Grubstakers - Episode 202: Robert Brockman and the No Good Very Big IRS Tax Fraud (Part 1)

Episode Date: November 19, 2020

We take a dive into the life of automotive software billionaire Robert Brockman and his recent indictment for what has been called the largest tax fraud in US history. Accused of dodging taxes on more than $2 billion in income he had an assist from an old episode subject, billionaire Robert F. Smith, of promising to pay off the debt of the graduating class of Morehouse fame. On this part 1 of 2 we provide an update on Smith and walk through the basics of the court case and the story of just how Brockman ended up in this situation. You can read the full federal indictment here: https://www.justice.gov/opa/press-release/file/1327921/download You can read more posts from the anonymous Reynolds and Reynolds whistle blower here: https://reynoldswhistleblower.blogspot.com/

We find people that basically can't make enough to eat before they go into the fields. I don't believe that. I think that you're looking at other places that are not Central Romana. People actually who focus on and who like getting an orgasm never get one. Pull up your socks and figure out what you're going to do. Any chance, Will, I don't get to be a complete red state? Oh, yeah. Well, the future is always uncertain. But more uncertain now.

Listen, Blue Ivy is six years old. Beyonce is crazy. She tried to outbid me on a painting. Everybody in Atlanta right now at the Louis Vuitton store, if you black, don't go to Louis Vuitton today. In five, four, three, two, one. Hello and thank you for choosing Grubstakers, the podcast about billionaires. My name is Sean P. McCarthy and I'm joined today by my fellow evidence eliminators. Steve Jeffries. Yogi Paywall.

And today we want to talk about something we don't usually talk about on the podcast, and that's because it's rare. It's like witnessing a perfect game in baseball. It happens so infrequently that it's not representative of the sport itself to talk about it often. And that is, of course, a billionaire facing serious legal consequences. So we're going to tell the story of Texas billionaire Robert Brockman, who in October 2020 was indicted in federal court for the largest tax fraud in US history. He's accused of dodging taxes on over 2 billion in income over 20 years. And it's a fascinating story and one where you have to kind of spend a few hours digging on the internet to really piece it together. So I hope that we can do it justice. But just kind of up front, the long and short of it is, when you're a huge asshole in business, and all your employees and all your competitors and all your partners hate you, it's not a good idea to do the largest tax fraud in US history.

Because you might actually face consequences for it. It's a sad day when a billionaire can't get away with tax fraud, you know? What's it say for the rest of us that are soon-to-be billionaires that want to commit tax fraud in the future? We won't get away with it if Robert Rockman can't. I'm sorry, I thought this was America. I thought a billionaire could just not pay taxes for 20 years and not face a federal prison sentence. But so I think the best way to kind of organize this episode is to start by explaining the

allegations of the tax fraud, you know, the current status of his court case. And then after that, we'll go back and talk about what we know about who this guy is and how he got his money. And there's a lot here. So if necessary, we're going to divide this into two parts and continue on the Patreon. But we'll just try to get through as much as we can right now. But just to start from the Washington Post, quote, an indictment filed early October alleges that Robert Brockman, the chief executive of Reynolds and Reynolds, an Ohio-based company that makes software for car dealerships, used a network of entities in Bermuda and Nevis to hide investment income from the IRS. He also allegedly had secret bank accounts in Bermuda

and Switzerland where he funneled untaxed profits from selling assets. And again, with the allegation being about $2 billion in income that he didn't pay any taxes on over 20 years starting in 1999. And why that 1999 start date is important is because it segues us to provide an update on a different billionaire that we've done a previous episode on. That's, of course, the billionaire Robert F. Smith is a private equity billionaire. He founded Vista Equity Partners in San Francisco. He founded it in 2000. And it just so turns out that he got to found his private equity firm $1 billion in capital investment from one investor named Robert Brockman. And the condition of that $1 billion in startup capital he got was that he

