Ghost of Brockman hangs over Bermuda company winding-up order
A Bermuda company that was allegedly used to hide more than $2 billion from the United States Government is still being wound up — almost a year after the death of the elderly tycoon accused of controlling it.
Robert Brockman used Point Investments Ltd and other “offshore entities” to commit “tax fraud” on an “unprecedented” scale, according to the US Internal Revenue Service, which is seeking to recover $1.4 billion from his estate.
The IRS said it was the largest such case involving an individual in the history of the country.
Mr Brockman was charged in a 39-count indictment with financial crimes including tax evasion, wire fraud, money laundering and destroying evidence, but he died last August, aged 81, before he could stand trial.
Records filed with the Registrar of Companies in Bermuda show the winding-up of Point Investments — a company Mr Brockman allegedly used to invest in funds in the Cayman Islands but failed to declare on his tax forms — is ongoing, with an end date of August 15.
The file shows efforts by the joint liquidators to have the Bermuda Supreme Court’s winding-up order recognised in the US were successful.
The Chapter 15 petition was aimed at preventing the IRS from seizing Point Investments’ assets in that country as part of its efforts to recover tax allegedly owed by Mr Brockman.
A recent notice published in The Royal Gazette by the joint liquidators asked for any creditors of Point Investments who have yet to come forward to make themselves known.
Mr Brockman, the former chairman and chief executive of Reynolds & Reynolds, a car dealership software company in Ohio, had a fortune of $4.7 billion, according to an estimate by Forbes in April.
The criminal indictment against him alleged he “used a web of offshore entities based in Bermuda and Nevis to hide from the IRS income earned on his investments in private equity funds, which were managed by a San Francisco-based investment firm [called Vista].
“As part of the alleged scheme, Brockman directed untaxed capital gains income to secret bank accounts in Bermuda and Switzerland.”
After he was criminally charged, the IRS issued a 70-page “jeopardy assessment” and related jeopardy levy against Mr Brockman to try to recover more than $1.4 billion in taxes, fraud penalties and interest.
It said such a step was necessary because Mr Brockman had begun “moving and liquidating assets” to put it out of the Government’s reach — a claim the billionaire vociferously denied in a civil action.
Mr Brockman’s attempt to have the levy dropped was dismissed by US District Judge George Hanks in September last year.
Judge Hanks, who was set to oversee the criminal case, issued an opinion and order in which he wrote: “The scale and complexity of the schemes through which Brockman allegedly avoided paying US taxes are immense …”
He said the IRS provided evidence which supported its “conclusion that Brockman used a labyrinthine web of nominees, offshore entities, foreign bank accounts and encrypted communications to mask his assets and avoid reporting billions of dollars in income between 2004 and 2018.”
The judge detailed the involvement of lawyer Evatt Tamine, who worked for Mr Brockman in Bermuda, in the alleged scheme, identifying him as the “Individual One” referred to in the criminal indictment.
Judge Hanks described Mr Tamine and billionaire investor and Vista founder Robert Smith — “Individual Two” in the indictment — as “participants in and beneficiaries of Brockman’s alleged fraud”.
Judge Hanks wrote: “Tamine is an Australian barrister who, according to the Government, was Brockman ’s nominee, a self-described ‘figurehead’ who served as the nominal trustee or director of Brockman’s offshore entities.
“IRS agents and Bermudan (sic) police executed a search warrant for a raid on Tamine’s home office in Bermuda in September of 2018 and Tamine has been a co-operating witness in the Government’s investigation of Brockman.”
He added: “The evidence provided by Smith [who himself admitted to evading US taxes] and Tamine, and uncovered in the raid on Tamine’s home office, is compelling …”
The judge’s opinion detailed how the US Government alleged that Mr Brockman formed Point Investments to invest in private equity funds with Mr Smith with a focus on US-based software and technology firms.
He wrote: “Tamine was the nominal trustee or director of the entities in the Point ownership structure; but he has told investigators [and testified to this court, at Brockman ’s competency hearing in his criminal case] that in reality Brockman controlled the entities, including the Bermudan (sic) trusts at the top of the ownership chain.”
The entities were linked to the A Eugene Brockman Charitable Trust, formed in 1981 by Mr Brockman’s father and said in court documents to have estimated assets of $6 billion.
Judge Hanks wrote: “Through his undisclosed beneficial ownership of the entities in the Point ownership structure, the [US] Government alleges that Brockman avoided US income taxes on taxable investment income and gains in the amounts of $2.3 billion of net capital gains, $29 million in interest income and $5.9 million in dividends during the years 2004 through 2018.”
The judge said there was evidence that Mr Brockman used an encrypted private e-mail server to communicate with Mr Tamine, whom he referred to by the alias “Redfish”.
“Decrypted e-mail conversations between Brockman and his business associates obtained in the Tamine raid discuss the falsification, backdating, concealment and destruction of documents.
“Tamine testified to this court at Brockman’s competency hearing that, on one occasion, he travelled to the home of a recently deceased business associate at Brockman’s behest to destroy documents and hard drives pertaining to Brockman.
“Tamine later wrote to Brockman in an e-mail that Brockman could ‘rest easily that any attempt to search [the associate’s] home would be fruitless.’”
Mr Tamine, who lived in Fairylands with his Bermudian wife, Sophie Tod, has been involved in complex civil litigation in Bermuda over the Brockman Charitable Trust.
He was ordered by the Chief Justice in May last year to pay back $28 million he was accused of “wrongfully taking” from a company linked to the trust. Mr Tamine denied any wrongdoing.
Asked to comment on the winding-up of Point, Bermuda-based joint liquidator Mathew Clingerman, of Kroll, said “ … we do not offer comments for news articles”.
• To view the US judge September 2022 opinion, the Point Investments order, and the Robert Brockman indictment, see “Related Media”
