Tuesday, December 1, 2020

Individual B, the Houston Attorney in the Smith NPA, Is Unmasked (12/1/20; 12/2/20)

I recently posted on the Brockman indictment and the Smith NPA.  One Big Fish Indicted and Lesser Big Fish Achieves NPA for Cooperation (Federal Tax Crimes Blog 10/16/20), here.  In that post I noted:

11.  (Added 9:30pm):  Being from Houston, I was particularly interested in the Houston lawyer who assisted Smith. The Houston lawyer is identified as Individual B in NPA Exhibit A, Statement of Facts.  In summary, Individual B did some very bad acts, creating offshore structures and disguising Smith's participation in those offshore structures.  Brockman (identified as Individual A) referred Smith to Individual B.  I don't know who the Houston lawyer is, but suspect that having practiced in Houston during this period, I likely know Individual B (whoever he or she is).  If anyone knows and is willing to share that information, please let me know.

The Houston attorney, Individual B, is named in a Motion to Dismiss in part for lack of Venue and to Transfer to the Southern District of Texas, here.  The relevant paragraph is (p. 11 of Motion, p. 18 of pdf) (bold-face supplied):

Fourth, and by contrast, the Statement of Facts made by Smith (“Individual Two”) in connection with his Non-Prosecution Agreement describes the extensive role of “Individual B, a lawyer in private practice in Houston, Texas who specializes in foreign trusts and ‘asset protection’ planning,” whom the defense recognizes to be Carlos Kepke. Keneally Decl. Ex. M at Statement of Facts ¶ 5. Mr. Kepke’s practice is located in Houston, Texas, as reflected on his website, his LinkedIn Profile, and the State Bar of Texas lawyer profile. Keneally Decl. Ex. N, Ex. O, Ex. P. The defense is not aware of Mr. Kepke’s role in this investigation, but he is an obvious potential witness.

Kepke's web site is here.  On that web site, he touts his work on Offshore Structures for U.S. Income Tax and Estate Tax Savings.

JAT Comments:

1. Kepke is the person I suspected to be Individual B.  So, in an email to Kepke, I asked Kepke.  Kepke first dodged the question, but then when I re-asked it, he denied that he was Individual B. I still suspected that Kepke was the one but could not go forward with my suspicion in light of his explicit denial.

2. I knew Kepke well in the 1970s.  He was a partner at Chamberlain Hrdlicka, here, when I was an associate there from March 1977 to October 1978.  Based on that experience, I am not surprised.  Perhaps telling is that the planning of the type described for Brockman and his father in the early 1980s is the type of planning I recall that Kepke and his associate, Joseph Valentino, did at Chamberlain Hrdlicka, although they played it close to the vest so that others (at least in the associate ranks) really would not know what they were doing.  Quite by accident, I stumbled into enough to be concerned. (Valentino, readers may recall, is now incarcerated awaiting extradition to the Netherlands for a tax related crime conviction there.  See Federal Tax Crimes Blog postings on Valentino, here.)  There is more to that story that I need not go into now but suffice it to say that I let my concerns be known.  The key point here is that I am not surprised that Kepke was the guy on at least some of the Brockman planning and the Smith planning and implementation.

3. Revised 12/2/20 2:00pm:  Since Kepke was doing the work in the early 1980s and thereafter and Valentino was at the firm even past Kepke leaving in, I think, the 1990s, Valentino was likely involved in doing some of the Brockman work (that is, unless Kepke did the work off the firm's books and radar screen).

4.  It is somewhat puzzling that Kepke was not indicted along with Brockman.  Perhaps there will be a superseding indictment.  Or the criminal statute of limitations may have run as to Kepke.  Or, perhaps, Kepke became an informant on Brockman and/or Smith (perhaps even with a whistleblower claim a la Birkenfeld).  Added 12/2/20 2:00pm:  The quote above from the motion at least suggests that Kepke may serve some unknown role in the investigation and is an obvious potential witness.  Presumably, the reference is to witness for the Government.  If that is right, the Government may have had to give Kepke some type of immunity (either use or derivative use) that might effectively shield him from prosecution because of the Kastigar hurdles.  And, I suppose, the defense may feel some need for Kepke as a witness or at least a scapegoat if Brockman tries to mount a Cheek good faith defense.  Or, even some type of nonprosecution agreement similar to Smith's (or letter immunity) if Kepke were critical to the prosecution of Brockman.  But all of those possibilities are speculations at this stage.  More information is likely to come out unless Brockman reaches a plea deal but even then he will have to give a detailed statement of the relevant facts that may lay out Kepke's role and perhaps even the reason that Kepke has not been indicted.

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