allow him to do the largest tax fraud in u.s history rob's looking out for robs you know i mean i think all he had to do was be like listen you're a robert i'm a robert come on let's rob the government bro yeah this is bizarre like bizarro u. us securities department of justice world where you have not one but possibly two billionaires facing personal liability and criminal charges for a time uh related to this this indictment uh so as sean was saying appears, based on this investigation, that his initial $1 billion investment came solely from Robert Brockman. And it came to him through a series of shell companies in Bermuda, British Virgin Islands, and Navis. And he would state that he was dealing with an intermediary and thus didn't know about the fraudulent intent behind the investment. But part of the deal that he made with this other person called, they're not named, they're just called Individual One in the indictment. took a $1 billion stake in Vista Equity Partners, and they would receive back their investment from the fund, circumventing capital gains tax, and by going through Brockman's, a series of companies

and LLCs that Brockman set up that made it look as though he had no role to play in the companies, but actually it was set up at his direction by this placement agent in Navis. Can I just say, man, Individual One is one of the most notorious recidivists in U.S. criminal history. That guy is involved in every scheme. Oh, by the way, it's not,

this is just an aside, but Sir Robert Smith, when we covered him, was in the process of claiming that he would pay off Morehouse College graduate student loan debt. That's right. 34 million to a non-profit that's run by morehouse and yeah that's run by some morehouse administrators and they have still they have promised to pay it back and there's a note saying they did but i can't really see any like actual confirmation that like if you if you were a morehouse student and you got all of your student loans knocked out by anyone, a billionaire, whoever, wouldn't you post about it to social media? Right, right. So I've been searching anywhere for independent confirmation that the payments actually went through. And you see headlines that say, like, Robert Smith pays off all the student loans.

And you click into it, and it's just about the one story about how he pledged to. Huh. Right. And he didn't, in any case, it wasn't direct. He set up a nonprofit that he gave money to, and then they said that they would do it. Right. And that's how most of our listeners might know Robert F. Smith is, of course, he made all these headlines in 2019, as Steve is mentioning, for

promising the graduating class of Morehouse 2019 that he would pay off all their student loans and remains to be determined if he actually did that or not. But it certainly got him some maybe unwanted attention from the Justice Department. Yeah, I mean, I'd love to be proven wrong as far as my skepticism, but whenever billionaires say that they are going to give people money, you should just be skeptical. It's crazy how the richest people

are the worst at paying bills sometimes. Like, in doing this show, what I've learned is that if a billionaire says they're going to pay you, you got to get that in writing because there's not there's no guarantee that that billionaire is going to give you the money that you're owed well it's interesting actually the subject robert brockman himself would uh later uh would pledge in 2013 250 million dollars to center college in kentucky and we'll tell that story later. But basically, he pledges, you know, a quarter of a billion dollars, and then three weeks later withdraws it. And it's just kind of

the funny way. It's kind of the funny way that the press works in this country, where, of course, the big the first story gets all the big headlines. And then when they quietly don't give the money, well, nobody sees that story. specific group if i know if i'm not if i'm not mistaken i think that originally the pledge was something around 15 to 22 million and then at the end it was 11 million to a holocaust survivors group and that was that and then they were like we're good and i i love that the money gets whittled down like as if they've been coached to be like okay you know we know you've said that you're gonna pay off all of these students debts but instead maybe just tone it down a little bit, Smith. To bring it back from the student loan stuff, back to the matter at hand.

So he got into, he entered into like a non-prosecution agreement, basically, where he did admit to wrongdoing, but not to anything criminal. And he paid $140 million and agreed to testify in Brockman's court case if it does go to the court. Yeah, and provide other evidence. But, you know, it's interesting to me how significant that all is, because how did Robert F. Smith get the money to pay off or claim he's going to pay off the Morehouse student loan debt? Well, he got this first $1 billion

in startup capital from Robert Brockman to found his private equity firm, which is what made him a billionaire. And just according to crn.com, Brockman provided Smith the first billion, but under certain conditions. One of them was that the private equity fund must be held offshore. Brockman, as well as an associate, also instructed Smith in how to set up two offshore trusts to shelter his income from taxes. So basically, he said to this guy, I will help you become a billionaire and get your own private equity firm, but you have to help me dodge taxes for 20 straight years. Yeah, from this Washington Post piece we'll get more into later, David A. Thomas, the president of Morehouse, says that he believes Robert F. Smith agreed to Brockman's offer because while it gave Brockman more control over his offshore assets than Smith might have wanted,

