International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Saturday, April 17, 2021

Tax Attorney Indicted for Facilitating $225 Million in Capital Gains Fraud for Robert E Smith

A federal grand jury in San Francisco returned an indictment today charging a Houston-based tax attorney of conspiring with the Chairman and Chief Executive Officer of a private equity firm to defraud the IRS. The grand jury further charged him with three counts of aiding and assisting in the preparation of the CEO’s false tax returns for the 2012 to 2014 tax years. The billionaire Robert F. Smith who has a non-prosecution agreement with the Department of Justice has provided evidence against his former tax attorney.

According to the indictment, from 1999 to 2014, Carlos E. Kepke helped Robert F. Smith create and maintain offshore entities that were used to conceal from the IRS approximately $225,000,000 of capital gains income that Smith had earned. In approximately March 2000, Kepke allegedly created a Nevisian limited liability company (Flash Holdings) and a Belizean trust (Excelsior Trust) to serve as the tax evasion vehicles. When Smith earned capital gains income from his private equity funds, a portion was allegedly deposited into Flash’s bank accounts in the British Virgin Islands and Switzerland. As alleged, Smith was able to hide this income because Excelsior, and not Smith, was the nominal owner of Flash. Smith then allegedly failed to timely and fully report his income to the IRS. Kepke allegedly assisted in the preparation of Smith’s false 2012 to 2014 returns.  

For his services, Smith has allegedly paid Kepke nearly $1,000,000 since 2007. These fees, as charged, included an annual payment for Kepke to purge or “securitize” his records related to Smith, Excelsior, and Flash.

https://lawprofessors.typepad.com/intfinlaw/2021/04/tax-attorney-indicted-for-facilitating-225-million-in-capital-gains-fraud-for-robert-e-smith.html

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