Smith applied for the amnesty program but was rejected. Typically, the IRS turns down taxpayers if it already knows about their undeclared assets. Later, Smith filed a false FBAR for 2013, again not disclosing his financial interest in the BVI and Swiss accounts.
In 2014, the same year his divorce was finalized, Smith turned to Brockman for a $75 million loan, according to prosecutors. The following year he married Hope Dworaczyk, Playboy’s 2010 Playmate of the Year and a Celebrity Apprentice participant. The couple’s seven-month-old son floated down the aisle on an artificial cloud created for their wedding at a hotel on Italy’s Amalfi Coast. John Legend entertained.
Around that time, Smith directed a Belize-based entity he controlled to transfer $182 million in assets to a new charitable foundation. One of its first donations was $15 million for a music education program operated by the Carnegie Hall Society. In its 2015 tax year, the foundation gave at least $149 million to the United Negro College Fund, the National Park Foundation, Cornell and other organizations, according to an IRS filing.
Smith tried to get right with tax authorities by amending past returns, but prosecutors were undeterred. In 2016, a San Francisco grand jury began investigating. It issued subpoenas to some Vista limited partners, according to a person familiar with the matter. In 2018, Brian Sheth, Vista’s co-founder and president, and Tamine were asked to testify. Sheth, who wasn’t a target of the investigation, declined to comment.
That August, federal authorities raided the home in Texas of the attorney who’d set up offshore entities for Smith and Brockman. A few weeks later, IRS agents and Bermudian police seized documents and encrypted electronic devices from Tamine’s home.
In a letter to Vista investors after the settlement was announced, Smith wrote that “the essence of this case involves an offshore structure I created twenty years ago at the insistence of my only investor in my first private equity fund.” It was, he said, a “personal tax matter,” and “the Department of Justice never claimed that Vista or any Vista funds were involved or under investigation.”
Justice Department legal filings tell a more complicated story. The Brockman indictment mentions Vista more than 80 times. In one filing, the government wrote that his scheme included “a machine built of two components.” One, it said, involved the offshore entities Brockman had used to conceal his income and assets. The other was “an investment vehicle through which Defendant secretly funded his offshore structure. That vehicle was Vista Equity Partners.”
The two components were intertwined and “involved continuous contacts with Vista employees,” the government alleges. In one 2010 transaction, Brockman directed that a $799 million distribution from Vista be deposited in a Swiss bank account in the name of Point Investments, the entity he’d set up in the British Virgin Islands a decade earlier to invest in Vista. Two years after that transfer, Tamine, Brockman’s trust manager, wrote to his boss: “My relationship with Robert and his team at Vista is going very well,” according to a court filing.
Smith has continued to put a positive spin on events, carrying on much as before. Shortly after the settlement was announced, he pledged $50 million to programs at historically Black colleges and universities. He also bought a pair of North Palm Beach mansions for $48 million, the Wall Street Journal reported. In December, Vista closed on $2.7 billion in capital commitments, according to a company presentation reviewed by Bloomberg. But Smith will have to move forward without his co-founder, Sheth, whose resignation was announced on Thanksgiving Day.
In his letter to Vista investors, Smith said the government’s criminal investigation into his finances left him humbled but unbowed. “I am as committed as ever to moving forward as a CEO, an investor, a community leader, and a philanthropist—in order to continue to be a productive person trying to leave the world better than I found it,” Smith wrote.
That effort may not include taking the witness stand against Brockman, who stepped down as chief executive officer of Reynolds & Reynolds in November. His lawyers said in court that the 79-year-old is suffering from dementia. They said the case should be dismissed because he’s unable to assist in his own defense.
Prosecutors characterized the timing of the claim as suspicious and urged the court to regard it with “healthy skepticism.” A federal judge in Houston will decide if he’s competent to stand trial in the coming months.
This article was provided by Bloomberg News.