Texan hit with largest tax case in history
Robert Brockman, a reclusive Houston software billionaire, was charged with using a web of Caribbean entities to hide $2 billion in income in what prosecutors called the largest U.S. tax case ever against an individual.
Brockman, 79, used a family charitable trust based in Bermuda and other offshore entities to hide assets fromthe Internal Revenue Service while failing to pay taxes, according to a 39count indictment unsealed Thursday in federal court in San Francisco. Brockman was also charged with money laundering and other crimes.
Brockman appeared in federal court from Houston via Zoom Thursday. He entered a plea of not guilty to all counts and was released on $1 million bond, said Abraham Simmons, spokesman for the Northern district of California.
Brockman made his fortune selling software to automotive dealerships, starting Universal Computer Systems out of his Houston living room in 1970 and merging it in 2006 with one of his top competitors, Reynolds and Reynolds, based in Ohio. He is nowthat company’s CEO.
Although he has served on the board of trustees of two of Houston’s highest-profile educational institutions, Brockman mostly has kept a lowprofile locally. The indictment says he lives in both Houston and Pitkin County, Colo., home to the Aspen ski resort.
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 allegation of a $2 billion tax fraud is the largest ever tax charge against an individual in the United States,” David Anderson, the U.S. attorney in San Francisco, said at a news conference.
The indictment charges Brockman with crimes including money laundering, evidence tampering and destruction of evidence. He’s also charged with wire fraud for using intermediaries to manipulate debt securities at his company. Brockman used code names and encrypted emails to secretly manage the trusts, according to the indictment.
Despite his secretive nature, this is not the first time Brockman has made headlines.
In 2013, Brockmanmade a $250 million donation to tiny Centre College in Danville, Ky. At the time it was the largest donation ever made to a liberal arts college, and would have funded 40 full-ride
scholarships.
But Brockman, who had left Centre during his sophomore year, withdrewthe money six weeks later. The gift was apparently part of a larger, $3.4 billion loan package for Reynolds and Reynolds, the automotive software company of which Brockman is CEO. The withdrawal of the gift and the loan behind it caused waves on Wall Street at the time, Buzzfeed reported.
In 2010, Brockman filed suit in a Harris County district court against Google, demanding that it reveal the identity of an anonymous blogger using its software under the name “Trooper.” In the blog, the writer likened Brockman to Bernie Madoff and Satan, accusing him of stealing, referring to him as a “crook.” It also referred to Reynolds and Reynolds’ software products as “crap.”
The case made its way to the Texas Supreme Court, which in 2014 struck down the district court’s order for Google to give up
the name. The blog no longer exists online.
Although Brockman keeps to himself, he sat on the board of trustees of Rice University and Baylor College of Medicine, but no longer holds those seats. A Baylor spokesperson would not comment on Brockman, while a Rice spokesperson would only confirm that he’s a “trustee emeritus.”
Rice recently finished building a new music building, the Brockmanhall for Opera. It is named after A. Eugene Brockman, Robert’s father, and the lead donorwas the A. Eugene Brockman Charitable Trust.
Brockman’s Houston-based software business acquired Reynolds and Reynolds in a $2.8 billion transaction that took the Ohio-based company private in October 2006. The company is one of the largest providers of software to auto dealerships.
Oneof its most-visible products is docupad, which turns an auto financing officer’s desk into a giant touchscreen, simplifying the process of signing vehicle purchasing documents.
Reynolds & Reynolds issued a statement saying the allegations were outside Brockman’s work with the company and that the company is not alleged to have participated in any wrongdoing.
As part of Smith’s settlement in the current tax fraud case, he admitted that he failed to pay about $30 million in taxes, with penalties and interest making up the remainder of the expected payout. Smith used untaxed income to buy a vacation home in Sonoma County, California, and ski properties in the French Alps, and to make charitable contributions, Anderson said.
Smith, 57, entered into a nonprosecution agreement and will pay $139 million, Anderson said.
“Smith committed serious crimes, but he also agreed to cooperate,” he said. “Smith’s agreement to cooperate put him on a path away” from criminal charges.
Smith faced a related four-year criminal tax inquiry involving about $200 million that moved through Brockman-linked offshore structures.
With a net worth of $7 billion,
Smith is the wealthiest Black person in America. The criminal tax probe into Smith was first reported by Bloomberg News in August.
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.
Brockman created false paper trails to secretly purchase a luxury yacht now known as Albula and to spend $30 million on properties called the “Frying Pan Canon Ranch” and the “Mountain Queen” vacation home in Pitkin County, Colorado, prosecutors said.
Brockman’s investment in the first private equity fund set up by Smith camefroman entity held as part of the A. Eugene Brockman Charitable Trust. Brockman is a beneficiary of the trust.