Forbes

Amer­ica’s Most Ma­nip­u­la­tive Bil­lion­aire

- By Chris Hel­man Business · Investing · United States of America · Darth Vader · Robert Freeman Smith · U.S. Internal Revenue Service · Austin, TX · Austin · Texas · United States Department of Justice · Vista · St. Petersburg, FL · Florida · Saint Petersburg · Greek Life at the University of Florida · United States Marine Corps · Ford Motor Company · IBM · Ford · Fresno · California · Fresno · Robert Smith · Columbia-TriStar Motion Picture Group · Goldman Sachs Group · Bermuda · British Virgin Islands · Virgin Islands · Reynolds & Reynolds · Reynolds, Georgia · Vista Equity Partners · Philippines Department of Justice · Houston · Livermore, CA · Lawrence Livermore National Laboratory · Columbia Business School · Samuel Wilson

The in­side story of how Bob Brock­man, the se­cre­tive bil­lion­aire who al­legedly mas­ter­minded Amer­ica’s big­gest tax­eva­sion scheme, used “Darth Vader” con­tracts to over­charge auto deal­ers and fi­nance Robert F. Smith’s pri­vate equity em­pire.

The 45-by-29-inch flat screen sits atop a sales­man’s desk, giv­ing him the abil­ity to quickly coax cus­tomers through what would nor­mally be moun­tains of pa­per­work. By en­abling car buy­ers to check boxes with a sty­lus and sign con­tracts on the in­ter­ac­tive screen, the DocuPad takes the fric­tion out of a car sales­man’s stock in trade—the up­sell.

In a 2019 court de­po­si­tion, the se­cre­tive Robert Brock­man, 79, whose en­ter­prise soft­ware com­pany, Reynolds and Reynolds, sells DocuPad, of­fered a rare peek into the micro­eco­nomics of car sales. Brock­man said the DocuPad en­abled fi­nance man­agers to up­sell by at least $200 per trans­ac­tion in a busi­ness where mar­gins on every car sold or leased are typ­i­cally ra­zor-thin. “You re­cover the ini­tial cost of DocuPad very, very quickly,” Brock­man said, al­lud­ing to the $10,000 startup fee, plus an on­go­ing $1,000 monthly li­cense. “And then, from that point on, it is a mas­sive gen­er­a­tor of prof­its.”

Nat­u­rally, a dealer can get the DocuPad only if he’s also a li­censee of one of Brock­man’s in­te­grated dealer man­age­ment sys­tems—dig­i­tal plat­forms for every­thing from parts in­ven­tory and ser­vice sched­ul­ing to the machines that se­cure the thou­sands of keys at an aver­age deal­er­ship. When you have thou­sands of cap­tive deal­ers locked into mul­ti­year con­tracts, those fees turn into $1 bil­lion, with an­nual in­come es­ti­mated to be $300 mil­lion. And Brock­man con­trols 98% of it through an off­shore trust, a stake worth at least $3 bil­lion. Brock­man’s abil­ity to qui­etly pile up billions came to a crash­ing halt in Oc­to­ber 2020, when he was charged with mas­ter­mind­ing the largest tax-eva­sion case in Amer­i­can his­tory, ac­cused of hid­ing some $2 bil­lion in in­come from the In­ter­nal Rev­enue Ser­vice over the last two decades. Brock­man has pleaded not guilty to all charges and is free on a $1 mil­lion bond. Nei­ther Brock­man nor his at­tor­neys have re­sponded to Forbes’ re­quests for in­ter­views. Brock­man’s al­leged scheme helped hide prof­its gush­ing from one of the na­tion’s most suc­cess­ful pri­vate equity firms, Austin, Texas–based Vista Equity Part­ners, founded by the na­tion’s rich­est Black per­son, Robert F. Smith. Last Oc­to­ber, Smith signed a non­pros­e­cu­tion agree­ment with the Depart­ment of Jus­tice and con­fessed to what would have been a host of tax felonies tied to se­cret off­shore ac­counts set up at Brock­man’s be­hest. Start­ing in 2000, Brock­man com­mit­ted $1 bil­lion in cap­i­tal to Vista’s first fund and taught Smith the ins and outs of run­ning an en­ter­prise soft­ware busi­ness. He con­tin­ues to hold large in­ter­ests in sev­eral of Vista’s $73 bil­lion in pri­vate equity funds. Smith has al­ready paid a record $139 mil­lion to get the IRS off his back and agreed to co­op­er­ate with in­ves­ti­ga­tors in the case against his one­time bene­fac­tor and men­tor. The saga has all the drama and in­trigue of a crime novel, in­volv­ing a Play­boy model, a net­work of off­shore ac­counts and an en­crypted email sys­tem in which Brock­man re­ferred to Smith as “Steelhead.” Brock­man’s at­tor­ney, an Aus­tralian named Evatt Tamine, who func­tioned as the bil­lion­aire’s nom­i­nal trustee, was known as “Red­fish.” The IRS was “the House,” and Brock­man, the tip of the pyra­mid, was “Per­mit.” A months-long in­ves­ti­ga­tion by Forbes re­veals that the al­leged tax eva­sion is not the first, or only, sin Brock­man may have com­mit­ted dur­ing his im­pres­sive ca­reer. On his way to amass­ing a net worth es­ti­mated to be $6 bil­lion, the Hous­ton-based en­tre­pre­neur has left a trail of hun­dreds of ar­bi­tra­tions and law­suits from auto deal­ers who are his core cus­tomers, claim­ing that his un­der­handed tac­tics cheated them, too, out of hun­dreds of mil­lions.

