Robert Brockman Tax Fraud Case

Tax Fraud
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Tax Fraud
Robert Brockman was charged by federal prosecutors with a $2 billion tax fraud scheme. According to the assistant attorney general of the tax division, Brockman is alleged to have engaged in an elaborate scheme to conceal around 2 billion dollars from the Internal Revenue Service (IRS) as well as defraud debt security investors in the multi-billion-dollar software company where he held the position of a chief executive officer. IRS alleged that Brockman used multiple offshore entities in Nevis and Bermuda to conceal the untaxed income gains he generated from private equity investments. Brockman is alleged to have directed the untaxed income to secret bank accounts in Switzerland and Neves. To execute the fraud, Brockman is alleged to have taken measures such as backdating records and encrypted communications with the co-conspirators. In addition to the tax fraud, Brockman is charged with the fraudulent acquisition of his company’s debt securities with the help of a third party who enabled him to circumvent the restrictions that prevent an executive from obtaining the debt securities of an organization." Evaluate the issues that led to tax fraud.
Based on the case, several factors play a role in the tax fraud. Notably, the complex offshore structures allowed Brockman to conceal the untaxed income and complicate the process of tracing funds. Hanlon, Maydew, and Thornock (2015) note that it is challenging for the tax authorities to detect offshore tax evasion as the current U.S. system heavily relies on self-reporting. In the case, Brockman allegedly failed to disclose untaxed income and utilized offshore structures to make it hard for the tax authorities to detect. Secret bank accounts in Switzerland, Nevis, and other offshore jurisdictions thrive on their ability to create opacity and facilitate tax evasion. Even in instances where the authorities become aware of the existence of secret bank accounts, there is a significant level of difficulty in obtaining information about the owners of such accounts which can only be accomplished by highly trained IRS agents (Hanlon, Maydew, & Thornock, 2015). In addition to the offshore tax structures, Brockman relied on deliberate backdating of records and further employed encrypted communications to cover up his fraudulent activities. Notably, the highlighted factors deceived authorities and hindered potential investigations into tax fraud.
Notably, certified public accountants (CPAs) should be conversant with their legal culpability in tax fraud by their clients regardless of their knowledge of the fraud. CPAs have to exercise due care, and professional skepticism, and adhere to ethical guidelines. They are responsible for conducting appropriate procedures to detect material misstatements, including fraud, during engagements (St...