Josh Boswell, Daily Mail, August 17, 2022
Billionaire tax cheat Robert Smith put up his girlfriend in a lavish apartment using business funds and bought luxury properties around the world using untaxed income, court documents claim.
A federal investigator’s affidavit lists a 300-acre ranch in Colorado, a club and condos in the French Alps and a Sonoma vacation home among the extravagant purchases he made with undeclared gains.
Smith, America’s richest black man, admitted to illegally hiding tens of millions of dollars from the IRS in offshore tax havens and was slapped with $139 million in penalties last year – but avoided jail in a controversial non-prosecution agreement.
He was ensnared by Treasury investigators as part of the biggest tax bust in history. They accused Smith’s business partner, hedge fund billionaire Robert Brockman, of hiding $2 billion from the government. 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 firm Vista Equity Partners in 2000. The company made a killing on investments in computer companies, and has risen to become the fourth largest enterprise software firm in 2019 with $46billion of funding, beaten only by Microsoft, Oracle and SAP.
He had hoped his sweetheart deal with prosecutors would minimize his embarrassment. His lawyers have since fought tooth and nail to keep his business and personal affairs from spilling out into the courts, and to keep their client from having to testify in public.
Even this month Smith’s lawyers were filing a flurry of motions in Brockman’s tax prosecution case to keep legal filings about Smith sealed.
The billionaire reportedly had his three top attorneys all sit in a Texas federal court to monitor proceedings, though a source lose to Smith denied the reports.
But with the feds attacking from all angles in the gargantuan tax case, tantalizing pieces of information are starting to leak out, revealing how Smith spent some of his untaxed millions.
One such leak comes from another prosecution, of Smith and Brockman’s accountant, Carlos Kepke, for constructing the allegedly illegal offshore schemes.
On June 3 this year, prosecutors lodged a filing that included an affidavit from a Treasury Special Agent, laying out Smith’s tax scheme and how he spent his money.
The affidavit includes information from a private investigator hired by Smith’s ex wife Suzanne McFayden amid their bitter divorce.
The PI found that ‘Smith had his business pay for, and treat as business-related expenses, the rental of a luxury New York City apartment and living expenses of Smith’s then-girlfriend,’ Special Agent Trista Merz wrote in the affidavit, dated August 2018.
In divorce filings, McFayden cited infidelity as the reason for her and Smith’s split.
It may be that these are just the kind of embarrassing personal details that Smith’s army of attorneys are trying to keep under wraps.
Whatever the reason, one tax probe expert told the New York Post the push for secrecy from the billionaire’s attorneys was odd.
‘It’s very unusual … I certainly never saw anything like it during my time working on these cases,’ said Victor Song, a former chief of IRS Criminal Investigations, now COO of forensic accounting company Integritas3.
The Treasury Special Agent’s affidavit listed mansions and luxury properties bought by Smith using money from his offshore funds.
One is the Boulder River Ranch, a 5 bed 9 bath, 6,598 sq. ft. home on 300 acres in Black Hawk, Colorado.
Satellite images show a pool and tennis court by the riverside ranch, with a fishing lake and its own land stretching for miles around it.
Smith bought it in parcels between 2009 and 2013 using more than $12million of untaxed income, and a further $22million renovating it, the affidavit said, adding that he used his attorney cousin Wayne Vaden to disburse the funds.
Vaden appears on state filings for the ranch’s holding entity, Boulder River Ranch Holding Company LLC.
Smith bought two ski condos and a ‘downtown restaurant/nightclub’, The White Pearl, in the French alpine town of Megève for €5.3million, the affidavit said.
According to the Treasury he used his Swiss and British Virgin Islands (BVI) accounts to furnish the properties and pay for his family’s travel there.
His ex wife dished the dirt to investigators on the property’s personal – rather than business – use.
‘According to McFayden, Smith, while living in Geneva, Switzerland, the family used the ski condominiums as a weekend and holiday getaway where their children learned how to ski,’ Special Agent Merz wrote.
Smith allegedly paid rent on the homes to his own company to conceal his purchase of them using his unreported income.