Born dur­ing the Sec­ond World War to a phys­io­ther­a­pist and a gas sta­tion owner, Robert Brock­man grew up in St. Peters­burg, Florida, and grad­u­ated summa cum laude from the Univer­sity of Florida in 1963, a mem­ber of its busi­ness honor so­ci­ety. While serv­ing in the U.S. Marine Re­serves, he worked in mar­ket­ing at Ford and then joined IBM in 1966, be­com­ing a star sell­ing main­frame com­puter ser­vices to auto deal­ers.

In 1970 he left IBM, launched Uni­ver­sal Com­puter Ser­vices and taught him­self how to pro­gram at a time when it in­volved feed­ing decks of punched cards into hulk­ing machines. Soon he was pro­vid­ing deal­ers with printed weekly re­ports on parts in­ven­tory.

EVER SINCE FORD MO­TOR COM­PANY BE­GAN SELL­ING ITS MODEL T IN 1908, FEW PIECES OF TECH­NOL­OGY HAVE BEEN AS IM­POR­TANT TO CAR DEALER PROFIT MAR­GINS AS THE DOCUPAD.

“Brock­man was the first provider who could en­able an owner to syn­the­size the fi­nan­cial state­ments of his 10 deal­er­ships into one. He was do­ing this in the 1980s,” mar­vels Paul Gill­rie, a vet­eran auto-in­dus­try con­sul­tant. By the late 1980s Brock­man had dozens of com­put­ers in­stalled at deal­er­ships, and he in­tro­duced what re­mains his one of his core soft­ware op­er­at­ing sys­tems, called Power. On his per­sonal web­site, since taken down, Brock­man, who holds 21 patents, wrote: “I’m still a pro­gram­mer at heart. And al­though I had to give up hands-on pro­gram­ming many years ago, I still stay very closely in­volved in all of our prod­uct de­ci­sions.” By the early 1990s, Ford de­cided it didn’t want to be in the IT busi­ness, so it sold Dealer Com­puter Ser­vices to Brock­man’s Uni­ver­sal Com­puter Ser­vices for $103 mil­lion. The deal came with a stip­u­la­tion: Ford would al­low Brock­man to con­tinue us­ing the Ford blue oval, brand, let­ter­head, ad­dress and even the same em­ploy­ees for five years, incog­nito. “When Brock­man took over, it was like a frog in boil­ing wa­ter,” ac­cord­ing to a con­sul­tant who ad­vised deal­ers on ar­bi­tra­tions. “Ford was so laid-back and easy­go­ing. The deal­ers trusted them, and Ford took very good care of them.” The deal­ers liked the tech up­grades—even the era’s clunky mon­i­tor beat the mi­cro­fiche and pa­per vol­umes they were used to. “Brock­man com­put­er­ized it all, cre­ated a su­pe­rior sys­tem.” And then, ac­cord­ing to a typ­i­cal case, he lever­aged that good­will by sign­ing deal­ers to con­tract ex­ten­sions “with the in­ten­tion of lock­ing in deal­ers be­yond the life of their com­puter sys­tems, in order to im­pose costly sys­tem up­grades.” Some deal­ers were irate when they re­al­ized that they hadn’t been deal­ing with Ford at all—and had lit­tle re­course against charges like $12,000 for the in­stal­la­tion of a 500-megabyte hard drive or $2,400 for a printer. Those who tried to get out of their con­tracts met the buz­z­saw of Brock­man’s lit­i­ga­tion team. He had cre­ated what an in­dus­try in­sider refers to as “the Darth Vader con­tract” be­cause it en­abled his at­tor­neys to de­stroy re­bel­lious deal­ers. Many up­grades or new ser­vices came with lengthy con­tract ex­ten­sions. Says Gill­rie, “When you have a con­tract that gives you a monopoly on your cus­tomer for 30 years, you don’t have to lis­ten to any­thing they say.” In 2010 Jay Gill, a Fresno, Cal­i­for­nia–based en­tre­pre­neur with 10 deal­er­ships, was hit with a $3 mil­lion bill when he ac­quired Liver­more Auto Group, which had been pay­ing $35,000 a month to Brock­man’s com­pany. They set­tled for about half that. “Brock­man made his money by screw­ing peo­ple,” Gill says. “Any­time you asked for some­thing or you needed some­thing, he would au­to­mat­i­cally ex­tend your con­tract with­out you know­ing. When you have a 12-inch-thick con­tract, it’s some­where in there.” Not even the threat of bank­ruptcy could free deal­ers from Brock­man’s grip. When Orville Beck­ford, a Black dealer in Florida, was strug­gling de­spite a re­cap­i­tal­iza­tion by Ford in 1994, Brock­man went af­ter Ford for the money and in a let­ter cas­ti­gated it for back­ing what he as­serted was an in­ept man­ager: “I would like to avoid this—how­ever, short of pay­ing ‘black­mail’ to this dealer, I see no other an­swer than to fight him legally to the end.” Beck­ford sued Brock­man for defama­tion and won $250,000 in a jury trial. Over the years more than 100 deal­ers, beaten in ar­bi­tra­tion, re­fused to pay off their con­tracts with Brock­man’s com­pa­nies and wound up in fed­eral courts. “Un­for­tu­nately, Ford cre­ated this mon­ster,” Gill says. “I know un­equiv­o­cally that I wouldn’t do busi­ness with this guy, even if it was free.”

Deal­maker Robert Smith had no such reser­va­tions when he met Brock­man in the late 1990s. Fresh out of Columbia Busi­ness School and a ris­ing star in Gold­man Sachs’ in­vest­ment bank­ing depart­ment, Smith was talk

When Brock­man took over, it was like a frog in boil­ing wa­ter. Ford was laid­back, and the deal­ers trusted it.

