Billionaire Robert Smith Reaches $140M Settlement With DOJ In Tax Probe
Pro-reparations billionaire Robert F. Smith has reached a $140 million settlement with the Department of Justice as part of a four-year criminal tax investigation.
It is one of the largest known agreements by a U.S. taxpayer to resolve issues involving undeclared offshore accounts, Wall Street Journal reported.
The tax problems began for Smith — estimated net worth: $5-billion-to-$7 billion — after he allegedly failed to file proper reports of foreign bank and financial accounts.
A philanthropist and tech investor, Smith is the wealthiest Black U.S. billionaire. He surprised the entire 2019 graduating class of Morehouse College by announcing at the commencement ceremony that he and his family would pay off their student loan debt.
As part of the settlement, Smith — the CEO of investment firm Vista Equity Partners — will not be prosecuted but he has to acknowledge misconduct related to tax crimes and assets held in offshore tax structures.
The settlement includes a penalty of $85 million, back taxes of about $30 million and $25 million of interest.
Smith allegedly failed to pay U.S. taxes on more than $200 million in assets from Caribbean entities set up by Houston software businessman Robert Brockman — the sole investor in Vista Equity Partners’ first private-equity fund. These assets ended up flowing into a charitable foundation created by Smith.
Smith founded Vista in 2000 when he was in his late 30s with $1 billion from a charitable trust established by the Brockman family. The funds originated from a charitable trust based in Bermuda, The Grio reported.
Vista was named the top software investor of the past decade in 2018 by Pitchbook and its sale of Marketo to Adobe was named Deal of the Year by Buyouts magazine. In 2019, Vista was named Dealmaker of the Year at the PitchBook Private Equity Awards.
One of the world’s most successful investment firms, Vista had more than $57 billion in capital commitments as of May 2020.
Smith has reportedly been on the IRS radar since 2014 when he sought amnesty from prosecution under a program for Americans who did not report offshore assets. The IRS, however, already knew about Smith’s offshore accounts and declined his request.
In September 2019, Smith’s Vista Equity Partners was sued and accused of self-dealing, according to the New York Post. Kurt Lauk, a former Audi executive, claimed he got kicked off the board of Solera Holdings automotive software firm when he brought up the concern. The suit accused Vista of using Solera as a “personal piggy bank” to bail out failed investments in other companies. The suit also accused Vista of misleading its investors, to which Smith and the firm denied, according to The Grio.
While addressing Cornell University’s sixth Entrepreneurship Summit in 2017, Smith said that he had overseen 294 buyout transactions totaling more than $73 billion. “We have never lost money in a buyout,” he told the audience.
Smith cooperated with the Justice Department and IRS criminal tax investigation to avoid prosecution. A conviction would have forced him out of Vista Equity Partners and imposed a $65 million fine prison sentence, The Grio reported.
George Floyd’s murder and the disproportionate impact of covid-19 on Black communities have shone a spotlight on longstanding racial inequities in the U.S., according to Smith.
Smith has talked about holding corporate America accountable for the profit made from the slave trade. Reparations would be one way for corporate America to address current inequities in the U.S., Smith said.
He has proposed a “2% Solution” in which he calls for large corporations to use 2 percent of their annual net income to empower Black communities over the next 10 years, Revolt reported.