Billionaire Robert Smith is reportedly being investigated by Justice Department prosecutors and the IRS over possible tax crimes.
Smith, who famously pledged to pay off the debt of Morehouse College students last year, is now the subject of a federal probe. Bloomberg reported Friday that sources told them that federal authorities have spent the past four years investigating the financier for not paying $200 million in taxes.
It is further being alleged that Smith may have moved assets to offshore accounts to avoid paying U.S. taxes. Thus far, Smith has not been charged with any crime but prosecutors may move forward if it is determined that “the beneficial owner of Caribbean entities that received proceeds from his company’s first private equity fund, according to two of the people. A portion eventually flowed through the offshore entities into a U.S. charitable foundation where Smith is president and founding director,” according to the Bloomberg report.
A U.S. citizen must pay taxes on any income even if the transaction does not take place in the country. The failure to declare foreign assets will alert the IRS at which point a civil settlement can be reached or prosecutors get involved.
The outlet added sources described Smith as apparently working with authorities to forgo any prosecution, settle the matter, and pleading for leniency. A possible conviction would force Smith out of his Vista Equity Partners management firm, $65 million fine and a prison sentence.
It was also noted that Smith may not be the primary target of an investigation and that his associate Robert T. Brockman was the one being sought after. Brockman is a Houston businessman and gave Smith $1 billion in 2000 to start his equity firm, funds that originated from a charitable trust based in Bermuda, and Brockman benefits from.
Representatives for Smith, the Justice Department, and the IRS did not respond to Bloomberg for comment about the possible tax evasion. However, an expert claimed that Smith could avoid being prosecuted especially during this time of racial unrest.
“The issue of jury appeal is often considered by prosecutors in cases that are a close call,” said David S. Weinstein, a former federal prosecutor in Miami who isn’t involved in the case.
“If 12 jurors believe they want to acquit a defendant based on something other than the evidence, that’s their inherent right. They may believe it’s not the right time or place to bring a case against a particular defendant.”
Smith has reportedly been on the radar of the IRS since 2014, Bloomberg also reported. That year, the billionaire reportedly approached the federal agency seeking amnesty from prosecution under a program to Americans who did not report offshore assets. The IRS, however, declined Smith’s request. The agency reportedly turns down taxpayers if it already knew they had not reported offshore accounts.
In September 2019, Smith’s Vista Equity Partners was hit with a lawsuit that accused it of self-dealing, according to the New York Post. Kurt Lauk, a former executive at Audi, claimed he got booted from the board at the automotive software firm Solera Holdings when he brought up the concern. The suit accused Vista of using Solera as a “personal piggy bank” to bail out the firm’s failed investments in other companies. The suit also accused Vista of misleading its investors, to which Smith and the firm denied.
Smith is recognized as one of the leading Black philanthropists in the world and has used his wealth to advance the causes of racial injustice and inequality. He is the chairman of Carnegie Hall, the first Black person to hold that position and gifted the National Museum of African American History and Culture in Washington, D.C $20 million in 2013. That generosity was on display again last year when he pledged to pay off $34 million in debt for the graduating class.
“On behalf of the eight generations of my family that have been in this country, we’re gonna put a little fuel in your bus,” Smith spoke at the ceremony.
“This is my class, 2019. And my family is making a grant to eliminate their student loans…I know my class will make sure they pay this forward…and let’s make sure every class has the same opportunity going forward because we are enough to take care of our own community.”
The students respond with chants of “MVP!”
Have you subscribed to theGrio’s podcast “Dear Culture”? Download our newest episodes now!