Robert Brockman $2 billion Tax Fraud Case Summary
In this tax fraud case, Robert Brockman, the CEO of a software company based in Ohio is charged with tax evasion, money laundering, and wire fraud among other offenses. According to the charges Brockman is alleged to be involved in a decades-long scheme to hide about $2 billion in income from the tax authority; IRS. He was also accused of engaging in a scheme to defraud debt securities software companies, investors. Brockman managed to evade a tax of about $2 billion domestically and abroad. Brockman, a Houston, Texas, and Pitkin County, Colorado resident employed a web of offshore entities located in Nevis and Bermuda to hide income earned on his private equity funds investments controlled by an investment firm located in Francisco.
The alleged tax fraud scheme involved directing untaxed capital income gains to secret bank accounts in Switzerland and Bermuda. He is also accused of executing fraud by backdating records and utilizing encrypted code words and encrypted communications to convey with a co-conspirator. He is also accused of a fraudulent scheme to get about $67.8 million in debt securities software companies, by using a third party to evade the requirements, and destroying any evidence that can link him to the transaction (Justice.gov, 1).
The Issues that Led to the Tax Fraud
The issue that led to the tax fraud was hiding income and investment offshore knowingly to avoid IRS. Hiding of income means that the company was reporting less than earned, or even losses to be able to pay less than its worth in terms of tax or evade tax and acquire some tax benefits or deductions by reporting losses. The company could divert its income to offshore accounts to ensure only a small amount is left in its country’s account and hence paying tax that is way below its worth. In an actual sense, Brockman hides the company’s actual earnings in foreign countries where they cannot be easily traced. It was also evaded tax by coding or encrypting communication to ensure no information leaks to the IRS regarding his dealing.
CPA’s Culpability in Cases of Fraud by Clients
CPAs are professionals regulated and licensed by their state accountancy boards. They are needed to follow a specific professional code of conduct that demands that they act with objectivity, competence, integrity, due care, and confidentiality. They should avoid conflict of interest, disclose all referral or commission fees and serve the public interest when offering financial services. The CPA’s code of conduct prevents them from collaborating with their clients to commit any form of fraud. According to IRS, an accountant is liable for signing off on the falsified information. CPAs might also be regarded criminally negligent or liable if they falsify accounts or financial records, with or without the knowledge of the client. Aiding in tax evasion is a crime. Also neglecting details that could have resulted in the exposure of such crimes is unprofessional and illegal (Nunn, 4).
CPAs are required to work with a high level of professionalism to ensure the company’s financial statements give a true reflection of the company’s financial position. A CPA’s liability denotes the legal liability assumed when accountants conduct their professional duties. CPAs become liable for accounting mistakes and misstatements of a client, a situation that puts the accountant in a bad spot professionally and legally. Such risks can also yield to fraud or negligence claims. CPAs performing auditing and tax computation were supposed to note the company’s irregularities and alert the client of the consequences. CPAs aiding the client in committing fraud including tax fraud can be convicted as an accomplice. CPAs are required to identify financial statements irregularities, omissions, or any other act likely to be done to defraud investors or the government. They should also avoid being bribed to take part in such activities. Failure to report such cases on time makes CPAs an accomplice in the crime (McGowan, 3).
Ways a Tax Preparer can Detect Signs of Tax Fraud to Prevent Future Tax Fraud
Tax preparers use the company’s financial statements to prepare taxable income and taxation. One way to detect signs of fraud is to note irregularities in these documents. For instance detecting personal expenses that are reported as business expenses, identifying lack of acknowledgment of some income or assets in financial statements among other irregularities. One can also identify signs of fraud including concealing personal assets and financial assets, having missing financial records, or unsupported financial expenses, poor financial recording and record maintenance, missing records, and having separate books sets for different purposes.
For instance, having a set of books for the management and another set for auditors. Fraud can also be detected where third parties are used to register properties or assets, especially if the third party is a minor (McGowan, 3). Also when some important transaction supporting documents are not available or are made inaccessible. Lack of internal control is also another strong sign of possible tax fraud. Such situations demonstrate the lack of transparency which results in different levels of fraud. For instance, Brockman offered falsified financial data, and probably maintained another record for actual company performance and the percentage transferred to offshore banks (Khersiat, 2).