Tax lawyer faces jail for allegedly helping billionaires Robert Smith and Bob Brockman dodge IRS
This is a new legal development for private equity billionaire Robert F. Smith and his former mentor Bob Brockman, already accused of the biggest tax evasion in US history.
The US Department of Justice yesterday announced the indictment of Carlos E. Kepke, a Houston tax lawyer who prosecutors say conspired with Smith to hide $ 225 million in untaxed capital gains from the IRS between 1999 and 2014 – during the years when Smith was growing. Vista Equity Partners.
Prosecutors say Smith has paid Kepke $ 1 million since 2007 for his services, which included helping with the preparation of Smith’s 2012-2014 false tax returns and setting up offshore entities to help with the escape fiscal.
Prosecutors allege that Kepke set up a Nevis limited liability company called Flash Holdings for Smith, as well as a Belize-based offshore trust called Excelsior Trust. Excelsior has been configured to have Flash. So when Smith’s share of capital gains from Vista funds was deposited into accounts held in Flash’s name in Switzerland and the British Virgin Islands, the money could be funneled into the offshore Excelsior trust, under the shelter from the eyes of the IRS.
According to the DOJ press release, Kepke allowed what Smith admitted to be an illegal scheme. Thanks to Kepke’s work, “Smith was able to hide this income because Excelsior, not Smith, was the nominal owner of Flash. Smith then allegedly failed to timely and fully report his income to the IRS. “
An official indictment is not yet available from the U.S. District Court for the Northern District of California, San Francisco. Kepke is due to be brought to justice on April 22. According to the announcement, he faces 5 years in prison for one count of conspiracy and 3 years for each of the 3 counts of preparing false tax returns. There was no response to the number listed for Kepke’s Houston law firm. A graduate of the University of Texas Law School, he appears to have been called to the Texas Bar in 1964.
This indictment appears to be the next step in the DOJ’s ending to a decade-long financial fraud against U.S. taxpayers perpetrated not only by Robert Smith but also, allegedly, by his mentor and funder Bob Brockman. Brockman agreed in 2000 to contribute $ 1 billion to finance the start-up of Smith’s private equity group, which now manages $ 73 billion.
Last October, Smith entered into a “non-prosecution agreement” with the DOJ, in which he admitted to committing a crime of tax evasion and the misuse of approximately $ 30 million in trust funds to individuals. charitable purposes for personal benefit. Smith has agreed to shell out over $ 139 million in taxes and penalties, and to cooperate against affiliated scofflaws like Brockman and Kepke. US attorney David L. Anderson said at the time that despite committing “serious crimes”, Smith’s cooperation “put him on the path to indictment.”
Kepke’s indictment comes as no surprise to Smith’s camp, who insists Smith is now out of danger. “This indictment is nothing new for top Robert Smith. He resolved his situation last year with the government and that does not affect that resolution in any way, ”said Smith’s attorney, Emily Hughes.
Indeed, prosecutors are undoubtedly focusing their attention on Kepke’s main client, Bob Brockman. Accused by the DOJ of evading taxes on some $ 2 billion in earnings from Vista Equity Partners’ investments, Brockman does not appear to be in a position to strike a deal like Smith did. Especially with Smith providing evidence against him.
According to a December 2020 motion by Brockman’s attorneys to move his case from San Francisco to Houston, Smith has previously told prosecutors that Kepke “had a central role in establishing the trusts and in assisting Mr. Brockman in the process. asset planning “.
Kepke’s name also appears in a 2017 secret memo written to Brockman by his money man and former administrator Evatt Tamine (submitted as evidence), in which Tamine writes about his meeting with Smith, his lawyer and Carlos Kepke to help cover their tracks: “I worked on their files and identified areas of concern.
In that same memo, Tamine describes a trip to see the widow of a recently deceased Brockman confidant from whom he collected and destroyed “records, records or documents” containing compromising financial information.
Smith and Tamine already cooperating against Brockman, this new indictment could also aim to get Kepke talking.
Meanwhile, in Bermuda, surveillance of multi-billionaire A. Eugene Brockman Charitable Trust remains in limbo, as lawyers for Brockman and his wife Dorothy recently argued in the Bermuda Court of Appeals that they should appoint a new independent director to oversee the trust, replacing anyone related to the former director Tamine. According to lawyers, Cayman Islands-based trust specialist Maples Group has agreed to take on the job.
Entities owned by the Brockman Trust control Reynolds and Reynolds, the auto dealer software solutions provider Brockman led until his retirement last year. According to court documents, he and his lawyers are now focused on convincing prosecutors and court-appointed psychiatrists that he has too advanced a dementia to stand trial.