Carlos Kepke, Indicted Tax Lawyer Allegedly Enabling Large Tax Evasion Offshore Schemes, Dies Just Before Start of Criminal Trial (11/28/22)

I have blogged on the prosecution of Carlos Kepke, a Houston lawyer, who was prosecuted as an enabler of offshore tax evasion for Robert Brockman and Robert F. Smith.  Kepke was set to go to trial in San Francisco on tax crimes charges.  He died over the weekend.  See  David Voreacos & Neil Weinberg, Lawyer Charged in Billionaire Tax Case Dies on Eve of Trial (2) (BloombergLaw 11/28/22), here.

The earlier blogs on the progress of Kepke’s prosecution may be viewed here.  (Note that this link brings up blogs referring to Kepke in relevance order (with most references first), but a link can be clicked to show the blogs in reverse chronological order.)

Like Brockman, Kepke’s death will avoid a criminal trial and possible conviction.  For Brockman, see Brockman, Defendant in Pending Major Tax Crimes Case, Dies (Federal Tax Crimes Blog 8/6/22), here.

I don't know if there are any ancillary proceedings that were instituted (as the jeopardy assessment and related civil tax proceedings in Brockman's situation).  

One issue left hanging in the Kepke criminal case was who was paying his fees in the criminal case which given the quality of his counsel were very large.  See The Kepke (Brockman and Smith Lawyer Enabler) Prosecution - Developments (Federal Tax Crimes 10/27/22), here. My understanding from inferences in the docket entries is that something happened and was placed under seal with respect to those fees, but it did not prevent the criminal trial from proceeding. There could be some income tax consequences  for his estate from the fee arrangement, but I do not have enough facts to try to anticipate that.

In the Brockman and Kepke prosecutions and the Smith NonProsecution Agreement predicate investigation, the Government put enormous resources to try obtain some criminal vindication.  Of course, Smith had to admit his guilt, and, just by hanging on until death, Brockman and Kepke did not have to admit guilt or be convicted.  In this regard, the Bloomberg Law article reports:

“Carlos always maintained that he was innocent of these charges, and we were prepared to prove that at trial,” said Strassberg, who represented Kepke along with Grant Fondo.

Finally, as noted in the article (JAT added the bracketed description):

The passing of Kepke relieves Smith, 59, of the need to testify as the government’s star witness. Prosecutors accused Kepke of helping Smith evade taxes on $225 million he earned from Vista by setting up a trust structure with entities or accounts in Belize, Switzerland, Nevis and the British Virgin Islands. Under an unusual 2020 agreement [NonProsecution Agreement], Smith avoided prosecution for tax crimes.

Readers interested in viewing the docket entries for the Kepke criminal prosecution may do so free at CourtListener, here. Those who are teaching or are students of tax crimes subjects might want to review some of the pleadings leading up to the now discontinued prosecution. Both sides presented outstanding documents in a well-funded case.  So there are some good examples of what a major criminal trial is like.