CEO of Multibillion-dollar Software Company Indicted for Decades-long Tax Evasion and Wire Fraud Schemes

Allegedly Used Secret Swiss and Bermudian Bank Accounts in Scheme to Conceal Approximately Two Billion Dollars of Capital Gains Income

A federal grand jury in San Francisco, California, returned a 39 count indictment charging Robert T. Brockman, the Chief Executive Officer of an Ohio-based software company, with tax evasion, wire fraud, money laundering, and other offenses, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Tax Division, U.S. Attorney David L. Anderson for the Northern District of California, and Chief of Internal Revenue Service (IRS) Criminal Investigation Jim Lee. The charges stem from an alleged decades-long scheme to conceal approximately $2 billion in income from the IRS as well as a scheme to defraud investors in the software company’s debt securities.

“Today’s indictment reflects the Department of Justice’s commitment to finding and prosecuting the costliest and most sophisticated tax crimes in the United States,” said Principal Deputy Assistant Attorney General of the Tax Division Richard E. Zuckerman.

“Complexity will not hide crime from law enforcement,” said U.S. Attorney Anderson. “Sophistication is not a defense to federal criminal charges. We will not hesitate to prosecute the smartest guys in the room.”

“As alleged, Mr. Brockman is responsible for carrying out an approximately two billion dollar tax evasion scheme,” said Jim Lee, Chief of IRS Criminal Investigation. “IRS Criminal Investigation aggressively pursues tax cheats domestically and abroad. No scheme is too complex or sophisticated for our investigators. Those hiding income or assets offshore are encouraged to come forward and voluntarily disclose their holdings.”

According to the indictment, Brockman, a resident of Houston, Texas, and Pitkin County, Colorado, used a web of offshore entities based in Bermuda and Nevis to hide from the IRS income earned on his investments in private equity funds which were managed by a San Francisco-based investment firm. As part of the alleged scheme, Brockman directed untaxed capital gains income to secret bank accounts in Bermuda and Switzerland. The indictment further alleges that to execute the fraud, between 1999 and 2019, Brockman took measures such as backdating records and using encrypted communications and code words to communicate with a co-conspirator, among other alleged actions.

In addition to the tax offenses, the indictment alleges that, between 2008 and 2010, Brockman engaged in a fraudulent scheme to obtain approximately $67.8 million in the software company’s debt securities. As CEO, Brockman was contractually restricted from purchasing any of the software company’s debt securities without prior notice, full disclosure, and amending the associated credit agreements. The indictment alleges that Brockman used a third-party to circumvent those requirements, to acquire the debt securities, and to conceal from the sellers valuable economic information. The indictment further alleges that Brockman used material, non-public information about the software company to make decisions about purchasing the debt. In addition, Brockman allegedly persuaded another individual to alter, destroy, and mutilate documents and computer evidence with the intent to impair the use of such evidence in a grand jury investigation.

Brockman is charged with conspiracy, in violation of 18 U.S.C. § 371; seven counts of tax evasion, in violation of 26 U.S.C. § 7201; six counts of failing to file foreign bank account reports, in violation of 31 U.S.C. §§ 5314 & 5322(b); 20 counts of wire fraud affecting a financial institution, in violation of 18 U.S.C. § 1343; two counts of concealment money laundering, in violation of 18 U.S.C. § 1956(a)(1)(B)(i)), and tax evasion money laundering, in violation of 18 U.S.C. § 1956(a)(1)(A)(ii)); and one count each of international concealment money laundering, in violation of 18 U.S.C. § 1956(a)(2)(B)(i)); evidence tampering, in violation of 18 U.S.C. § 1512(b)(2)(B), and destruction of evidence, in violation of 18 U.S.C. § 1512(c)(1).

An indictment merely alleges that crimes have been committed. The defendant is presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Brockman potentially faces a substantial period of incarceration, as well as restitution and criminal forfeiture. Any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Brockman is scheduled to make his initial federal court appearance before U.S. Magistrate Judge Nathanael M. Cousins today.

