SAN FRANCISCO, California – A federal grand jury in San Francisco returned an indictment Thursday charging a Houston-based tax attorney of conspiring with the chairman and chief executive officer of a private equity firm to defraud the IRS. The grand jury further charged him with three counts of aiding and assisting in the preparation of the chief executive officer’s false tax returns for the 2012 to 2014 tax years.
According to the indictment, from 1999 to 2014, Carlos E. Kepke helped Robert F. Smith create and maintain offshore entities that were used to conceal from the IRS approximately $225,000,000 of capital gains income that Smith had earned. In approximately March 2000, Kepke allegedly created a Nevisian limited liability company (Flash Holdings) and a Belizean trust (Excelsior Trust) to serve as the tax evasion vehicles. When Smith earned capital gains income 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.
For his services, Smith has allegedly paid Kepke nearly $1,000,000 since 2007. These fees, as charged, included an annual payment for Kepke to purge or “securitize” his records related to Smith, Excelsior, and Flash.
Kepke is scheduled for his initial court appearance on April 22 before US Magistrate Judge Corley of the US District Court for the Northern District of California. If convicted, Kepke faces up to five years in prison on the conspiracy count and three years in prison for each count of assisting in the preparation of a false return. A federal district court judge will determine any sentence after considering the US sentencing guidelines and other statutory factors.
Acting deputy assistant attorney General Stuart M. Goldberg of the Justice Department’s Tax Division; acting US attorney Stephanie M. Hinds of the US attorney’s office in the Northern District of California; and Jim Lee, chief of the IRS Criminal Investigations (IRS-CI), made the announcement.
IRS-CI are investigating the case. Senior Litigation Counsel Corey Smith, assistant US attorney Michael G. Pitman, and Trial attorneys Lee Langston and Christopher Magnani are prosecuting the case.
An indictment is merely an allegation and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
