SAN FRANCISCO—The United States Department of Justice announced on Thursday, April 15, that a Houston, Texas attorney, Carlos E. Kepke, was indicted with conspiring with the Chairman and Chief Executive Officer of a private equity firm, to defraud the Internal Revenue Service of millions of dollars. Kepke has also been charged with three counts of aiding and assisting in the preparation of a CEO’s false income tax returns for the years 2012 through 2014, federal prosecutors noted in a news release.
The authorities said that from 1999-2014, Kepke aided a client of his, Robert F. Smith, to “create and maintain a structure of offshore entities and foreign bank accounts that were used to conceal from the IRS approximately $225 million of capital gains income that Smith had earned.”
According to the indictment, Smith was a resident of California and Texas and was the Chairman and Chief Executive Officer of Vista Equity Partners, which was a private equity firm in Northern California.
Kepke created a “Nevisian limited liability company (Flash Holdings) and a Belizean trust (Excelsior Trust)” to serve as the tax evasion vehicles in March of 2020, the authorities explained.
The indictment said that Flash Holdings and Excelsior Trust “had no employees, no offices, and never provided any service to Vista or any Vista fund.” The indictment added that Excelsior Trust “had no business purpose other than holding assets for the benefit of Smith.”
The Department of Justice said that when Smith earned money from his private equity funds, “a portion was allegedly deposited into Flash’s bank accounts in the British Virgin Islands and Switzerland.”
“As alleged, Smith was able to hide this income because Excelsior, and not Smith, was the nominal owner of Flash. Smith then allegedly failed to timely and fully report his income to the IRS. Kepke allegedly assisted in the preparation of Smith’s false 2012 to 2014 returns,” the authorities continued.
Since 2017, Smith paid Kepke more than $1,000,000 for his services, which included payment for Kepke to “purge” or “securitize” his “records related to Smith, Excelsior, and Flash,” noted the authorities.
Authorities indicated that Kepke’s court appearance is scheduled for April 22, and if convicted, faces a prison term of 5 years for the conspiracy count and 3 years for each count of assisting in the preparation of a false tax return.