The billionaire also used $2.5million from his offshore account in the BVI to buy ‘a second home’ in Sonoma, California ‘for weekend getaways with their children.’.
He used the untaxed money to hire a designer to renovate, furnish and build a pool house, paying a total $7.5million through the offshore accounts, the court document said.
The affidavit does not specify which New York City apartment he put his unidentified girlfriend up in using a business account in 2013 – but he currently owns a $59million penthouse in Chelsea which he has been renovating with his new wife, 2010 Playmate of the Year Hope Dworaczyk.
The triplex, 10,000 sq. ft. property which he bought in 2018 has two kitchens and a private rooftop terrace.
Its developer, Michael Shvo, was also caught in a tax evasion scheme and pleaded guilty in 2018 to the crime in connection with purchases of furniture, jewelry, art and a Ferrari.
Smith reportedly bought a pair of North Palm Beach, Florida, homes in 2020 for $48.19million, in a private, gated community next to the Seminole Golf Club.
Together the homes total 25,878 square feet with 11 bedrooms, 15 full bathrooms and three half bathrooms, a putting green, wine cellar, roof deck, sports court, movie theater and subterranean gym.
Agent Merz went into detail about the surprising lengths Smith allegedly went to, to avoid detection of his tax evasion schemes.
Smith used his wife’s uncle, Headley Waddington, a London-based Jamaican retired builder, to ‘pose as the ‘creator’ of a foreign trust’ called Excelsior.
Waddington said in a November 2013 deposition that ‘he did not contribute any money to the trust, nor did he have the financial means to do so,’ – despite allegedly signing documents at Smith’s behest saying Waddington alone funded the offshore entity.
‘Based on my training and experience it appears that Excelsior Trust was created through a fraudulent conveyance, using Smith’s ex-wife’s uncle Waddington as a nominee settlor,’ Merz wrote.
‘Further, that Excelsior Trust and [another offshore trust] Flash Holdings do not have a significant independent business purpose other than acting as nominees for a portion of Smith’s income earned from various Vista funds, for the purpose of concealing this income from the IRS.’
Smith set up entities in Nevis, Belize, Bermuda, and the BVI over a decade and paid his accountant, Kepke, ‘more than $1 million’ to create and manage the trusts, stuffed with money from his hedge fund Vista.
‘Smith used this structure to conceal from the IRS approximately $150 million of taxable income he earned from various Vista Private Equity Funds,’ the affidavit said.
Kepke’s prosecution continues. But following Brockman’s death, it is unclear what will happen to the IRS’ tax case – or Smith’s role in it.
In the past few years, as the feds caught up with him over his dodged taxes, Smith went on a spree of grand charitable donations.
He went viral in 2019 when he pledged to pay off $34million of student loans for 400 students at an Atlanta university, prompting praise from Jamie Foxx and Martin Luther King Jr.’s daughter Bernice.
After he gave the Smithsonian’s National Museum of African American History and Culture a $20million gift in 2016, the museum’s director of development Adrienne Brooks told the Washington Post he had been a relative unknown just three years earlier.
‘We kept wondering, “Who is this Robert Smith?”‘ she told the paper.
He became the first black man to sign the Giving Pledge in 2017, committing to devoting half of his net worth to causes which support ‘equality of opportunity for African Americans’ and ecological protection.
Smith grabbed headlines in February 2019 when he gave $5 million to criminal justice nonprofit Reform Alliance, of which he is listed as a ‘founding partner’.
During Donald Trump’s presidency he also made a point of befriending White House insiders.
He got close with Trump’s daughter Ivanka, then-Treasury Secretary Steve Mnuchin – who oversaw the IRS – and Jared Kushner’s friend Van Jones.
The billionaire held daily calls with Mnuchin during the roll out of the first coronavirus stimulus package in May and June 2020, joined Ivanka’s White House advisory board on jobs in September that year and is even believed to have rented a home in Palm Beach, Florida, close to the Trump family’s playground of Mar-a-Lago while he searched for the perfect mansion in the neighborhood.
A spokesman for Smith declined to comment.