’s settlement includes a non-prosecution agreement in which he admits that he failed to pay about $30 million in taxes, with penalties and interest making up the remainder of the expected payout, according to a person familiar with a call that Smith conducted Wednesday with investors. Smith said on the call that over three years, he failed to file accurate reports of foreign bank and financial accounts, known as FBARs, the person said.
Smith is the wealthiest Black person in America with a net worth of $7 billion. The criminal tax probe into Smith was first reported by Bloomberg News in August.
Automotive News contributed to this report.