ing to Brock­man about do­ing a buy­out of his grow­ing soft­ware busi­ness. Brock­man didn’t need fi­nanc­ing from Gold­man. His UCS had oo­dles of ex­cess cash—which he ap­par­ently had no in­ten­tion of shar­ing with Un­cle Sam. Ac­cord­ing to the state­ment of facts signed by Smith in his non­pros­e­cu­tion deal, Brock­man agreed to seed Smith with $1 bil­lion in the 2000 cre­ation of Vista Equity Part­ners—on the con­di­tion that Smith co­op­er­ate with him in cre­at­ing what the DOJ’s in­dict­ment refers to as a “con­spir­acy and scheme and ar­ti­fice to de­fraud.” In 1997, Brock­man, via his Ber­muda-domi­ciled A. Eu­gene Brock­man Char­i­ta­ble Trust, set up a hold­ing com­pany in Ne­vis called Span­ish Steps Hold­ings. Un­der Span­ish Steps he cre­ated a Bri­tish Vir­gin Is­lands com­pany called Point In­vest­ments. This firm would act as Brock­man’s straw buyer for in­vest­ments in Vista. Ac­cord­ing to Smith’s state­ment, Brock­man, in a “take it or leave it” pro­posal, in­sisted that Smith hold half his car­ried in­ter­est in the ini­tial Vista Fund II via a “per­fected for­eign trust” like his own. Pre­sum­ably, this way Brock­man could take com­fort in know­ing they were in it to­gether. “I had one of those in-themir­ror mo­ments,” Smith, 58, told Forbes in 2018, in a cover story, be­fore any hint of crim­i­nal­ity had emerged. “I looked at my­self and asked, ‘If I don’t do this, how will I feel about it ten years from now?’ Ac­cord­ing to his state­ment, Smith had a rel­a­tive of his then-wife, Suzanne McFay­den, create a Belize-based trust called Ex­cel­sior, through which Smith funded his off­shore in­vest­ment com­pany, Flash Hold­ings. It’s le­gal and nor­mal for cor­po­ra­tions to set up sub­sidiaries in tax havens to own patents and other high-mar­gin in­tel­lec­tual prop­erty—soft­ware mak­ers have long parked IP in Ire­land, for in­stance. Like­wise, hedge funds and pri­vate equity in­vestors set up off­shore trusts in which to di­rect pro­ceeds of their car­ried in­ter­est. Such struc­tures’ le­gal­ity tends to be con­tin­gent upon how much con­trol the ul­ti­mate ben­e­fi­cia­ries have over the as­sets, and what they do with it. Brock­man could have got­ten away with hav­ing his busi­nesses held through the A. Eu­gene Brock­man Char­i­ta­ble Trust had he been able to show that he was a pas­sive ben­e­fi­ciary—rather than the con­trol freak that Smith al­leges him to have been: “It be­came ap­par­ent to Smith that de­spite pa­per­work that in­di­cated to the con­trary, In­di­vid­ual A [Brock­man] com­pletely con­trolled In­di­vid­ual A’s