it made his financial dreams a reality. This was 20 years ago, and a 36-year-old brown man running around Wall Street trying to get people to invest in a very big idea. Not a lot of takers. Then he gets a billion-dollar investment. That's how he built an empire that made him a billion dollars. So without Brockman, Robert F. Smith would not have the capital he does today. But as we now know, that capital came from

defrauding the government. Can I just push back on that quote? Systemic racism made me do the largest tax fraud in US history. Like, because the thing is, yeah, maybe it would be a little harder for him to raise money than the typical insider, but he got $1 billion from one person, from one investor. He could have gone around and found more investors, but if you want to get $1 billion from one person, yeah, you're going to have to agree to these kinds of conditions. Yeah. And we talked about this when we did the Robert F. Smith episode. Smith goes from Goldman Sachs to then before that, I believe he was at HP. And then before that, he was also with... So he was connected to people that had

money. It's not like he came out of nowhere and just was on Wall Street begging people for money in 99 when Brockman landed in his lap. But so for those interested in learning more, if you haven't listened to our episode on Robert F. Smith, we have it on the Patreon. That tells a bit more of his story. And I think we're also probably going to revisit that story more in the future now that we know this about the private equity fund, because it just so happens that Robert F. Smith's co-founder at the private equity fund is also a billionaire. And he just recently announced that he's leaving, I'm sure totally unrelated to all of these allegations in court cases. But as Steve mentioned, Robert F. Smith is going to get away with this by just paying, you know, $140 million fine and not doing any jail time and turning snitch against Robert

Brockman. So the subject of the episode, Robert Brockman, seems like the guy who's really going to face the actual consequences of all this. Oh, and if you're feeling bad for Robert Smith, he's worth $7 billion today. Right. The amount that he was going to donate to the Morehouse College kids would have been less than the cost of his Manhattan penthouse. As we mentioned, a federal grand jury in San Francisco indicted him in October on 39 counts, including tax fraud, wire fraud, evidence tampering and money laundering. The recent news in this court case as of November, this is according to Hugo Miller and Neil Weinberg writing in Bloomberg, quote, Swiss prosecutors froze more than one billion dollars held in bank accounts belonging to Houston software tycoon Robert Brockman, who's been charged in the U.S. for alleged tax evasion and money laundering. They talk about about $950 million was held at Maribod and Company.

According to the October 1st indictment, Brockman instructed someone identified as, quote, individual one to open an account for him at the Geneva-based Maribod in 2010. There are further references in the 42-page document to transfers in and out of three Maribod accounts that Brockman allegedly controlled. So he had about $1 billion in his Swiss bank account assets frozen by prosecutors. And just scanning much of the Twitter response to him having 1 billion in Swiss bank accounts frozen. A common theme is, you know what can't be frozen? Bitcoin. Diversify your assets now. So, you know, there's a lot of coin advocates are big on this story. But for Robert Brockman, aside from having his assets frozen, he's pleaded not guilty on all counts. He's been released on a $1 million bond. He's vowed to fight this in court.

We'll see if it gets that far. And he's employed a novel legal strategy, again, from Bloomberg in November, quote, lawyers for Robert Brockman, the 79-year-old software tycoon facing a record tax fraud case, will seek a determination of whether he's mentally competent to stand trial, U.S. prosecutors said Monday in a court filing. If the court determines that Brockman isn't competent to stand trial, it could result in the delay or dismissal of the case against him. Beyond questions about Brockman's mental competency, he has battled Parkinson's disease, a heart condition, and two bouts of cancer, his attorney said during an October 15 video hearing. Despite the health problems, Brockman successfully sought court permission to travel while awaiting trial to several parts of the U.S.

to consult with his attorneys and conduct business. So he's mentally competent enough to conduct his business, but he has that selective Alzheimer's that only attacks the part of the brain that remembers doing the largest tax fraud in U.S. history. In 1999, when he was instructing Vista to help him set up an elaborate shell company scheme. And then he gives them a billion dollars and then they give him back his fund payments to avoid capital gains tax. I think he was competent. Yeah.

No, he's going to say that was a moment of temporary insanity. A legal definition. He actually has BPD. Right. He's like, systemic racism made me present this offer to Robert F. Smith, and that was at a moment of... This was like unconscious bias. So I didn't have the training. I should have had the training. That would be great.

