Belize and Nevis International Tax Fraud Scheme
Robert F. Smith Agrees to Pay $139,000,000 to the U.S. Government.
Robert F. Smith, the Chairman and Chief Executive Officer of a San Francisco based private equity company, was involved in an illegal scheme to conceal income and evade millions in taxes by using an offshore trust structure and offshore bank accounts for 15 years.
As we emphasize in our website, it is never too late to do the right thing and arrange your financial affairs legally as well as resolving indiscretions with the various taxing authorities. This sentiment was echoed by U.S. Attorney Anderson in this case, “It is never too late, to tell the truth. Smith committed serious crimes, but he also agreed to cooperate. Smith’s agreement to cooperate has put him on a path away from indictment.” Of course, “indictment” equates to substantial Federal Prison time.
The known specific details in this conceal and evasion case are as follows: Robert F. Smith, a resident of Austin, Texas, formed the Excelsior Trust in Belize, and a shell company, Flash Holdings, in Nevis in 2000. Smith used third-parties to conceal his beneficial ownership and control of the Excelsior Trust and Flash Holdings. In reality, Smith controlled both offshore structures and made all substantive decisions regarding Flash Holdings’ operations, transactions, income, investments, and assets. Smith used the Excelsior Trust to conceal his ultimate ownership and control over Flash Holdings. He further used Flash Holdings to hide his interest in private equity investments. Smith admits that he formed these foreign entities in order to use them to avoid the payment of U.S. taxes.
Smith also admitted that he knowingly and intentionally used the Excelsior Trust and Flash Holdings and their associated foreign bank accounts in the British Virgin Islands and Switzerland to conceal from the IRS, and the U.S. Treasury Department, income earned and distributed to Flash Holdings from private equity funds. As a result of the overall scheme, Smith willfully did not report to the IRS over $200 million of partnership income. Smith continued to admit that he also failed to report his ownership of his foreign bank accounts in the British Virgin Islands, (BVI) and Switzerland. He used millions of this unreported income to acquire and make improvements to real estate used for his personal benefit, such as using approximately $2.5 million in untaxed funds to purchase and renovate a vacation home in Sonoma, California, and again used untaxed funds to purchase two ski properties and a piece of commercial property in France. Also, he used approximately $13 million of untaxed funds to build and make improvements to a residence in Colorado and to fund charitable activities at this property.
Currently, Smith is:
1. Cooperating with the Department of Justice in other related investigations.
2. Paying approximately $56 million in taxes and penalties stemming from the unreported income and
3. Paying another $82 million in penalties stemming from his concealment of his offshore bank accounts.
Taken altogether, Smith will pay more than $139 million in taxes and penalties to the IRS which does not include the interest of up to 9% compounded daily…yes daily… to be owed to the IRS on these accounts that date back over 20 years which will be added to his financial debt and obligation to the IRS.
There is still more, the protective claims Smith filed for a refund totaling approximately $182 million for charitable contribution deductions on Sept. 21, 2018, and Oct. 11, 2019, will not be allowed so that Smith will not benefit, directly or indirectly, from such claims of charitable contributions.
This whole sorry matter against Mr. Smith, I suspect, was a well-tried procedure of the IRS, following the money. No high-tech monitoring, no use of International laws or tax treaties; just follow the money, a time-tested method that the IRS does very well.
Government personnel involved in this matter included Principal Deputy Assistant Attorney General Zuckerman, U.S. Attorney Anderson, and Jim Lee, Chief of IRS-Criminal Investigation, Special Agents of IRS-Criminal Investigation, who conducted the investigation, and Senior Litigation Counsel Corey Smith of the Tax Division, Assistant U.S. Attorney Michael G. Pitman, and Trial Attorneys Lee Langston and Christopher Magnani of the Tax Division, who handled the case, and finally, the Justice Department’s Office of International Affairs of the Department’s Criminal Division provided extensive international assistance.