Wednesday, February 3, 2021

Bloomberg Article on the Intrigue in the Smith NPA (Related to Brockman Indictment) (2/3/21)

I have written previously about Robert Smith’s unusual nonprosecution agreement.  I say unusual because his misconduct was sustained and blatant over many years.  Based on my experience and attention to the federal tax crime universe over the years, it was unusual because, even with an agreement to cooperate, a plea of guilty to some serious tax crime (often conspiracy and/or tax evasion) would be required for the type of conduct involved.

 Bloomberg has a report of some of the intrigue behind the unusual plea agreement (at least as alleged in the article).  Neil Weinberg and David Voreacos, How Billionaire Robert Smith Avoided Indictment in a Multimillion-Dollar Tax Case (Bloomberg 2/3/21), here.

 Excerpts that attracted my attention:

But rather than expose a man worth about $7 billion to a possible prison term and potentially force him to give up control of his private equity firm, Vista Equity Partners, Barr signed off on a non-prosecution agreement. It required Smith to admit he had committed crimes, pay $139 million and cooperate against a close business associate indicted in the largest tax-evasion case in U.S. history—Texas software mogul Robert T. Brockman.

Smith, the richest Black person in the U.S. according to the Bloomberg Billionaires Index, agreed to cooperate after spending years raising his public profile as a philanthropist and advocate for racial justice. He praised the Trump administration’s efforts to provide economic assistance to minority business owners amid the Covid-19 pandemic. As his wealth tripled over the past five years, he also gave away more than he had hidden abroad. All that complicated the possible prosecution of a defendant whom jurors may have viewed sympathetically.


Smith’s open support of the Trump administration didn’t seem to influence the Justice Department. In June, prosecutors told his lawyers they were still planning to indict Smith on charges of conspiracy and filing false tax returns, three of the people familiar with the discussions said.


Smith’s lawyers continued to push for a non-prosecution agreement, and the case went to Barr a second time, people with knowledge of the matter said. Again, the attorney general drew a line: He told Zuckerman, the top tax prosecutor, that he would green-light an indictment if Smith didn’t agree to cooperate fully against Brockman and pay a sizable penalty, one person said.


The Justice Department got an attention-grabbing fine and a cooperation agreement without having to risk losing at trial. But the decision to let Smith walk away unscathed by criminal charges doesn’t sit well with some former prosecutors, who said it illustrates how the richest Americans can maneuver the justice system in their favor. “This case sends a message that wealthy people will be treated differently than not-so-wealthy people,” said Paul Pelletier, a former Justice Department fraud section supervisor now in private practice who wasn’t involved in the case. “People of lesser economic means normally don’t avoid getting charged when they cooperate. The magnitude of the tax fraud here is enormous.”

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