Robert Smith, founder and CEO of Visa Equity Partners, has agreed to cooperate with an ongoing federal probe into what authorities are calling the largest tax evasion case in American history.
Smith has signed a non-prosecution agreement admitting that he used two foreign funds to hide some $200 million in partnership income from tax authorities, federal authorities announced Oct. 15. He’s also agreed to pay $139 million in back taxes, interests and fines to settle accusations he used his firm, Vista Equity Partners, to hide his overseas cash and that of his friend and partner, Houston software tycoon Bob Brockman.
Separately, federal authorities announced Brockman’s indictment Oct. 15, accusing him of 39 counts including conspiracy, tax evasion, money laundering and wire fraud. Brockman, 79, and chairman of Reynolds and Reynolds, hid some $2 billion from tax authorities, the largest single evasion case in US history, federal prosecutors claim.
In charging documents and the non-prosecution agreement, authorities allege that Smith set up Vista ($65.2B in AUM) to help Brockman hide his cash in a dizzying array of overseas funds and bank accounts. Vista started with $1 billion in funds from Brockman’s overseas trusts. Smith’s agreement lists Brockman as “Individual A” and says that the pair met in 1997, when Smith was an investment banker at a leading global investment bank and securities firm.”
According to Smith’s LinkedIn profile, he worked at Goldman Sachs from 1994 until 2000, when he formed Vista.
From 1997 to 1998, Smith worked with “Individual A” on a potential acquisition of an unidentified company. That deal fell through but during “that process, Smith learned that Company A was purportedly owned by a foreign holding company that, in turn, was purportedly owned by a foreign trust located in Bermuda. Individual A told Smith that the foreign trust was created by Individual A’s father in the 1980s. Individual A, and others who worked for Individual A, told Smith that because Company A was owned by the offshore trust, no United States income tax would be owed on the profits gained from the sale of Company A’s stock,” the agreement states.
‘Never too late’
Using Brockman’s lawyer—identified only as “Individual B” in court papers—Smith set up two overseas trusts, the Excelsior Trust and Flash Holdings, to hide tens of millions of dollars from the IRS, authorities claim.
“Smith admits that, in 2005, he used approximately $2.5 million in untaxed funds to purchase and renovate a vacation home in Sonoma, California,” federal prosecutors said in announcing Smith’s agreement. “In 2010, Smith again used untaxed funds to purchase two ski properties and a piece of commercial property in France. In 2011 and 2012, Smith used approximately $13 million of untaxed funds to build and make improvements to a residence in Colorado and to fund charitable activities at the property.”
The agreement will keep Smith out of prison. For David Anderson, U.S. Attorney for the Northern District of California, the lesson is straightforward: “It’s never too late to do the right thing,” Anderson said in a statement. “It is never too late to tell the truth.”