The case is being prosecuted by Senior Litigation Counsel Corey Smith of the Tax Division, Assistant U.S. Attorney Michael G. Pitman, and Trial Attorneys Lee Langston and Christopher Magnani of the Tax Division. The Justice Department’s Office of International Affairs of the Department’s Criminal Division also provided extensive assistance in this matter.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

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    What GAO Found GAO's Disaster Resilience Framework serves as a guide for analysis of federal actions to facilitate and promote resilience to natural disasters and changes in the climate across many policy areas, including transportation. The framework is organized around three guiding principles—information, integration, and incentives—and a series of questions that can help identify opportunities to enhance federal efforts to promote disaster resilience. Specifically, the integration principle states that integrated analysis and planning can help decision makers take coherent and coordinated actions to promote resilience. For example, in October 2019, GAO reported that no federal agency, interagency collaborative effort, or other organizational arrangement has been established to implement a strategic approach to climate resilience investment that includes periodically identifying and prioritizing projects. Such an approach could supplement individual agency climate resilience efforts and help target federal resources toward high-priority projects. GAO recommended that Congress consider establishing a federal organizational arrangement to periodically identify and prioritize climate resilience projects for federal investment. The Federal Highway Administration (FHWA) has taken steps to encourage states to enhance the climate resilience of federally funded roads by developing agency policy, providing technical assistance to states, and supporting climate resilience research funding, among other actions. In addition, as part of ongoing work on FHWA's federal-aid highway program, GAO identified options that could further enhance the climate resilience of federally funded roads, based on a literature review and interviews with knowledgeable stakeholders (see table). Some of these options are similar to recommendations made previously by GAO. Further, according to FHWA officials, some of these options would likely require additional congressional direction or authority to implement. Options to further enhance resilience of federally funded roads, as suggested by relevant literature and knowledgeable stakeholders Option Integrate climate resilience into Federal Highway Administration policy and guidance. Update design standards to account for climate change and resilience best practices. Provide authoritative, actionable, forward-looking climate information. Add climate resilience funding eligibility requirements, conditions, or criteria to formula grant programs. Expand the availability of discretionary funding for climate resilience improvements. Alter the Emergency Relief (ER) program by providing incentives for, or conditioning funding on, pre-disaster resilience actions. Expand the availability of ER funding for post-disaster climate resilience improvements. Establish additional climate resilience planning or project requirements. Link climate resilience actions or requirements to incentives or penalties. Condition eligibility, funding, or project approval on compliance with climate resilience policy and guidance. Source: GAO analysis of literature and interviews with knowledgeable stakeholders. | GAO-21-561T Why GAO Did This Study Since 2013, GAO has included Limiting the Federal Government's Fiscal Exposure by Better Managing Climate Change Risks in its High Risk List. In addition, according to the U.S. Global Change Research Program, a changing climate threatens the performance of the U.S. transportation system across all modes, including roads. Congress authorized approximately $43 billion of fiscal year 2021 formula funding for the U.S. Department of Transportation's FHWA's federal-aid highway program, which primarily funds highway planning and construction. This testimony discusses (1) GAO's framework for identifying opportunities to enhance the climate resilience of transportation infrastructure; and (2) preliminary observations on actions taken and options to further enhance the climate resilience of federally funded roads. This work is based on GAO reports issued from 2014 through 2019, a review of literature, and interviews conducted with FHWA officials and knowledgeable stakeholders conducted as part of on-going work. GAO expects to issue a report on the results of its ongoing work in summer 2021.
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  • Commercial Space Transportation: FAA Continues to Update Regulations and Faces Challenges to Overseeing an Evolving Industry
    In U.S GAO News
