KEY POINTS

  • Smith admitted to using false filings, faked paper trails, and offshore accounts to hide hundreds of millions from the U.S. government
  • He is known for his charitable giving, such as paying off the debt of an entire college class
  • Smith will avoid prosecution by cooperating with the investigation against his business partner, Robert Brockman

Billionaire Robert Smith is likely best known for his charitable stunts, such as vowing to pay off the debts of Morehouse College’s entire graduating class last year.

That clean image may run into trouble due to a recent agreement with the IRS showing that Smith lied for years to avoid paying taxes. Smith reportedly used false statements, forged paper trails, and also used a network of offshore accounts. 

He will only avoid prosecution due to compliance with a larger tax avoidance investigation into Robert Brockman, recently accused of the largest tax avoidance case against an individual in U.S. history. Smith will also pay $139 million in back taxes, fees, and interest. He agreed to drop $182 million in tax refund claims due to purported charitable contributions, as well. 

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Federal officials announced the agreement Thursday, saying that Smith had been under investigation for over four years. Smith admitted to them that he had used millions in untaxed funds to buy and renovate real estate properties. He spent $2.5 million on a California vacation home in 2005, using untaxed income stored in the British Virgin Islands and the Swiss Banque Bonhote.

Five years later, Smith moved to Switzerland, using the money in his Swiss account to buy two ski properties and a commercial estate. He eventually moved back to the U.S., living now in Austin, Texas. 

He took more than $13 million back with him. He states that he used the money “to build a home and make improvements to property that he owned in Colorado and to fund charitable activities on that property for inner-city children and wounded veterans.”

Smith’s partnership with Brockman goes back to 2000, when he used $1 billion of Brockman’s seed money to start his first private equity firm. Smith admits to knowing the money was hidden from the government but used it anyway to jump-start his fortune.

Smith also took Brockman’s advice to restructure his businesses offshore, paying an attorney Brockman recommended $800,000 to create a fake paper trail of related businesses from 2000 to 2014.

In 2014, Smith took $182 million from those businesses and moved it to his charitable foundation Fund II, falsely telling the IRS he was required to do so as part of a deal with Brockman. Offshore assets already designated for charity do not have to pay taxes upon reentering the U.S.

After his 2014 interactions, his Swiss bank urged him to admit his lies to the IRS.  Smith applied for an amnesty program but was rebuffed by the government. After this rejection, he continued to file false tax reports for years until becoming caught up in the Brockman investigation.