The Internal Revenue Service saw its largest tax fraud case ever end on Aug. 5 when Robert T. Brockman died.
The 81-year-old billionaire had been charged with 39 criminal financial crimes, including tax evasion. Federal investigations alleged that Brockman was part of an elaborate offshore tax fraud scheme that cheated the U.S. Treasury out of more than $1.4 billion in taxes, penalties, and interest.
While the criminal case is over, legal actions in civil and tax courtrooms to recoup the allegedly unpaid taxes (and add-on charges) continue.
Special tax action to protect collection: As part of that process, the IRS acted to seize part of Brockman's estate to cover the $1.4 billion it says he owed.
The official action was a jeopardy assessment and levy on Brockman's assets. The move, said tax officials, was to prevent efforts to dispose of assets before the judicial process plays out and Uncle Sam gets, he hopes, what he says he's owed.
A federal judge agreed with the IRS' special tax collection efforts in the Brockman case and approved the IRS action.
Jeopardy assessment and seizure: U.S. District Judge George Hanks, Jr. on Sept. 30 denied the request by Brockman estate attorneys to halt the IRS jeopardy assessment and levy.
As the name indicates, a jeopardy assessment is taken in extreme cases where the IRS believes, and has evidence to support, that an alleged tax scofflaw has, is, or will hide assets that could be used to ultimately pay taxes the agency says it is owed.
Hanks note in his ruling that —
Courts have found jeopardy assessments reasonable when the Government has shown that the taxpayer used nominees to purchase assets, concealed assets in foreign bank accounts, concealed sources of income, and refused to cooperate with the IRS, … and when the Government has "put forth substantial information" that the taxpayer "perpetrated a massive fraudulent tax refund scheme[.]"
In the Brockman case, wrote Hanks, the IRS showed that its jeopardy assessment was reasonable under the circumstances.
"The Government has presented substantial evidence that Brockman engaged in tax fraud; and the nature, sophistication, and sheer size of the tax fraud alleged here satisfy the reasonableness requirement by themselves," according to the ruling.
The judge elaborates in his ruling on the evidence, but cuts to the chase in his official decision.
The Court concludes that the Government has met its burden to show that the challenged jeopardy assessment was reasonable under the circumstances. Plaintiff Robert T. Brockman's motion to abate the jeopardy assessment and jeopardy levy under 26 U.S.C. § 7429 (Dkt. 10) is DENIED, and this civil matter is DISMISSED.
Lots of tax and tax code numbers: The IRS described the Brockman $1.4 billion jeopardy assessment situation as its largest property seizure ever. That's fitting, since the tax agency also deemed the legal charges that precipitated it as the largest U.S. tax fraud case ever.
However, that ginormous dollar amount isn't this week's By the Numbers figure.
That honor goes to the Internal Revenue Code (U.S. Code Title 26) provisions that authorize jeopardy tax actions by the IRS, as well as review of such actions. Specifically, this weekend's By the Numbers honor goes to —
- 26 U.S.C. § 6861, which applies to income, estate, gift, and certain excise taxes; and
- 26 U.S. Code § 7429, which allows for judicial review of jeopardy levy or assessment procedures.
You also might find these items of interest:
- Offshore tax loophole helps U.S. tax cheats
- IRS-CI countdown of 2021's Top 10 criminal tax cases
- Tax lessons from an indicted millionaire for the rest of us
- Defendant's death ends IRS' largest individual criminal tax fraud case