    What GAO Found The Federal Aviation Administration (FAA) recently updated and streamlined its launch and reentry licensing regulations but has made less progress on other key commercial space transportation regulations. The new licensing regulations, issued in December 2020, replaced prescriptive requirements—in which a certain technology or action was required—with a performance-based regulatory framework, which provides applicants flexibility in how they achieve required outcomes, such as a specific level of safety. Given its focus on the licensing regulations, FAA placed on hold revisions to other regulations governing commercial space transportation—revisions which, according to FAA officials, are warranted given the industry's evolution. For example, FAA has not yet begun to revise its financial responsibility regulations, which require launch companies conducting FAA-licensed launches to purchase insurance to cover damage to third parties in case of a launch mishap. According to FAA officials, revising these regulations is their next planned rulemaking and when finalized, will respond to GAO's recommendations to improve FAA's methodologies for evaluating and calculating potential third-party losses from launch and reentry mishaps and help ensure the federal government is not exposed to greater liability than expected. FAA also faces ongoing challenges regulating an evolving industry. In particular, as GAO previously reported, FAA continues to face the challenge of whether and when to regulate the safety of crew and spaceflight participants. While some companies have announced plans to take tourists to space within the next several years, FAA is prohibited by statute from regulating crew and passenger safety before 2023, except in response to events that caused or posed a risk of serious or fatal injury. However, FAA has taken some steps in anticipation of the expiration of the statutory moratorium, such as working with its industry advisory committee to develop and disseminate human spaceflight best practices. FAA also has taken some steps to help the agency keep pace with changes in the industry. For example, in response to recommendations GAO made in 2019, FAA recently assessed its workforce to identify skills and competencies that are needed among its workforce and is working to improve its workload projections to better account for the full range of its regulatory activities and the timeline of its licensing process. Such efforts are critical for ensuring FAA can better anticipate and respond to the growing and evolving commercial space industry and FAA's emerging workforce needs. Why GAO Did This Study The commercial space transportation industry provides launch services for government and private customers that carry objects, such as satellites and vehicles with scientific research, or passengers to or from space. Continued growth and evolution in the industry is expected as reliance on space-based applications increases. Within FAA, the Office of Commercial Space Transportation (AST) is charged both with overseeing the industry, including licensing and monitoring launch vehicle operations, and promoting the industry. This statement describes FAA's efforts to update regulations governing commercial space transportation; challenges FAA faces regulating an evolving industry; and steps FAA has taken to help ensure it is positioned to meet the needs of the evolving industry. This statement is based largely on GAO's body of work on commercial space transportation, including GAO-19-437 issued in May 2019. To update this information, GAO interviewed FAA officials and reviewed applicable statutes, regulations and selected industry documents.
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  • Federal Employees’ Compensation Act: Comparisons of Benefits in Retirement and Actions Needed to Help Injured Workers Choose Best Option
    In U.S GAO News
    Factors such as the timing of an injury in a career affect how Federal Employees' Compensation Act (FECA) total disability benefits compare to income security from typical federal retirement. The FECA program compensates federal employees for lost wages from work-related injuries, among other benefits. FECA recipients can receive this compensation for as long as their disability continues. At retirement age, they can remain on FECA or, instead, choose to receive their benefits from the Federal Employees Retirement System (FERS). Thus, FECA benefits represent a significant portion of retirement income for some injured federal employees. Through simulations, GAO found that factors such as the length of retirees' careers absent injury affected how similar their hypothetical FECA benefits packages were to their FERS packages in 2018. FERS benefits increase substantially the longer a federal employee works. As a result, median current and reduced FECA packages were greater than the FERS median for retirees with shorter careers absent injury. However, median FECA packages were similar to or less than FERS for retirees with longer careers (see figure). Median FECA Benefits as a Percentage of FERS Benefits by Career Length Absent an Injury For FECA recipients who choose to compare their FECA and FERS benefit options at retirement, estimates for most components of those benefits packages are available. However, the Department of Labor (DOL) does not routinely remind recipients to compare benefits, so they may be unaware of their options or how to consider them. In addition, DOL and the Social Security Administration (SSA) use a manual and highly complex process to calculate one key component of a FECA recipient's compensation in retirement related to Social Security benefits. As a result, estimates of FECA benefits in retirement that include this component are not readily available prior to retirement. These challenges hinder recipients' ability to accurately compare their options and may result in some recipients not choosing their best option at retirement. The President's budgets for fiscal years 2019-2021 have proposed several FECA reforms, including reducing disability compensation at retirement age. In a series of reports published in 2012, GAO analyzed the effects of similar proposed revisions to FECA compensation. GAO was asked to update its FECA and FERS benefit comparisons. This