for­eign trust and re­lated for­eign com­pa­nies, and made all sub­stan­tive de­ci­sions re­gard­ing all of its trans­ac­tions and in­vest­ments.” In­clud­ing, of course, the de­ci­sion not to dis­close any of it to the IRS. As Brock­man said of him­self in a 2019 de­po­si­tion, “As you prob­a­bly can tell, I’m into the de­tails, big time.” In his state­ment, Smith ex­plains that he was in­cen­tivized to de­liver re­turns on Brock­man’s $1 bil­lion be­cause Brock­man had the power to re­place him by forc­ing Vista to sell him their gen­eral-part­ner­ship con­trol in­ter­ests at Brock­man’s price. Brock­man con­trolled Smith with an iron grip the same way he did the car deal­ers. With Brock­man’s cap­i­tal, Vista Fund II ac­quired the likes of Sir­siDynix, Ap­plied Sys­tems, BigMachine­s, Brain­ware, Sur­gi­cal In­for­ma­tion Sys­tems and SER So­lu­tions. Brock­man was in­ti­mately in­volved in di­rect­ing the Vista team on how to ap­ply his play­book of op­er­at­ing prin­ci­ples fo­cused on cost re­duc­tion and prod­uct con­sol­i­da­tion. Ac­cord­ing to some­one fa­mil­iar with Vista’s early days, the budding pri­vate equity firm ap­plied IBM’s process-ori­ented ap­proach, learned from Brock­man, to ac­quire and grow soft­ware com­pa­nies: “Every­thing that Vista knows about soft­ware came from Bob Brock­man.” One smart strat­egy em­ployed by Vista has been soft­ware roll-ups. Take the case of for­mer Vista port­fo­lio com­pany Ven­tyx—an At­lanta firm fo­cused on in­dus­trial man­age­ment soft­ware. In 2005 Vista paid $70 mil­lion for MDSI, added In­dus in 2007 for $240 mil­lion, then merged them into Ven­tyx. It then rolled in Global En­ergy De­ci­sions and NewEn­ergy As­so­ciates and Tech-As­sist in order to add key ap­pli­ca­tions and mar­ket share. Then, in 2010, Vista sold Ven­tyx to Swiss power and au­to­ma­tion gi­ant ABB for $1 bil­lion. Vista then dis­trib­uted $799 mil­lion of the pro­ceeds to an ac­count at Swiss bank Mirabaud that was con­trolled by Brock­man’s Point In­vest­ments. Brock­man also ap­peared to use Vista as a straw buyer to help him roll up other deal­er­ship soft­ware providers. In 2005, UCS ac­quired call-track­ing and mea­sure­ment com­pany Call­bright. The next year, Vista Fund II (all Brock­man’s money) ac­quired Call­bright’s com­peti­tor Who’s Call­ing—which it later sold to Brock­man as well. Ac­cord­ing to Pre­qin, Smith’s first Vista fund, launched in 2000, went on to re­turn more than 29% an­nu­ally. If that re­turn is to be be­lieved, it would mean that Brock­man and Smith mul­ti­plied the ini­tial $1 bil­lion more than ten­fold.

