“The allegation of a $2 billion tax fraud is the largest ever tax charge against an individual in the United States,” David L. Anderson, the U.S. attorney for the Northern District of California, said at a news conference.
An indictment filed earlier this month alleges that Brockman, the chief executive of Reynolds and Reynolds, an Ohio-based company that makes software for car dealerships, used a network of entities in Bermuda and Nevis to hide investment income from the IRS. He also allegedly had secret bank accounts in Bermuda and Switzerland, where he funneled untaxed profits from selling assets.
To keep up the scheme, Brockman used secret, encrypted email systems to coordinate with offshore money handlers, according to the indictment. Brockman, who seemed to have a penchant for assigning monikers to people and places, called himself “Permit,” the IRS “the house,” and assigned his handlers fish-themed code names like, “Redfish, “Bonefish” and “Snapper.” He also named his $29 million luxury yacht — allegedly paid for with the hidden funds — “Turmoil.”
Brockman, who lives in Houston and Pitkin County, Colo., is a Marine veteran who started out in marketing at Ford Motor Co. He later worked as a salesman at IBM before founding Universal Computer Systems in the 1970s, leading the company through its acquisition by Reynolds and Reynolds in 2006.
But starting in 1999, prosecutors say, Brockman began carefully stashing money overseas and covering his tracks to avoid investigators.
Brockman was adept at evading fees and covering up suspicious activity, prosecutors allege. He told his main handler, who is unnamed in the indictment, to “operate as much as possible in a paperless manner” so that everything was “in encrypted digital form,” the indictment said.
Investigators also said that Brockman backdated documents to cover up his alleged crimes. In an email from July 2008, Brockman notified his handler to avoid using copy machines and laser printer paper because it “has encoded into it the manufacturer of that paper as well as the year and month of manufacture,” Brockman wrote, according to the indictment. “For that reason I always set aside some packets of copy paper with dates on them - for potential future use.”
The charges also included allegations that between 2008 and 2010, Brockman lied to investors and allegedly bilked them out of nearly $68 million.
A spokesman for Reynolds and Reynolds told The Post that the company “is not alleged to have engaged in any wrongdoing, and we are confident in the integrity and strength of our business,” and noted that Brockman’s actions occurred “outside of his professional responsibilities.”
The case against Brockman was bolstered by witness and alleged co-conspirator Robert F. Smith. Referenced as the wealthiest Black person in the country, the 57-year-old billionaire attracted national headlines in May 2019 when he pledged to pay off all the student loans for the graduating class of Morehouse College, an all-male, historically Black college in Atlanta.
Smith is the founder of Vista Equity Partners, a San Francisco-based private-equity fund that had a single investor: Brockman. According to prosecutors, Smith helped Brockman hide his profits earned through Vista in offshore accounts so he could avoid paying taxes.
In a news conference, Anderson, the U.S. attorney in San Francisco, said that Smith signed a non-prosecution agreement, where he admitted to his part in the scheme and agreed to cooperate with investigators. He also acknowledged evading $43 million in federal taxes from 2005 to 2014 and accepted a settlement to pay about $140 million in taxes and penalties.
A lawyer for Smith did not immediately respond to a request for comment.
During the virtual hearing on Thursday, Brockman pleaded not guilty on all counts and was released on $1 million bond.
“We look forward to defending him against these charges,” Kathryn Keneally, Brockman’s lawyer, said in a statement to the Wall Street Journal.
Correction: A previous version of this post inaccurately said that Robert T. Brockman founded Universal Computer Services in the 1970s. He founded Universal Computer Systems.