report examines (1) how FERS and total disability FECA benefits at retirement age compare under current and previously proposed reduced FECA compensation rates, and (2) the extent to which FECA recipients have access to information to compare their FECA and FERS benefits options. GAO compared the FERS benefits selected retirees received in 2018 with the hypothetical total disability FECA benefits they would have received from simulated injuries. GAO reviewed agency documents and interviewed officials from DOL, SSA, and other federal agencies. GAO is recommending that DOL remind FECA recipients as they approach retirement to obtain FERS benefit estimates for comparisons with FECA, and that DOL and SSA take steps to modernize and improve their process for calculating and providing information on certain FECA benefits in retirement that would enable recipients to make complete comparisons of retirement options. DOL and SSA concurred with all three recommendations. For more information, contact Cindy Brown Barnes at (202) 512-7215 or brownbarnesc@gao.gov.
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  • Federal Rulemaking: Selected EPA and HHS Regulatory Analyses Met Several Best Practices, but CMS Should Take Steps to Strengthen Its Analyses
    In U.S GAO News
    GAO reviewed 11 Executive Order (EO) 13771 rules—five significant Environmental Protection Agency (EPA) rules and six economically significant Department of Health and Human Services (HHS) rules. Seven of the 11 rules modified (i.e. repealed, amended, or delayed) existing rules (see table). GAO found that analyses for most of the seven rules monetized the same types of benefits and costs as analyses for the rules they modified, an indicator of consistency in the regulatory analyses. For example, one EPA rule modified an earlier rule that had established requirements for chemical risk management programs. EPA monetized anticipated changes to industry compliance costs for both rules. Where agencies monetized similar types of benefits and costs for both reviewed rules and modified rules, the value of some estimates differed, in part, because agencies had updated analytical assumptions, such as the number of entities subject to requirements or relevant wage data. Topics and Characteristics of 11 Environmental Protection Agency (EPA) and Department of Health and Human Services (HHS) Rules Selected for Review Agency Topics Modified existing rule(s) Monetized costs exceeded benefits EPA Risk management programs ● ○   Railroad ties as non-waste fuels ● ○   Chemical data reporting ● ●   Mercury reporting ○ ●   Effluent from dental offices ○ ● HHS, FDA Food labeling ● ○   Agricultural water requirements ● ● HHS, CMS End-stage renal disease treatment ● ●   Home health quality reporting ● ●   Patient discharge planning ○ ●   Diabetes prevention and appropriate use of imaging services ○ ● Legend: ● = Yes; ○ = No Source: GAO analysis of EPA, Food and Drug Administration (FDA), and Centers for Medicare & Medicaid Services (CMS) data. | GAO-21-151 Regulatory analyses for eight of the 11 rules GAO reviewed projected that monetized costs would exceed monetized benefits, though each identified other factors that may have led decision makers to determine that the total benefits justified the total costs, such as important, non-quantified effects. These eight analyses met about half of the selected best practices for economic analysis. However, some analyses developed by HHS's Centers for Medicare & Medicaid Services (CMS) did not fully meet best practices associated with analyzing regulatory alternatives, assessing important effects, and providing transparency. It is particularly important that agencies develop quality analyses for economically significant rules, such as those finalized by CMS. By meeting these best practices, CMS could help the public and other parts of government provide effective feedback and mitigate potential conflict with entities affected by rules. It could also help CMS assess whether a rule's benefits justify the costs. EO 13771 generally requires executive agencies to identify two rules for repeal for each new rule issued. Since EO 13771 went into effect in 2017, executive agencies have taken regulatory actions expected to generate over $50 billion in savings to society. Quality regulatory analysis provides agency decision makers and the public with a thorough assessment of the benefits and costs of different regulatory options. GAO was asked to review regulatory analyses for rules finalized under EO 13771. For selected agencies, this report examines (1) how the calculated economic effects of selected rules differed, if at all, from those of rules they modified; and (2) the extent to which agencies met best practices in analyzing the economic effects of selected rules for which monetized costs exceed monetized benefits. GAO reviewed analyses for 11 rules—and the rules they modified— finalized by EPA and HHS, the two agencies that finalized the most economically significant EO 13771 rules through fiscal year 2019. GAO compared analyses to selected best practices in GAO's Assessment Methodology for Economic Analysis . GAO recommends that CMS take steps to ensure its future regulatory analyses are consistent with best practices for analyzing alternatives, assessing important effects, and providing transparency. EPA said it appreciated GAO's findings. HHS generally agreed with the report, and CMS agreed with the recommendation directed to it. For more information, contact Yvonne D. Jones at (202) 512-6806 or jonesy@gao.gov.
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