As Brock­man was di­rect­ing Vista’s growth from be­hind the scenes, his busi­ness was flour­ish­ing. In 2005 his soft­ware com­pany re­port­edly had $530 mil­lion in rev­enue and $100 mil­lion in prof­its, with 2,600 em­ploy­ees. His com­put­er­ized parts cat­a­log was in­stalled in nearly 2,500 Ford and Lin­coln-Mer­cury deal­er­ships.

But Brock­man was fac­ing a big prob­lem—Ford had de­vel­oped its own elec­tronic parts cat­a­log. In 2005 Ford re­fused to re­new Brock­man’s exclusive li­cense un­less he agreed to a three-year wind-down of his ex­ist­ing con­tracts. Brock­man sued, al­leg­ing vi­o­la­tion of an­titrust laws, but even­tu­ally dropped the suit.

His exclusive deal over, Brock­man had to do some­thing to re­place the busi­ness. He then en­listed Smith to help with the deal of his ca­reer—a lever­aged buy­out of Ohio’s Reyn

olds and Reynolds in 2006 for $2.4 bil­lion. Brock­man put up $300 mil­lion in equity; Vista added $50 mil­lion (of Brock­man’s money). Deutsche Bank ar­ranged the loans. The in­dus­try was shocked, as­sum­ing that much larger Reynolds would be buy­ing UCS, not the other way around. Now Brock­man had thou­sands of new clients to tran­si­tion to his Darth Vader con­tract. Al­most im­me­di­ately, there was a cul­ture clash. A but­tonedup ex-Marine, Brock­man was not well-liked at easy­go­ing Reynolds. He pro­hib­ited em­ploy­ees from smok­ing, even dur­ing off hours, and re­port­edly mon­i­tored time spent on bath­room breaks. In a de­po­si­tion, Brock­man de­scribed his frus­tra­tion with the com­pany’s data se­cu­rity: “When I got to Reynolds, it’s kind of like I had been spend­ing my life, you know, mop­ping and pol­ish­ing the floor. And I in­her­ited this house, and it has two inches of wa­ter on the floor.” In 2008, dur­ing the Great Re­ces­sion, Reynolds debt sold off in a flight to qual­ity. See­ing his com­pany’s loans trading as low as 35 cents on the dol­lar was too good for Brock­man to pass up. Even though he had per­son­ally signed credit agree­ments bar­ring him from buy­ing any of Reynolds’ sub­or­di­nated debt with­out the ap­proval of first-lien hold­ers, Brock­man se­cretly bought about $20 mil­lion of Reynolds debt in 2009, ac­cord­ing to an IRS in­ves­ti­ga­tion. To do so, Brock­man, through his Aussie at­tor­ney Tamine, used funds held by Edge Cap­i­tal In­vest­ments (like Point In­vest­ments, Edge was a Caribbean en­tity set up via a trust con­trolled by Brock­man’s long­time CFO, Don Jones, “as a cover to shield Brock­man’s own­er­ship,” ac­cord­ing to an IRS in­ves­ti­ga­tion). A year later, when Deutsche ar­ranged a re­fi­nanc­ing of Reynolds debt, Edge re­deemed Brock­man’s notes at par, net­ting $72 mil­lion on the trade and de­posit­ing the funds into an off­shore ac­count. Ac­cord­ing to the af­fi­davit of an IRS in­ves­ti­ga­tor, “Tamine, at the di­rec­tion of Brock­man, then laun­dered ap­prox­i­mately $57 mil­lion of the pro­ceeds” through