Billionaire tax cheat Robert Smith put up his girlfriend in a fancy apartment using company finances and acquired expensive properties throughout the globe using untaxed revenue, court records show.
A federal investigator’s complaint includes a 300-acre ranch in Colorado, a club and condominiums in the French Alps and a Sonoma vacation house among the expensive acquisitions he made with unreported income.
Smith, America’s wealthiest black man, acknowledged to unlawfully concealing tens of millions of dollars from the IRS in overseas tax havens and was smacked with $139 million in fines last year – but spared prison in a contentious non-prosecution deal.
He was entrapped by Treasury investigators as part of the greatest tax raid in history. They accused Smith’s business partner, hedge fund billionaire Robert Brockman, of concealing $2 billion from the authorities. Brockman, who had been suffering from dementia, died on August 5.
Smith, 59, cut his teeth as an investment banker and became the founder and CEO of private equity company Vista Equity Partners in 2000. The corporation earned a fortune on investments in computer startups, and has climbed to become the fourth biggest enterprise software firm in 2019 with $46billion of capital, beaten only by Microsoft, Oracle and SAP.
He had believed his sweetheart arrangement with prosecutors would lessen his shame. His attorneys have subsequently battled tooth and nail to protect his commercial and personal issues from leaking out into the courts, and to keep their client from having to testify in public.
Even last month Smith’s attorneys were submitting a flurry of requests in Brockman’s tax prosecution case to keep court papers involving Smith hidden.
The billionaire allegedly had his three top lawyers all appear in a Texas federal court to oversee proceedings, while a source related to Smith rejected the claims.
But with the prosecutors hitting from all aspects in the enormous tax case, interesting nuggets of evidence are beginning to seep out, indicating how Smith spent some of his untaxed millions.
One such leak comes from another prosecution, of Smith and Brockman’s accountant, Carlos Kepke, for designing the allegedly unlawful offshore structures.
Prosecutors filed a petition on June 3 of this year that contained an affidavit from a Treasury Special Agent outlining Smith’s tax plan and his financial transactions.
In the midst of their contentious divorce, Smith’s ex-wife Suzanne McFayden engaged a private investigator, whose findings are included in the affidavit.
According to Special Agent Trista Merz’s statement from August 2018, “The PI determined that Smith had his company pay for, and classify as business-related costs, the rental of an opulent New York City apartment and living expenses of Smith’s then-girlfriend.”
McFayden and Smith’s divorce petitions listed adultery as the cause of their breakup.
It’s possible that Smith’s team of lawyers is attempting to conceal these and other embarrassing personal information.
Whatever the cause, a tax investigation specialist told the New York Post that the billionaire’s lawyers’ insistence on confidentiality was strange.
It’s quite rare, Victor Song, a former head of IRS Criminal Investigations who is now the COO of the forensic accounting firm Integritas3, said, “I definitely never saw anything like that throughout my time working on these cases.”
Smith purchased a number of mansions and opulent homes using money from his offshore holdings, according to the Treasury Special Agent’s affidavit.
The Boulder River Ranch near Black Hawk, Colorado, has five bedrooms and nine bathrooms and is 6,598 square feet.
A fishing lake and miles of private property are seen surrounding the riverside ranch’s pool and tennis court on satellite pictures.
According to the affidavit, Smith spent more than $12 million in untaxed income between 2009 and 2013 to purchase it in pieces and another $22 million to renovate it. He also employed his lawyer cousin Wayne Vaden to disperse the money.
The holding company for the ranch, Boulder River Ranch Holding Company LLC, lists Vaden on its state records.
According to the affidavit, Smith paid €5.3 million for two ski condominiums as well as the “downtown restaurant/nightclub” The White Pearl in the French alpine resort of Megève.
According to the Treasury, he furnished the residences and paid for his family’s trips there using his Swiss and British Virgin Islands (BVI) accounts.
Investigators learned about the property’s personal usage, as opposed to its intended purpose for business, from his ex-wife.
According to McFayden, Smith, the family used the ski condos as a weekend and holiday vacation while residing in Geneva, Switzerland, where their kids learned to ski, Special Agent Merz wrote.