Just hires the best law firm on earth to get this thrown out as a case of unconscious bias because they didn't have access to the current uh technology technological breakthroughs and anti-racism training back in 1999 no of course not that's right yeah but so on the court case there's a 42 page indictment online that we'll link to if you're curious in reading it uh but there's a jacqueline pizer article in the washington post where she kind of summarizes some of the bold points of it. And there's a lot of interesting stuff within. Just quoting from the Washington Post article, in June 2016, the Texas billionaire allegedly ordered his offshore money handler to travel to the United States, destroying paper evidence and, quote, electronic media with shredders and hammers hammers they used hammers right

he's like an enemy in Mario 3 just flinging flinging hammers at this Italian plumber who's going to testify against him it's the office space printer scene but just with a whole bunch of fucking shredders die motherfucker die motherfucker kill you've been referencing that a lot that oh i love the movie

yeah yeah i do reference office space a lot here and there i just like it is one of my it used to be my favorite movie of all time and i just think that it encapsulates uh american corporate culture especially office culture to to a t did you know that idiocracy is a documentary idiocracy is a great 15 minutes short that unfortunately is an hour and a half long movie uh continuing from the washington post article to keep up the scheme brockman used secret encrypted email systems to coordinate with offshore money handlers according to the indictment Brockman who seemed to have a penchant for assigning monikers to people in places called himself quote permit the IRS quote the house and assigned his handlers fish themed code names like names, like, quote, Redfish, Bonefish, and Snapper.

He also named his $29 million luxury yacht, allegedly paid for with the hidden funds, quote, Turmoil. And Turmoil is, of course, an appropriate name for an item that causes you to die in prison i love that the code names they use aren't really like like it's like it's like fishes and then like persona one like they're not that difficult to decipher if you ask me the the irs is the house i believe i read part of the indictment and like it you know oh person one was just like

the courts they they wanted them to be anonymous right right but yeah all the the the nautical themes mm-hmm code names and stuff so it's weird we're gonna file a FOIA to find out which fish individual number one is. Like, no, I don't care about the real identities. I need to know which fishes these people were. But just continuing on from the article, Brockman, we mentioned in starting in 99, Brockman began stashing this money overseas and covering his tracks to avoid investigators Brockman was adept at evading fees and covering up suspicious activity he told his main handler who is unnamed in the indictment quote to operate as much as possible in a paperless manner so that everything was quote in encrypted digital form apparently he or someone close to him also created a computer program so in addition to like all the usual ways people engage in in dodging taxes which we kind of talked about on

our offshore money episode they also created a computer program to assist in tax dodging which they called evidence eliminator oh that's fucking great yeah people say stem brains aren't capable of creative thinking but when you just have that kind of poetic name for such a program who can argue like why give code names and then the software is called Evidence Eliminator. Like, what type of fucking idiots are these? Sort of in the vein of Universal Computer Systems. Right, right. Yeah, it is one of those things. It's like a fucking obvious name.

Right, right. In the Washington Post article, I'm looking at this right now, it says that Robert F. Smith's codename was Steelhead. So that is his codename in the whole fucking game. Sounds like he might have some unconscious bias going on i wonder if he ran through all the salmon like i can't prove it but like people that fish are the most untrustworthy people if you ask me i'm not saying that like they are the worst people i just

mean that like those that fish have their best interests and that's it i don't trust a person to be generous that also knows how to fly fish he's like good good work sake you really came through you just have to imagine uh him at his job as ceo of reynolds and reynolds just spending all day on the computer looking up the names of different types of tuna yeah they pull for the court case they pull his computer logs there's like eight eight and a half hours of him looking at fish terminology this is this is what differentiated it from every other tax fraud in u.s history the nautical element but you know it is really something like just imagine you were watching a james bond movie and they had a software program called evidence eliminator you would immediately

walk out of the theater and be like come on you can't do any better than this. It is creativity at the lowest level to call software evidence eliminator. And then for it to be used to that, and then be like, no, no, no, we're good. I gave everyone fish names. It was in a folder, and it marks not a fraud. The software was called doing the prosecution's job for it. There's the email chain that's just, it says like, re, yo, let's embezzle the plaintiff.