Brock­man’s other ac­counts and com­pa­nies, “in­clud­ing sev­eral of Vista Equity Part­ners’ funds.” Some of the un­taxed prof­its from Brock­man’s lu­cra­tive trade al­legedly went to fund his pas­sions. His Fry­ing Pan Canyon Ranch near Aspen, Colorado, was pur­chased for $15 mil­lion. He also di­rected his at­tor­ney to pur­chase a 209-foot lux­ury yacht named Al­bula, com­plete with a he­li­pad, for $33 mil­lion. Brock­man, an avid fish­er­man and hunter, was also fond of zip­ping by pri­vate jet to Cór­doba, Ar­gentina, for the hemi­sphere’s best dove shoot­ing. Smith was en­joy­ing life too. In 2009, he re­lo­cated with Suzanne, his wife of 22 years, to Switzer­land. The next year he redi­rected more than $30 mil­lion of his own un­taxed cap­i­tal gains into an ac­count at Swiss Banque Bon­hôte through which he bought two Alpine ski chalets in Megève, France. The fam­ily also main­tained homes in Texas, Cal­i­for­nia and Colorado. En­ter the 2010 Play­boy Playmate of the Year, Hope Dworaczyk, with whom, his wife dis­cov­ered, Smith was hav­ing an af­fair. This be­came an im­me­di­ate con­cern for Brock­man’s team. In Au­gust 2011, ac­cord­ing to emails un­cov­ered by Depart­ment of Jus­tice in­ves­ti­ga­tors, Brock­man’s CFO Jones, a.k.a. “King,” wrote to trustee Tamine, a.k.a. “Red­fish”: “Bob called con­cerned about the Robert Smith sit­u­a­tion and what ef­fect a nasty di­vorce might have on us. We agreed that if his busi­ness is dis­sected by her at­tor­ney, Point would be an ini­tial tar­get.” In­deed, in her di­vorce pe­ti­tion, Suzanne McFay­den, who met Smith when they both at­tended Cor­nell in the 1980s, de­manded full own­er­ship of their homes, com­pre­hen­sive sup­port for their chil­dren, a pro­hi­bi­tion against them ever as­so­ci­at­ing with Dworaczyk and a “strict ac­count­ing of all monies ex­pended” for Smith’s mis­tress’ ben­e­fit. And in what was per­haps her tough­est ask, McFay­den’s lawyers de­manded that Smith get up to date with his taxes.

As Mr. and Mrs. Smith ne­go­ti­ated a di­vorce set­tle­ment, Brock­man was look­ing for the exit.

In late 2012 he came close to strik­ing a deal to sell Reynolds and Reynolds to KKR for $5 bil­lion, but backed out. In 2013 Brock­man at­tempted a div­i­dend re­cap­i­tal­iza­tion of Reynolds that would have val­ued the com­pany at $5.3 bil­lion and in­creased debt from $900 mil­lion to $4.3 bil­lion. A Moody’s re­port at the time es­ti­mated Reynolds’ “free cash flow” that year at $350 mil­lion, with 40% mar­gins. Brock­man re­port­edly planned to take out $2.5 bil­lion in cash. But this deal too fell apart. Bizarrely, af­ter loans had al­ready been fi­nal­ized and al­lo­cated to in­vestors, all the trades were re­port­edly un­wound and the is­sue with­drawn. Brock­man then can­celed a well-pub­li­cized pledge of $250 mil­lion to Cen­tre Col­lege in Danville, Ken­tucky, which he had at­tended be­fore trans­fer­ring to the Univer­sity of Florida.

