Second defendant in alleged vast connected federal tax evasion network dies

November 29, 2022
Tropical beach_pexels-asad-photo-maldives-2549017-1

Not all foreign tax havens are tropical islands, but the idyllic getaways do conjure images of tax crooks enjoying isolated beaches at Internal Revenue Service's expense. (Photo by Asad Photo Maldives)

Correlation does not imply causation, but in a couple of high-profile offshore tax evasion cases, it's starting to look like trying to allegedly put one over on the U.S. tax collector is not a healthy move.

For the second time in four months, a defendant in an offshore tax evasion case has died.

Carlos Kepke, a Houston-based tax attorney who was indicted on charges that he helped hide $225 million from the IRS, died over the weekend. He was 83 and his lawyers had previously raised his age and health issues in pre-trial proceedings. 

Update, Nov. 30, 2022: Kepke's death has been ruled suicide.

Kepke's trial was scheduled to start Monday, Nov. 28.

However, on that day presiding Judge James Donato vacated "all remaining trial dates." Donato said he would dismiss the case once prosecutors file the appropriate motion, and set a status conference on the case for March 6 in San Francisco.

The passing of two connected tax evasion defendants: Kepke is the second defendant to die while fighting charges in a criminal case connected to private equity billionaire, and yet another Texan, Robert F. Smith.

On Aug. 5, Robert T. Brockman, 81 and also of Houston, died. Brockman had been charged with 39 criminal financial crimes, including tax evasion, as part of the alleged offshore tax fraud scheme tied to Smith.

The U.S. Treasury alleged it was cheated out of more than $1.4 billion in taxes, penalties, and interest by Brockman's tax actions. The judge in the Brockman case denied the request by Brockman estate attorneys to halt an IRS jeopardy assessment and levy.

Kepke was indicted on charges he helped hide $225 million from the IRS. Federal prosecutors alleged that he conspired to defraud the tax agency of tax due on the money by aiding and abetting the filing of false tax returns by Smith.

Smith escaped tax charges by entering into a non-prosecution agreement in October 2020, and helping federal agents build their cases against Brockman and Kepke. Kepke's death, as did Brockman's, means Smith won't have to testify in the criminal cases.

And given the residency of the three major players in the cases, maybe the correlation, if not the causation, is the Lone Star State.

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