Finance

Who Is The Mysterious Houston Attorney At The Center Of Multibillion-Dollar Tax Fraud Case?

Aren’t you just dying to learn more about something that isn't Trump- or COVID-related?

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You know, as I sit here at my laptop, Donald Trump’s slow-moving coup attempt is ongoing, but floundering. The pandemic is at its destructive height, but we do have some hope on the horizon with two promising vaccines in development. Things are bad. But they look like they might get better fairly soon. So today, in the spirit of looking forward, I’m going to afford all of us a luxury it’s hard to even remember at this point: something written about neither Donald Trump nor COVID-19.

And this one’s really getting back to our roots for this column, because it’s about billionaire tax cheats, heroic civil servants, and somewhere at the center of it all, a mysterious Houston attorney whose identity is unknown.

In mid-October, a federal grand jury in San Francisco returned a 39-count indictment against billionaire Robert T. Brockman. Brockman stands accused of tax evasion, money laundering, and wire fraud, among other offenses, as part of a decades-long scheme aimed at hiding $2 billion from the IRS and bilking investors who hold debt securities in Brockman’s software company. Brockman has pleaded not guilty, and was released on a $1 million bond. According to the Department of Justice, his is the largest criminal tax prosecution ever brought.

At the same time, the DOJ announced a nonprosecution agreement with Robert F. Smith, another billionaire named “Robert,” this one of slightly more fame in that he told last year’s graduating class at Morehouse College that he would pay off their student loan debt. As part of the nonprosecution agreement, Smith admitted that he criminally evaded taxes on more than $200 million in income between 2000 and 2015 by stashing it in secret Swiss and Caribbean accounts. Smith agreed to pay more than $139 million in taxes (that he already would have owed, absent the tax evasion) and penalties to the IRS, and to forfeit $182 million in charitable contribution tax deductions.

The case of the Dos Robertos is an example of the DOJ Tax Division and the IRS Criminal Investigation team kicking ass and taking names, but it isn’t only that. It’s also just the first peek, for the public, into a deep world of money-laundering intrigue.

Smith’s payment to the IRS, while among the largest ever made in connection with getting busted for using secret offshore accounts, still comes off as a slap on the wrist to some legal commentators, who marvel at him avoiding any time for his myriad offenses. Ominously, though, for the other Robert, Smith’s nonprosecution agreement contains a requirement that he “continue” cooperating with the DOJ in other “related investigations.”

These two men have a lengthy history, with Brockman serving as the sole investor in Smith’s first private equity fund 20 years ago, an investment which allowed Smith to become a billionaire in the first place. And, it seems, for well over a decade, the Roberts may have shared a lawyer.

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The Wall Street Journal reported late last month on some of the key details of Smith’s admissions in his nonprosecution agreement. Included in those details is the existence of an “unnamed Houston lawyer” who served as “a longtime adviser to Mr. Brockman.” Smith himself used this enigmatic attorney from 2000 to 2014 to put in place false paper trails to hide his accounts, according to Smith’s, ahem, account. For the dangerous task of helping Smith hide hundreds of millions of dollars from the IRS (and potentially risking the same legal exposure as his or her client in doing so), this law school-educated reverse Robin Hood was apparently paid the comparatively paltry sum of just $800,000, which works out to a smidge over $57,000 per year on average over 14 years of involvement with Smith. Really doesn’t seem worth it for one month’s worth of decent, but far from extraordinary, receipts every year.

For now, that’s all we know about this shadowy legal figure at the heart of what could certainly become the largest criminal tax conviction in U.S. history. But aren’t you just dying to learn more? Does the nature of Smith’s deal suggest government cooperation by his former attorney? Do any readers in Houston have rampant speculation as to which attorney this might be (if I have to say it, that’s a joke, don’t post any accusations publicly [but feel free to email me whatever wild theories you might have privately])?  Will “unnamed Houston lawyer” be trending on Twitter? Is an Ozark-style spinoff in development at Netflix?

Time will tell. Until it does, kudos to all the hardworking lawyers and investigators at the DOJ and the IRS for reeling in a couple real big fish, and best of luck to Robert Smith in turning over a new leaf as a cooperating government witness.

Jonathan Wolf is a litigation associate at a midsize, full-service Minnesota firm. He also teaches as an adjunct writing professor at Mitchell Hamline School of Law, has written for a wide variety of publications, and makes it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.

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