Vista was like­wise feel­ing pres­sure. In a 2012 memo, Tamine told Brock­man that he was be­gin­ning to en­counter un­com­fort­able ques­tions. “It is the in­volve­ment of Point In­vest­ments, an un­known non-U.S. in­vestor, which gen­er­ally causes the com­pli­ance is­sues.” When “pressed on Point’s ben­e­fi­cial own­er­ship,” Tamine wrote, “I have walked us through with min­i­mal dis­clo­sure.”

At the end of 2013, Banque Bon­hôte no­ti­fied Smith that it in­tended to par­tic­i­pate in the DOJ’s Swiss-bank pro­gram and would be in­form­ing U.S. au­thor­i­ties of his ac­count. Re­al­iz­ing the jig was up, Smith hur­riedly filed an IRS ap­pli­ca­tion in March 2014, seek­ing in­clu­sion in its amnesty pro­gram for Amer­i­cans who had failed to dis­close their off­shore ac­counts. A month later, his ap­pli­ca­tion was de­nied.

When Smith and McFay­den fi­nal­ized their di­vorce later in 2014, Brock­man loaned Smith $75 mil­lion, ac­cord­ing to court doc­u­ments. That same year Vista wound down Brock­man’s Fund II and ex­ited its small stake in Reynolds and Reynolds.

Smith cel­e­brated his new­found free­dom in July 2015 by wed­ding Dworaczyk in a lav­ish, star-stud­ded af­fair at Villa Cim­brone on Italy’s Amalfi Coast. Mu­si­cians Seal and John Leg­end per­formed.

Less than a year later, in June 2016, the al­leged co­con­spir­a­tors went into high gear in an­tic­i­pa­tion of a fed­eral grand jury in­ves­ti­ga­tion. Tamine was dis­patched to Ox­ford, Mis­sis­sippi, to visit Don Jones’ widow, who was in pos­ses­sion of in­crim­i­nat­ing ev­i­dence in­clud­ing floppy disks and hard drives. Said Tamine in an en­crypted memo, “As you know, I even cut short the trip to Ar­gentina to get back to Ox­ford to de­stroy more drives that had been dis­cov­ered.”

