Dec 2, 2022 - Economy & Business

Robert Smith's tax fraud epilogue

Illustration of Robert Smith with a money pattern

Illustration: Eniola Odetunde/Axios

When private equity billionaire Robert Smith settled tax fraud charges in late 2020, he agreed to cooperate with prosecutors on related cases. But he won't ever need to testify in court, because two former Smith associates have died on the eves of their respective trials.

Driving the news: Carlos Kepke, an 81 year-old Houston lawyer accused of helping Smith avoid taxes, killed himself on Sunday. His trial had been scheduled to begin Monday, with Smith among the scheduled witnesses.

  • Robert Brockman, a former Smith mentor and limited partner in Vista Equity's debut fund, passed away in August while in hospice care for dementia.

The big picture: Smith is one of private equity's most prominent and wealthiest investors, plus a major philanthropist. But he's never been subjected to much public questioning of his tax fraud, one of the largest in American history, even when being interviewed on stage after his settlement.

  • The deaths of Brockman and Kepke will help Smith keep it that way. Not surprisingly, he's declined comment on both of them.
  • In a filing late last week, Kepke's attorneys filed papers suggesting that they planned to dig into Smith's original claims of innocence — both to bolster their client's similar claims, and also to impugn Smith's credibility.
  • Smith might have viewed the possibility of Kepke being found not guilty as his own de facto exoneration, but getting there would have required jurors to effectively believe that Smith either lied to prosecutors or to them.

PE angle: Smith's software-focused firm, Vista Equity, is in the midst of trying to raise $20 billion for its eighth flagship fund. Sources say that the tax situation has come up repeatedly in limited partner meetings, with Vista just past the halfway point after nearly a year in market.

  • Smith also has been floated as a possible NFL owner, but it's tough to see him bidding on the Washington Commanders while Vista's fundraise remains ongoing. Both because his tax issues would make new headlines, and because some LPs want to make sure Smith is fully committed to the firm.

The bottom line: The deaths of Brockman and Kepke are tragedies for their friends and families. For Smith, they represent a chance to put his embarrassment further in the rearview mirror.

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