Yeah. Forward, forward, re, re, about doing the largest tax fraud in US history. And they're just like, be careful to mark BCC, okay? So that they don't see everyone on this email chain. Right, right, right. But, you know, as we'll kind of talk about later, Brockman's a pretty fascinating guy, and he's kept a very low profile. So we've kind of had to piece together what we know about this man and his personality and how he made his money from just various different bits and pieces internet sources. But just from the Washington Post article, like he was, he seems like a very technically competent person. But I think he was just such

an asshole that he alienated people around him, which is how you end up with Robert F. Smith going state's evidence against you. But from the Washington Post, investigators also said that Brockman backdated documents to cover up alleged crimes. In an email from July 2008, Brockman notified his handler to avoid using copy machines and laser printer paper because, quote, it has encoded into it

the manufacturer of that paper as well as the year and month of manufacturer. Quote, for that reason, I always set aside some packets of copy paper with dates on them for potential future use. Wow. So the guy was smart enough to keep old stacks of copy paper for backdating documents, but not smart enough to avoid not calling his co-conspirator steelhead. And that was what

finally pushed him over the edge into cooperating with prosecutors i'm sure you know i was uh looking at one of the other billionaires and the bad boy billionaires research that i did i believe the last guy raju he submitted a word document that was supposed to say that like this occurred at certain date and they what they did was they looked it up and they figured out that Word hadn't released the font that he used at the time of the crime. So, like, they figured out that he was duping them because of the font that he chose in Word. So, like, this, like, minor detail stuff is important. I mean, I don't know i just i'm surprised that he was so intelligent enough to figure out the printer backdate stuff but didn't have the creativity to be like maybe i

shouldn't name it evidence eliminator of all things i don't know i think they're i can just picture all their brains are going at 5 000 rpms trying to tryingMs trying to really hard to cover their tracks and stuff. Right, right. Yeah, that's true. Maybe that's part of his insanity plea is he's going to go, look, if I was competent to do this fraud, would I really call it Evidence Eliminator? No, this was part of the scheme.

It's like if they really do find me, I mean, nobody's going to believe that I named it evidence eliminator yeah i mean it's kind of like how our show misspelled jeffrey epstein the first time around like okay come on you really think we're cia when we can't spell jeffrey epstein correctly that was our code word to eliminate him we sent the signal to get him killed in prison. But lastly, from the Washington Post article, the charges also include allegations that between 2008 and 2010, Brockman lied to investors and allegedly bilked them out of nearly $68 million. And the indictment elaborates on this. Between 2008 and 2010, Brockman engaged in a fraudulent scheme to obtain approximately $67.8 million in the software company's debt securities. This is Reynolds and Reynolds, the company that he is the CEO of that we will talk more about later. As CEO, Brockman was contractually restricted from purchasing any of the software company's debt

securities without prior notice, full disclosure, and amending the associated credit agreements. The indictment alleges that Brockman used a third party to circumvent these requirements to acquire the debt securities and to conceal from the sellers valuable economic information. The indictment further alleges that Brockman used material non-public information about the software company to make decisions about purchasing the debt and then also allegedly persuaded another individual to destroy documents and evidence related to this. So again, 39 count federal indictment. We'll see if his insanity plea works out if he goes to trial.

But it sounds to me like this guy is cooked and very likely going to die in federal prison. Wow. Which brings us back to the beginning, which is, as a billionaire, how do you fuck up so badly that you die in prison? And it's not easy to do. You have to screw up a lot. And I think that's a good entry point to start the Robert Brockman biography and get through as much as we can initially. To start from the beginning, the website EarnTheNecklace.com wrote up a bio of Robert Brockman that is mostly just copied from his bio on his official website. And it's not really their fault.