By 2017 Tamine could see the writ­ing on the wall. In a

memo to Brock­man he wrote: “Even if Robert Smith clears up his prob­lems, the tar­get is well fixed on me and we need to an­tic­i­pate that we’ll be au­dited at some point.” In Septem­ber 2018, agents in Ber­muda raided Tamine’s home. As the govern­ment closed in, Smith be­gan up­ping his char­i­ta­ble giv­ing. Around the time the IRS re­jected his amnesty plea, Smith set up a foun­da­tion with hun­dreds of mil­lions of dol­lars con­nected to the prof­its of Vista’s first fund. In 2016 he and his foun­da­tion pledged $50 mil­lion to Cor­nell Univer­sity’s engi­neer­ing school and $20 mil­lion to the Na­tional Mu­seum of African Amer­i­can His­tory and Cul­ture. Most fa­mously, Smith de­liv­ered a com­mence­ment speech at More­house Col­lege in May 2019, an­nounc­ing that he would spend $34 mil­lion to pay off the stu­dent debt of the en­tire grad­u­at­ing class of the his­tor­i­cally Black col­lege. Brock­man, too, sought to bur­nish his phil­an­thropic bona fides, do­nat­ing $25 mil­lion to the Bay­lor Col­lege of Medicine and tens of mil­lions more to erect build­ings at Cen­tre Col­lege and Rice Univer­sity. Tamine, in a memo to Brock­man, wrote of the im­por­tance of ap­pear­ing char­i­ta­ble: “Th­ese ac­tiv­i­ties would work as a strong bar­rier against an at­tack from the IRS.” On Oc­to­ber 15, 2020, U.S. at­tor­neys dropped their bomb­shell about Smith and Brock­man. In ex­change for an agree­ment not to pros­e­cute, Smith would pay $56 mil­lion in taxes and penal­ties on un­re­ported in­come plus another $82 mil­lion in penal­ties for con­ceal­ing off­shore ac­counts. Fur­ther, he would aban­don his claims for $182 mil­lion in re­funds de­rived from his phil­an­thropic giv­ing and ear­lier pay­ments to Un­cle Sam. “It is never too late to do the right thing,” said U.S. at­tor­ney David An­der­son in a state­ment. “Smith com­mit­ted se­ri­ous crimes, but he also agreed to co­op­er­ate”—against Brock­man—which “has put him on a path away from in­dict­ment.” Smith con­tin­ues to pre­side over Vista, and only a hand­ful of in­vestors have shown signs of con­cern. New Mex­ico’s Ed­u­ca­tional Re­tire­ment Board has with­drawn a $100 mil­lion com­mit­ment, and the Vir­ginia Re­tire­ment Sys­tem, which has $350 mil­lion in­vested with Vista, says it is mon­i­tor­ing the sit­u­a­tion. In late Novem­ber 2020 Vista’s long­time pres­i­dent, Brian Sheth, an­nounced he was leav­ing the com­pany, im­plau­si­bly telling Forbes that his de­ci­sion had noth­ing to do with Smith’s con­fessed trans­gres­sions: “I know for Robert and Vista the best is yet to come.” Vista now boasts $73 bil­lion in as­sets un­der man­age­ment. In Novem­ber, Brock­man stepped down as CEO of Reynolds to pre­pare for his trial. So far, Ber­mu­dian and Swiss au­thor­i­ties have frozen his ac­counts, and Tamine is co­op­er­at­ing with the au­thor­i­ties. Brock­man’s at­tor­neys say he is suf­fer­ing from early-stage de­men­tia. So far his lawyers have per­suaded the court to trans­fer the case from San Fran­cisco to Hous­ton in recog­ni­tion of Brock­man’s de­clin­ing health. Fed­eral pros­e­cu­tors dis­miss Brock­man’s symp­toms as an “amor­phous malaise” and point to his lu­cid de­po­si­tion tes­ti­mony from 2019, as well as a lengthy memo he sent to Reynolds’ vice chair­man in May 2020 fore­shad­ow­ing an all-too-fa­mil­iar be­hind-the-scenes role he was plan­ning: “My in­tent is to work 4 or 5 more years help­ing teach the next gen­er­a­tion every­thing I know about how to run the com­pany ef­fi­ciently.”

 ??  ??
 ??  ?? The in­side story of how Bob Brock­man, the se­cre­tive bil­lion­aire who al­legedly mas­ter­minded Amer­ica’s big­gest tax-eva­sion scheme, used “Darth Vader” con­tracts to over­charge auto deal­ers and fi­nance Robert F. Smith’s pri­vate equity em­pire.
The in­side story of how Bob Brock­man, the se­cre­tive bil­lion­aire who al­legedly mas­ter­minded Amer­ica’s big­gest tax-eva­sion scheme, used “Darth Vader” con­tracts to over­charge auto deal­ers and fi­nance Robert F. Smith’s pri­vate equity em­pire.
 ??  ?? Faced with a bil­lion-dol­lar take-it-or-leave-it
scheme from Bob Brock­man, fi­nancier Robert F. Smith, a.k.a. “Steelhead,” took the bait. Man-in-the-Mir­ror Mo­ment
Faced with a bil­lion-dol­lar take-it-or-leave-it scheme from Bob Brock­man, fi­nancier Robert F. Smith, a.k.a. “Steelhead,” took the bait. Man-in-the-Mir­ror Mo­ment

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