Former CEO Accused of Biggest Tax Fraud Ever Wins Transfer of Case

U.S. District Judge William Alsup on Monday didn’t rule on whether Mr. Brockman, accused of staging the biggest individual tax dodge ever, is fit to assist in his own defense. Mr. Brockman’s residence in Houston, the possibility of hardship related to his illness, and San Francisco’s crowded docket weighed in favor of moving the case to Houston, Judge Alsup wrote.

The case against Mr. Brockman stems from allegations that he evaded taxes tied to his profits on investments in private-equity funds managed by Vista Equity Partners, a firm founded by billionaire Robert Smith, the wealthiest Black person in the U.S.

Mr. Smith, who lives in Austin, Texas, admitted last year to evading $43 million in federal taxes from 2005 to 2014 and agreed to cooperate with the Justice Department’s prosecution of Mr. Brockman. Vista primarily invests in software companies. Mr. Smith’s leniency deal required him to pay $139 million in fines and back taxes but saved him from prosecution.

Mr. Brockman, who has pleaded not guilty, directed investments of more than $1 billion into Vista’s funds, according to prosecutors. He used secret bank accounts in Bermuda and Switzerland to hide the income he earned from those funds, prosecutors said.

The federal investigation of Messrs. Brockman and Smith was under way for years and culminated in Mr. Brockman’s indictment in October. The businessman disclosed to his own attorneys in 2019 that he had sought a diagnosis for memory shortcomings and other problems related to dementia. Four doctors in Houston have examined Mr. Brockman “and concluded that his dementia makes him incapable of assisting in his defense,” his lawyers wrote in a court filing in December.

The Justice Department was informed about Mr. Brockman’s health issues in April 2020, his lawyers said during a recent court hearing. Prosecutors at the time declined an offer to speak to the physicians who had diagnosed Mr. Brockman with dementia, attorney Jason Varnado of Jones Day said at the hearing.

Prosecutors said they didn’t immediately accept the offer and asked for more medical records that Mr. Brockman’s attorneys haven’t provided. “The government has serious concerns about the claimed incapacity,” prosecutor Michael Pitman said in December.

Attorneys for Mr. Brockman and a Justice Department spokeswoman didn’t respond to requests Monday seeking comment.

Mr. Brockman stepped down as CEO of Reynolds & Reynolds in November, the month after he was charged with tax evasion, wire fraud and failure to disclose foreign bank accounts.

Reynolds & Reynolds, which makes software for auto dealerships, and its affiliated companies have about 5,000 employees and annual sales of about $1.4 billion. Reynolds is headquartered in Dayton, Ohio.

Write to Dave Michaels at [email protected]