Brockman has spent decades turning down almost all media requests, keeping a very low profile. Apparently, for the longest time, his company wouldn't, keeping a very low profile. Apparently, for the longest time, his company wouldn't even provide a picture of him, right up until like the mid-2000s. He just had no picture and no essential information. But just from the earnthenetlist.com profile, Bob Brockman is called the reclusive billionaire for good reason. Forbes has estimated his net worth at well over $5 billion, and he lives a quiet life in Houston. He was born May 28, 1948, to Pearl Brockman and Albert Eugene Brockman. He is a longtime resident of Houston, Texas,

but court records show that he's also a resident of Pitkin County, Colorado. Pearl Brockman passed away in 2004. His father, Eugene Brockman, passed away in 1986. Robert Brockman himself is married to Dorothy K. Brockman. They reportedly have one son in his 40s whose identity is not known. But according to an anonymous blog spot, a Reynolds and Reynolds whistleblower who runs an anonymous blog spot,

according to this person that we will discuss more later, Brockman's one son worked for him at his first company and Brockman fired his own son. Wow. So it's like, again, how do you become the kind of billionaire who dies in prison well

that's definitely step one he fired his own son what a piece of shit yeah that's kind of cool yeah over nepotism well and it's like i'll develop this more later just because i had to get this picture by putting different pieces together but it seems to me like this guy is a mega control freak libertarian entrepreneur guy who i guess as you know a huge libertarian got the idea in his head that he just didn't have to pay federal income taxes and just stopped paying federal income taxes for 20 years. But it's just the thing is, if you're smart and if you have allies and alliances, you can maybe get away with that. Sure. Look, just look at Amazon or Walmart or anybody.

But he just happened to be a huge control freak asshole who alienated everyone around him and fired his own son so that's kind of how you end up in the situation that he's currently in well i mean he almost it almost worked i mean he got away with it for 20 years uh had he died in a plane crash in 2012 then he would have you know he would have been like i i got away with the crime basically like you know he was a uh overalous, aggressive businessman, but at the same time, that is what is necessary in this guy's case to retain the money. I just don't see, because Sean, I don't know if you touched upon it yet, but what was his net worth before this scandal? Well, so that's the thing is Reynolds andnolds and reynolds uh and we'll talk about this in a minute but reynolds and reynolds is a software company that provides software to

primarily uh automotive dealerships so like if you have a car dealership you need like software to keep track of the cars you're selling or also if you're selling parts for repair you need software to keep track of all that he supplies re, Reynolds and Reynolds supplies software to those entities. So Reynolds and Reynolds was not his company. Initially, he founded a different company. Then he took over Reynolds and Reynolds, which was a public company, and took it private. And in 2006, he took it private. And the thing is, because he runs a private company, it's very hard to estimate his net worth.

I see. So Forbes took a stab at it and estimated $5 billion. And that was the only figure I found, but they haven't estimated it recently, and I don't know how long out of date that is. Gotcha. Well, even still, I don't see why he would feel compelled to do this scheme. But, I mean, more money begets more money. And when you're obsessed, all you want is more money.

I mean, it is funny just how much of a libertarian you have to be to do this in the United States. Where you're like, yeah, so just legally under the law, I could pay 15% on capital gains. Right, right. But that's too much. I want to pay zero and risk federal prison. Yeah. Right, right. As we just mentioned, he's made most of his fortune from selling software to automotive companies. Reynolds & Reynolds makes a software that's used to manage sales logistics at dealerships. But from the biography, he started his career working for various corporate giants, primarily Ford Motor and IBM. According to his official website bio, Brockman graduated summa cum laude with a bachelor's degree in business administration from the University of Florida. He had the highest GPA and a full scholarship to graduate school.

He also had a stint in the U.S. Marine Reserves while in college. And that stuff about highest GPA and full scholarship, again, this is according to his official website biography. So nobody fact checkschecks these. Written by individual one. He put it in a software program he created called Resume Embellisher. He changed his official biography to model it after that student he was always jealous of bone fish the smartest student at all of florida state university but after he graduates from not florida state university but the university of florida after college he spent

two years in a marketing job at Ford. He would then be hired by IBM selling automotive parts inventory and accounting data processing services. And again, from his official biography and his official website, quote, his five-year tenure at IBM is distinguished by his many sales records, unquote. So again, nobody fact checks these, but he says he was really killing it there at IBM. And he has kind of his recollection of his time at IBM that I'm just going to quote from a bit here, because it's interesting. He's working there in the early to mid 60s. And he says, quote, I was fortunate enough to land a job as a sales trainee at IBM with the IBM Service Bureau. Those were the days when computers were really expensive. IBM had a huge percentage of the computer market,

and it was virtually impossible for a business to own its computers except for a fairly large company. And, you know, IBM would, of course, famously be sued as a monopoly by the Justice Department, which would drag on and they would actually lose that case. But he is right that in the 60s, you know, obviously computers were giant. They were very expensive. It was very hard to get time on a computer. He continues, so the service bureau was the way things worked. People would bring in their work literally in baskets or boxes.

