Summary List Placement
Robert F. Smith, best known as the billionaire who paid off the student loans of a college’s entire graduating class, hid $200 million in an offshore trust designed to dodge federal taxes, the Department of Justice said Thursday.
According to prosecutors, Smith used offshore trusts to hold half of his ownership stake in Vista’s first private equity fund and dodge $43 million in taxes over a span of 15 years (taxes went unpaid for nine of those years, the same years the fund was profitable).
Smith paid $139 million in back taxes, penalties, and interest to resolve authorities’ four-year investigation into his finances, Business Insider previously reported. The Department of Justice published Smith’s non-prosecution agreement Friday, revealing details of Smith’s troubles with the IRS.
A representative for Smith at Vista Equity Partners declined Business Insider’s request for comment on the contents of the non-prosecution agreement or on Axios’ reports of its effects within the firm.
A dubious partner
Prosecutors traced Smith’s troubles back to his time as a young investment banker at Goldman Sachs, when he allegedly met a person identified only as “Individual A.” Both various news reports and a source familiar with the matter identified that person as Houston businessman Robert Brockman, who is still under investigation for what DOJ called the “largest-ever” tax fraud scheme by a U.S. citizen.
At the time, Brockman was the CEO of a company he owned through a foreign holding company and a Bermuda-based trust and told Smith that he could then sell said company without paying taxes on the profits, per the statement of facts. Brockman was more than 20 years Smith’s senior at the time, a source familiar with the matter told Business Insider.
When Smith left Goldman to open a private equity firm in 2000, Brockman became the sole investor in the firm’s first fund, eventually using his foreign trusts to sink in $1 billion, according to the document. Brockman required that Smith’s fund be held through a “perfected foreign trust” in the Cayman Islands similar to Brockman’s original company to hide the two firms’ connection from the IRS, per the statement of facts. Smith realized Brockman alone controlled all of the trusts in question, but viewed the new fund as a “unique business opportunity he eagerly wanted to pursue,” the non-prosecution agreement states.
To create the trusts needed to complete this scheme, Brockman recommended a lawyer that prosecutors call “Individual B.” “B” had a long history with “A,” and created “A’s” original trust decades earlier, per the document. “B” promised Smith that the assets in the new trust would be exempt from American income and estate taxes if that trust appeared to be funded by one of Smith’s British relatives and some of the money went to charitable endeavors, according to the agreement. The trust’s documents contradicted “B’s” claims and sounded “too good to be true,” prosecutors wrote, but Smith never got a second opinion from another lawyer.
The new trust was called Excelsior and based in Belize, according to the …read more
Source:: Business Insider