How The IRS Caught A Tech Baron Using Offshore Vehicles To Cheat on Taxes

How The IRS Caught A Tech Baron Using Offshore Vehicles To Cheat on Taxes

The first signs of trouble were indirect. Robert T. Brockman, seventy-nine, received news that Texas law enforcement just raided his erstwhile tax lawyer. Brockman was worried. As a wealthy software developer for auto dealerships, he had nothing to gain by the IRS snooping around his records. He made a phone call to Bermuda, using Silent Caller, which made his call untraceable. He needed to know: will this raid uncover his links to off-shore trusts? Robert T. Brockman started as an IBM salesman. Later, fifty years ago, he founded his own software company, Universal Computer Services, Inc. Universal later merged with Reynolds & Reynolds, now a $1 billion operation based in Dayton, Ohio. Brockman is the CEO of Reynolds & Reynolds.

Within two weeks, IRS agents raided the home of the very advisor he spoke to in Bermuda. The agents seized encrypted devices that documented a Brockman family charitable trust holding billions of dollars. The next thing Brockman heard, the advisor turned and cooperated with the agency.

It has been called one of the largest (alleged) US tax frauds. It centers on an insider turned state witness, a private equity billionaire, and a wealthy but reclusive Texas off-shore investor who hides behind codenames.

On the face of it, Brockman’s off-shore trusts were overseen by independent directors. Prosecutors believe he maintained control at all times. Prosecutors are also investigating Brockman’s tax compliance and how the assets were used. They suspect that Brockman’s veil of secrecy was driven by his intention to conceal his control of the assets on which he owed taxes to the IRS.

Trusts for tax purposes is an attempt to divest yourself of ownership or control of assets, which relieves you of any tax liability. If you secretly keep control, the IRS will most certainly tax your assets. Brockman has not been charged, and no one knows whether he will ever be charged.

His lawyer insists that Brockman’s only interest is to ensure that the trust is adequately safeguarded by a trust protector who will use his judgment in the management thereof. He reiterated that Brockman was a discretionary beneficiary of the trust set up by his father and that Brockman made distributions to charities only.

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According to Justice Department prosecutors, they are investigating Brockman’s role in a massive tax fraud against the United States. They alleged that this case could set a new record for off-shore tax fraud, with more than $1.5 billion of revenue concealed from US investigators. There are also allegations of money-laundering crimes.

The moment the Bermuda adviser turned state witness, Brockman unleashed his lawyers. In an ex-part application in the Bermuda court, Brockman stripped the advisor of all control over the trust worth more than $1 billion. Brockman moved the assets to various entities controlled by individuals he selected. It was a strategic victory for Brockman that caught the US off-guard and left prosecutors angry. They claim that Brockman fooled the court into replacing a trustee and that this change in control could impede the investigation and make it challenging for the government to seize the assets.

In documents that form part of litigation over the assets, Brockman submitted a letter claiming that he and his family already supported a change of control in 2019. The Bermudian court cited this to support the court’s decision to allow the change.

Investigators are leaving no stone unturned in an investigation that spans two decades and includes Brockman’s ties to Robert Smith. This private equity billionaire is also under investigation by the IRS. There are many similarities in the facts of these two investigations. Brockman founded a private equity firm, Falcata Capital, two years ago. Falcata is very similar to Smith’s Vista Equity Partners, established with a $1 billion investment from a source outside of the US, to buy and fix-up enterprise technology firms. According to court records, Falcata’s information is in the public forum, but funding is tied to the Brockman’s trust.

These off-shore jurisdictions were designed to circumvent not only taxes but the law in general. It has been described as an avoidance system, a type of Wild West for the wealthy.

Evatt Tamine is Brockman’s advisor who turned and testified before a grand jury in exchange for immunity. Tamine, an Australian born lawyer, lives in the UK and managed Brockman assets off-shore for fourteen years. He quickly changed teams after the Bermudian police and IRS agents raided his home and storage lockers.

Brockman is a man obsessed with detail and cloaked in secrecy. Prosecutors allege that Brockman saw himself as a de facto trustee of the off-shore trust and maintained control over management amongst others by issuing to-do lists to ‘underlings’ that had to submit undated resignation letters that the boss could invoke at will.

Brockman was audited by the ORS once and made sure that never happened again, so he insisted on storing all documents on encrypted storage cards and encrypted devices. When Tamine made the mistake of sending a courier with an unencrypted database, he received a dire warning from Brockman who described it as the worst data security breach ever managing his holdings.

Brockman used various code names and used so-called burner phones that left no traces. The prosecution alleges that Brockman referred to the IRS as ‘The House” and himself as “John Barnes.” Brockman and his advisors communicated via the web domain of ‘houstonfishingservices.com.’ In these communications, Brockman is known as “Permit,” and Tamine is “Redfish.” Some of the trustees were known as “Snapper” and “Chum.”

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Brockman’s lawyer, Keneally, rejects the IRS’s innuendos. Brockman has a right to privacy. Safeguarding his privacy is not proof of criminal intent or conduct.

Tamine often delivered encrypted data to Brockman by hand. According to prosecutors, Tamine traveled to Rome in 2018 merely to provide a data storage card to his boss. Brockman invited him to take a cruise aboard his luxury yacht, the 200-foot Albula, with its 14 crew members, eight cabins, and a helipad.

Brockman did not take kindly to Tamine’s treachery, and some Brockman entities made sealed court filings under both British and Bermudian law, accusing Tamine of theft of more than $20 million. Of course, tamine denies all allegations. According to his version, Brockman allowed him to take an advance of six years’ remuneration, legal fees, and the expenses of his Bermuda home, which housed the Brockman Trust. As part of his legal strategy, he placed the $20 million in a UK court’s trust account. Tamine started with a salary of $205,000 in 2005, but by 2018 Brockman was paying him an annual salary of $2.6 million.

Statement by Tamine: I am a cooperating witness in a US Department of Justice investigation of the affairs of Bob Brockman. The theft allegations are bogus, raised after I began to cooperate with the DOJ, to undermine my credibility as a witness. The entities which made the allegations also tried, without success, to delay access by myself and the DOJ to critical documents related to the case.

Unsurprisingly, the DOJ came out supporting Tamine’s innocence and even represented him in court at one point. According to the DOJ’s statements in a Bermuda court, the allegations are inaccurate and disingenuous. They informed the court that Tamine was no longer a target of the investigation¾he was now a cooperating witness. The submission added that Mr. Brockman was the investigation’s target, along with the entities he controls, including the Brockman family charitable trust and three others.

Brockman denies this. He says that neither he nor his legal team plays any role in the proceedings, and any contention that he and his counsel hindered any ongoing investigation was baseless. Nevertheless, his equity push stalled. While Falcata announced its first acquisition in 2018, buying Xpressdocs, owned by Reynolds & Reynolds, all went quiet on this front after the IRS raid on Brockman’s Texas tax lawyer.

Readers should note that this article is only intended to convey general information on these issues and that FAS CPA & Consultants (FAS) in no way intends for the contents of this article to be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. This article cannot serve as a substitute for such professional services or advice. Any decision or action that may affect the reader’s business should not rely solely on the contents of this article, but should rather be consulted on with a qualified professional adviser. FAS shall not be responsible for any loss sustained by any person who relies on this presentation. This article is subject to change at any time and for any reason.

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