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Illustration: Eniola Odetunde/Axios

Robert Smith's admission to tax fraud has done more than just cost him a whopping $140 million. It's also roiled Vista Equity Partners, the private equity firm he founded and leads, with some insiders and limited partners feeling they were misled (or left in the dark) about the extent of Smith's legal troubles.

Behind the scenes: Smith called a virtual meeting of Vista's managing directors and other top staffers on Wednesday, to discuss details of his settlement. A source says he called the overall experience "humbling" and that he regretted the "undue burden" that his actions had put on others, including some Vista colleagues.

Smith also said that Brian Sheth, Vista's co-founder and president, is likely to be leaving Vista. Sheth himself was not on the call, and it does not appear that he was invited to participate.

  • Sheth, long considered one of Vista's top dealmakers, had told managing directors last December that he was thinking about leaving the firm or retiring.
  • But he had not yet made any formal decision, nor have he and Smith discussed specifics of how a departure would be structured. Complexities include his existing firm economics, fund "key man" clauses, etc.
  • Sources say that Smith's tax troubles are a contributing factor to a breakdown in the two men's relationship, and that Smith's meeting comments raised some eyebrows.
  • Expect Dyal Capital Partners, which has twice purchased minority stakes in Vista, to have some say in the final resolution.

Of note: Sheth did not return a request for comment, while a Vista spokesman also declined comment.

One of Smith's biggest internal challenges is a perception that he long underplayed the severity of the investigation — presenting it as a relatively minor accounting problem. Or not raising it at with certain limited partners, save perhaps for a minor data room mention.

  • But, yesterday, the U.S. Attorney's press release was much more biting, calling it an "illegal scheme to conceal income and evade millions in taxes."
  • It added that Smith did so "knowingly and intentionally," which reads a bit different from Smith's narrative of being a naive young investor who went along to get along with the tax structures proposed by an older, more experienced limited partner.
  • That LP was Robert Brockman, who yesterday was charged with what DOJ calls the "largest ever" tax fraud scheme by a U.S. citizen. Smith is cooperating in that ongoing investigation.
  • Smith and Vista are said not to be concerned about a subsequent SEC investigation into Smith's continuing ability to run a securities firm, but I'm not quite sure why they're so confident. Particularly if new sheriffs roll into town next year, and they're not thrilled with the fact that Smith's fat bank account is largely what kept him out of jail.
  • Read the full findings of facts.

The bottom line: Smith has settled with DOJ and the IRS, but the story isn't over yet.

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Arizona Republicans censure Cindy McCain and GOP governor

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Arizona Republican Party members voted on Saturday to censure prominent GOP figures Cindy McCain, Gov. Doug Ducey and former Sen. Jeff Flake (R-Ariz.), who've all faced clashes with former President Trump.

Why it matters: Although the resolution is symbolic, this move plus the re-election of the Trump-endorsed Kelli Ward as state GOP chair shows the strong hold the former president has on the party in Arizona, despite President Biden winning the state in the 2020 election.