Smith reportedly used his unreported income to acquire the residences while concealing his acquisition by paying his own firm rent on them.
The millionaire reportedly purchased a “second property” in Sonoma, California, for “weekend trips with their kids,” using $2.5 million from an offshore account in the British Virgin Islands.
According to the court complaint, he paid a designer $7.5 million via the offshore accounts to refurbish, furnish, and construct a pool home using the untaxed funds.
The affidavit is silent on the New York City apartment he used to house his unnamed girlfriend in 2013 while using a business account; nonetheless, he presently owns a $59 million penthouse in Chelsea that he is remodelling with his new wife, Hope Dworaczyk, 2010, the 2010 Playmate of the Year.
He purchased the triplex, 10,000 square foot home in 2018 and it features two kitchens in addition to a private rooftop patio.
Michael Shvo, the project’s developer, admitted to the crime in 2018 after being implicated in a tax evasion scheme including the acquisition of furniture, jewellery, artwork, and a Ferrari.
In a secluded, gated neighbourhood near to the Seminole Golf Club, Smith allegedly paid $48.19 million for a pair of properties in North Palm Beach, Florida.
The properties’ combined square footage is 25,878 and includes 11 bedrooms, 15 full bathrooms, three half bathrooms, a wine cellar, roof deck, sports court, movie theatre, and underground gym.
Agent Merz went into great detail regarding the extraordinary lengths Smith is said to have taken to hide his tax evasion methods.
Headley Waddington, a retired Jamaican builder who lives in London, was utilised by Smith to “pose as the “founder” of a foreign trust” named Excelsior.
Despite purportedly signing paperwork at Smith’s direction stating that Waddington alone financed the offshore organisation, Waddington said in a November 2013 deposition that “he did not contribute any money to the trust, nor did he have the financial resources to do so.”
According to my education and expertise, Waddington, Smith’s ex-uncle, wife’s seems to have been a nominated settlor when Excelsior Trust was established.
In addition, “Flash Holdings and Excelsior Trust do not have a major independent commercial function other than serving as nominees for a part of Smith’s revenue derived from multiple Vista funds, for the purpose of disguising this income from the IRS.”
Over the course of a decade, Smith established businesses in Nevis, Belize, Bermuda, and the BVI. He paid his accountant Kepke “more than $1 million” to establish and oversee the trusts, which were funded by the proceeds of his hedge fund Vista.
According to the affidavit, Smith utilised this arrangement to hide from the IRS over $150 million in taxable income he received from several Vista Private Equity Funds.
The prosecution of Kepke is ongoing. However, it is unknown what will happen to the IRS tax case or Smith’s involvement in it in the wake of Brockman’s passing.
Smith made a series of sizable charity payments over the course of the last several years when the government caught up with him over his evaded taxes.
He gained notoriety in 2019 after promising to repay $34 million in student debts for 400 students at an Atlanta institution, an act that earned him accolades from Jamie Foxx and Bernice King, daughter of Martin Luther King Jr.
After he handed the Smithsonian’s National Museum of African American History and Culture a $20million contribution in 2016, the museum’s head of development Adrienne Brooks told the Washington Post he had been a relative unknown only three years before.
She told the newspaper, “We kept wondering, “Who is this Robert Smith?”
In 2017, he signed the Giving Pledge for the first time by pledging to donate half of his net fortune to organisations that promote “equality of opportunity for African Americans” and environmental preservation.
When Smith donated $5 million to the nonprofit Reform Alliance, of which he is listed as a “founding partner,” he made headlines in February 2019.
During his time in office, Donald Trump also made a point of developing relationships with White House insiders.
He developed friendships with Jared Kushner’s friend Van Jones, Ivanka Trump, and Steve Mnuchin, who oversaw the IRS as the Treasury Secretary at the time.
The billionaire is rumoured to have rented a home in Palm Beach, Florida, close to the Trump family’s resort of Mar-a-Lago while looking for the ideal mansion in the area. The billionaire also joined Ivanka’s White House advisory board on jobs in September of that year. The billionaire held daily calls with Mnuchin during the roll out of the first coronavirus stimulus package in May and June of 2020.