Bob Brockman, 79, has been charged with tax evasion, wire fraud, money laundering and other offenses. The scheme ran for 20 years. Prosecutors say it is the largest tax fraud case against an individual in the US.
Mr Brockman has his primary residence in the Memorial Villages area of Houston. He founded Universal Computer Systems in 1970. The business supplies software to assist car dealerships in managing their inventory. In 2006, it took over a publicly-traded rival called Reynolds & Reynolds for $2.8 billion. Mr Brockman remains the CEO of the combined business, still privately-owned and based in Ohio.
Mr Brockman is a former trustee of both Rice University and Baylor College of Medicine.
Robert Smith – Co-operating with the government
At the same time that prosecutors were announcing the charges, they also issued a press release stating that Robert Smith, an Austin-based billionaire had entered into a non-prosecution agreement. Mr Smith agreed to pay $139 million in taxes and penalties . He also agreed to abandon a refund claim of $182 million that he had filed against the IRS, related to charitable contribution deductions. Most damaging, Smith agreed to co-operate with the government investigation against Brockman. The investigation of Mr Smith took four years.
Mr Smith made headlines last year when he pledged to pay off the $34 million of student loan debt for the Morehouse College graduating class.
Smith and Brockman met in 1997 when Mr Smith was a Goldman Sachs. At Brockman’s urging Smith founded Vista Equity Partners, a PE firm, in 2000. Brockman invested $1 billion in the first fund. When the portfolio companies in that and subsuquent funds were later sold at a profit, Brockman used a series of offshore companies and trusts, that he secretly controlled, to allegedly avoid paying capital gains tax.
Brockman used a proprietary, encrypted email system to communicate with the trustees and nominees that he controlled. Each person had a codename. At one point, Brockman emailed the trustee and reminded him that
‘all copy machine/laser printer paper has encoded into it the manufacturer of that paper as well as the year and month of manufacture. For that reason I always set aside some packets of copy paper with dates on them – for potential future use.’
The trustee is also co-operating with the government.
In all, Mr Brockman faces 39 counts. If convicted, he faces a substantial prison term and restitution and criminal forfeiture.