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A matter of trust

Stories of criminals hiding ill-gotten gains in offshore trusts have become all too common. But a new age of transparency has begun as governments look to lift the veil covering this secretive world. Here we examine the history of offshore trusts and how fraudsters have gamed the system to their advantage.

Before he died earlier this year, Robert Brockman stood accused of multiple charges of wire fraud and money laundering in what was the biggest tax evasion case of its kind in U.S. history. During a 20-year period, he allegedly hid over $2 billion in income from the IRS in secret offshore accounts, using encrypted communications and false documents. 

A trial date to decide the fate of Brockman, the CEO of software company Reynolds and Reynolds, had been set for February 2023 following his 39-count, grand-jury indictment in 2020. According to that indictment, Brockman had woven a web of complex offshore companies and trusts to hide capital gains earned from his investments in private equity fund Vista Equity Partners. Those earnings were then allegedly funneled to secret bank accounts in Switzerland and Bermuda. [See “CEO of Multibillion-dollar Software Company Indicted for Decades-long Tax Evasion and Wire Fraud Schemes,” U.S. Department of Justice (DOJ), press release, Oct. 15, 2020 and “Robert Brockman, billionaire charged in $2 billion tax evasion case, dies at 81,” by Ken Dilanian, NBC News, Aug. 8, 2022.]

According to court documents, Brockman employed and compensated people to act as trustees and directors of the offshore structure to give the appearance that they controlled Reynolds and Reynolds and other organizations that were in fact owned by Brockman. He sent encrypted emails to communicate with the trustees and other accomplices using code names such as “Steelhead” and “Snapper” and referred to the IRS as the “house.” (See “United States of America v. Robert T. Brockman,” U.S. District Court for the Northern District of California, Oct. 1, 2020.)

Brockman also stood accused of using the tangled offshore network to hide his purchase in the secondary markets of Reynolds and Reynolds loans, which had plummeted in value in the wake of the 2007-2008 global financial crisis. A credit agreement that Brockman had signed with banks expressly prohibited such purchases. Nonetheless, he snapped up the cheap debt through Edge Capital Investments, an offshore entity set up via a trust to conceal that it was controlled by Brockman himself. (See “The Manipulative, Little Known Billionaire Who Nearly Ruined The Country’s Richest Black Person,” by Christopher Helman, Forbes, Daily Cover, Feb. 5, 2021.)

Stories of fraud associated with offshore havens and the trust vehicles used there, like the ones above, have become increasingly commonplace, especially as leaks like the Panama Papers have peeled back for public viewing how fraudsters and other criminals use this secretive world to hide wrongdoing. 

Here we examine some of the history of international trust centers (ITCs), the types of fraud perpetrated through these vehicles and the changing regulatory backdrop to make them more transparent. But first let’s look at a basic definition of a trust. 

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