SAN FRANCISCO –
The chief executive officer of Reynolds and Reynolds allegedly was involved in one of the largest tax evasion schemes ever to be prosecuted by the Justice Department and the Internal Revenue Service.
According to a news release distributed on Thursday afternoon, a federal grand jury in San Francisco returned a 39-count indictment, charging Bob Brockman with tax evasion, wire fraud, money laundering and other offenses.
The charges stem from an alleged decades-long scheme to conceal approximately $2 billion in income from the IRS as well as a scheme to defraud investors in the software company’s debt securities.
The charges were announced by Principal Deputy Assistant Attorney General Richard Zuckerman of the Tax Division, U.S. Attorney David Anderson for the Northern District of California and Chief of IRS Criminal Investigation Jim Lee.
In a statement sent by Reynolds to Auto Remarketing, a company spokesperson said, “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.”
According to the indictment, Brockman, a resident of Houston and Pitkin County, Colo., used a web of offshore entities based in Bermuda and Nevis to hide from the IRS income earned on his investments in private equity funds that were managed by a San Francisco-based investment firm.
As part of the alleged scheme, officials alleged Brockman directed untaxed capital gains income to secret bank accounts in Bermuda and Switzerland. The indictment further alleged that to execute the fraud — between 1999 and 2019 — Brockman took measures such as backdating records and using encrypted communications and code words to communicate with a co-conspirator, among other alleged actions.
In addition to the tax offenses, the indictment alleged that between 2008 and 2010, Brockman engaged in a fraudulent scheme to obtain approximately $67.8 million of Reynolds’ debt securities. As CEO, officials explained that Brockman was contractually restricted from purchasing any of the software company’s debt securities without prior notice, full disclosure and amending the associated credit agreements.
The indictment alleged that Brockman used a third-party to circumvent those requirements, to acquire the debt securities and to conceal from the sellers valuable economic information.
The indictment further alleged that Brockman used material, non-public information about Reynolds to make decisions about purchasing the debt. In addition, Brockman allegedly persuaded another individual to alter, destroy and mutilate documents and computer evidence with the intent to impair the use of such evidence in a grand jury investigation.
Brockman is charged with:
— Seven counts of tax evasion
— Six counts of failing to file foreign bank account reports
— 20 counts of wire fraud affecting a financial institution
— Two counts of concealment money laundering
— Tax evasion money laundering
— One count each of international concealment money laundering, evidence tampering and destruction of evidence
The Justice Department reiterated that an indictment merely alleges that crimes have been committed.
“The defendant is presumed innocent until proven guilty beyond a reasonable doubt,” the Justice Department said.
If convicted, the Justice Department said Brockman potentially faces a substantial period of incarceration, as well as restitution and criminal forfeiture. Any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence
Brockman was scheduled to make his initial federal court appearance before U.S. Magistrate Judge Nathanael Cousins on Thursday.
“Today’s indictment reflects the Department of Justice’s commitment to finding and prosecuting the costliest and most sophisticated tax crimes in the United States,” Zuckerman said in the news release.
Anderson said, “Complexity will not hide crime from law enforcement. Sophistication is not a defense to federal criminal charges. We will not hesitate to prosecute the smartest guys in the room.”
And Lee added, “As alleged, Mr. Brockman is responsible for carrying out an approximately $2 billion tax evasion scheme. IRS Criminal Investigation aggressively pursues tax cheats domestically and abroad. No scheme is too complex or sophisticated for our investigators. Those hiding income or assets offshore are encouraged to come forward and voluntarily disclose their holdings.”