Brockman: The Largest Individual Tax Evasion Case in U.S. History

On August 24, 2022, the United States Senate Committee on Finance released an investigative report titled The Shell Bank Loophole. The report uncovered a case of exploiting loopholes in the Foreign Account Tax Compliance Act (FATCA). Billionaire Robert Brockman was found to have concealed over $2.7 billion (approximately 18.6 billion RMB) in taxable income between 2004 and 2018, evading hundreds of millions of dollars in taxes. This case stands as the largest individual tax evasion case in U.S. history.

In this article, we will analyze how Brockman exploited FATCA loopholes to evade taxes and how the U.S. government ultimately uncovered his scheme.

I. The Background of FATCA

Under U.S. tax law, all U.S. citizens and permanent residents (green card holders) are required to pay taxes on their global income. Historically, wealthy Americans have used offshore accounts to hide assets and evade taxes. To combat this, the U.S. government implemented FATCA in 2010. Leveraging the dominance of the U.S. dollar and its global financial influence, FATCA compels financial institutions worldwide to report the financial account information of U.S. persons. Non-compliant institutions face a 30% withholding tax on U.S. dollar transactions. As a result, most banks comply with FATCA by automatically sharing account information with the IRS, making global tax evasion increasingly difficult for Americans.

Although the Common Reporting Standard (CRS)—a global framework inspired by FATCA—has been implemented worldwide, it is far less effective due to the lack of U.S. dollar dominance.

Despite these measures, Brockman discovered a loophole in FATCA that allowed him to shield his offshore income from the IRS and successfully evade taxes. What makes this case particularly noteworthy is that the loophole remains effective today, and countless others may be exploiting similar schemes. Brockman’s evasion was only uncovered due to insider whistleblowers and accomplices turning against him. Without these revelations, the IRS and other regulatory bodies might never have detected his tax evasion.

Let’s delve deeper into this fascinating case.