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. Brockman was due to appear Thursday before a judge in U.S. District Court in San Francisco.
“Mr. Brockman has pled not guilty and we look forward to defending him against these charges," Kathryn Keneally, a lawyer for Brockman and a partner in the Jones Day law firm in New York, said in an email to Automotive News.
A Reynolds spokesman told Automotive News via email that “the allegations made by the Department of Justice focus on activities Robert Brockman engaged in outside of his professional responsibilities with Reynolds & Reynolds. The Company is not alleged to have engaged in any wrongdoing, and we are confident in the integrity and strength of our business.”
The spokesman also said that Brockman is working with his own private attorney and added: "While the situation is evolving, Mr. Brockman will continue to serve as Chairman and CEO of Reynolds & Reynolds at this time.”
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.
“Brockman is charged with two schemes, a tax fraud scheme and an investor fraud scheme,” Anderson said Thursday.
“In the tax fraud scheme, Brockman is charged with hiding approximately $2 billion in income from the IRS over a period of 20 years. In the investor fraud scheme, Brockman is charged with manipulating debt securities by his own company to defraud investors.”
The company declined to comment on the size of Brockman’s ownership stake in Reynolds and declined to comment on the government’s allegations regarding Reynolds’ debt securities.