Liquidators try to prevent Brockman-linked company’s assets being seized by IRS
An exempted Bermuda company linked to a Texan billionaire accused of a massive tax fraud has been named in a federal bankruptcy court in the United States.
Joint liquidators of Point Investments Ltd have applied to the court in Delaware to have it recognise a winding-up order issued by the Bermuda Supreme Court in February.
The Chapter 15 petition aims to prevent the US Internal Revenue Service from seizing Point’s assets in that country as part of its efforts to recover tax allegedly owed by 80-year-old Robert Brockman.
Mr Brockman, former CEO of Reynolds and Reynolds, an Ohio-based vendor of management software for auto dealerships, stands accused of a $2 billion tax fraud using a web of offshore entities – the largest ever tax prosecution brought against an individual in America.
He was charged with multiple counts of tax evasion, money laundering, failing to file foreign bank account reports, wire fraud affecting a financial institution, evidence tampering, destruction of evidence and other crimes in an October, 2020 indictment.
Mr Brockman denies all the charges. His lawyers say he has dementia and cannot stand trial, with a judge in Texas still to rule on his competency.
The joint liquidators of Point Investments Ltd, including Bermuda-based Matthew Clingerman, of international asset recovery firm KRyS Global, asked the Delaware court to stay the “ … execution, commencement, or continuation of any action or proceeding concerning the debtor’s assets, rights, obligations or liabilities …” and to suspend the “ … right to transfer, encumber or otherwise dispose of any of the debtor’s assets to the extent any such right has not been suspended.”.
All the shares in Point are owned by a British Virgin Islands entity called Spanish Steps Holdings, which is itself owned by BCT Limited, the trustee of the Bermuda-registered A. Eugene Brockman Charitable Trust.
Court proceedings in Bermuda have previously heard that the charitable trust has estimated assets of $6 billion.
The Chapter 15 petition states that Point’s principal asset in the US is minority ownership of Solera Global Holding Corp, a Delaware corporation, as well as direct investment in Reynolds & Reynolds.
It says Point has various foreign assets, including in Cayman Islands funds managed by entities understood to be affiliated with Vista Equity Partners Management, a Delaware limited liability company with a principal office and place of business in California.
Mr Brockman launched the private equity career of American billionaire, Robert Smith, in 2000 when he invested in Smith’s Vista Equity Partners, eventually providing at least $1 billion in capital.
Mr Smith avoided prosecution in 2020 when he admitted he evaded taxes, paid $139 million in back taxes and penalties, and agreed to cooperate against Mr Brockman.
The joint liquidators of Point Investments Ltd state in their filing with the Delaware court that the IRS began “serving purported notices of levy targeting the assets of the debtor” last month.
They say some of the “purported levies” were directed to Vista and some to Mr Smith, as Vista’s founder, chairman and CEO.
“The purported levies identify the taxpayer as ‘Point Investments Ltd as alter ego of Robert T Brockman’ or ‘Point Investments Ltd as nominee of Robert T Brockman’.
“The petitioners dispute that the debtor is an alter ego or nominee of Mr Brockman.”
The joint liquidators say it is not clear why the levies were directed at Vista, adding: “Nevertheless, the petitioners fear that individuals or entities associated with the Vista funds will deliver the debtor’s property to the IRS and that the IRS will issue additional purported levies against the debtor’s property.”
Point Investments Ltd is described in the court filing as a private fund registered with, and regulated by, the Bermuda Monetary Authority and the joint liquidators are the “court-appointed, independent fiduciaries charged by the Bermuda court with protecting and preserving the debtor’s worldwide assets for the benefit of the debtor’s stakeholders”.
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