We'd key punch it, process it, and then send the reports back out. It was one of the early examples of automating processes in business. That division of IBM sold payroll services, accounting, and oil royalty interest accounting. But they also had a parts inventory package and an accounting package for car dealers. And that's where I was assigned. I think mostly because I was a car guy from way back from his work at Ford before IBM. And I knew the names of all the parts in a parts department. So early on, I became a parts inventory specialist. In 1966, I sold my first parts inventory package to a small dealership called Mearns Chevrolet in Liberty, Texas. So basically how he's able to build his fortune is he's working at Ford, then he's working at IBM,

and he kind of gets in on the ground floor of computing and car dealerships and car sales, and he recognizes the overlap between these two. And from his own recollection, he teaches himself computer programming. He leaves IBM, and then in 1970, he founds Universal Computer Services Incorporated, UCS. And this is his first company, the one that he would go on to fire his own flesh

and blood from some years later. You know, the claim that he programmed the first systems himself, I don't know if I necessarily buy that. I mean, he really just merged his previous job experiences from Ford and IBM to create the technology for the new company. But at that time, you know, mid 90s, a computer software for monitoring inventory would be revolutionary in any industry. But the fact that you would only market that to, you know, motor vehicle businesses makes me suspicious in that, I bet that he paid someone to build it and then started marketing it afterwards. Yeah. But Yogi, what kind of world do we live in when we can't take the claims at face value from a guy who dodged taxes for 20 straight years, lying about his tax returns every single year in

that period? I don't know. This guy that lied about his tax returns every single year in that period. I don't know. This guy that lied about his tax returns and his life story seems to be somebody that I might not trust when he says he did something. If it is the case that there is an embellishment, then he was incompetent when that happened. And then he became competent again afterwards. Temporary insanity when I stole all that computer code. He wasn't fit to stand trial stand trial so no not at all it is kind of interesting and we'll talk about this more later and probably on a part two but in my mind this guy is kind of mini bill gates but just of

software for the automotive industry specifically where you kind of see him employing all those sort of monopolistic tactics and possible intellectual property theft and this kind of stuff that characterized Bill Gates, as we talked about in our three-part Bill Gates episode. Yeah, it definitely seems like the same tactics of software monopolization were what he would utilize in his company later on. computer programming, quoting, well, with IBM, Mr. Brockman developed a clear understanding of the business need parts managers had for a more effective way to track parts inventory. That understanding led to the first product he developed and sold to local dealerships. Mr. Brockman's

product tracked automotive retail parts inventory and generated weekly reports of the dealership's parts inventory. Quoting from Mr brockman himself quote i taught myself how to program i wrote the first parts inventory package in the evening then went out and sold it i actually sold it in the daytime programmed at night and processed on the weekend i rented computer time from a company called armco steel in houston and used part-time key punch operators to get the work done our company was successful right from the get-go. After a few years, we were actually able to afford our own computer. Wow.

Yeah, but you know, this guy who makes up fish names for everybody he's ever met, I could see him making up the name of a company called Armco Steel. Yeah, right. Steel spelled S-T-E-A-L. But so at the start, they were having kind of a service bureau approach to providing data processing to dealerships. Later, they would switch to kind of a turnkey in dealership computer systems and software approach, where they write the software, they give it to you rather than servicing it and servicing your needs individually. And that was kind of a shift over in the 1980s. Just again from the official biography, by the 90s, early 2000s, UCS had steadily grown into a well-known computer systems and software provider for automotive dealerships and had earned an industry-wide reputation for top-notch software products. And I can already fact-check that one for you guys.

The industry-wide reputation is not quite that. Particularly the all-caps Power Dealership Management System was one of their most famous products. They were, UCS was for a time, the number three spot in the industry behind the two much larger companies, ADP Dealer Services and Reynolds and Reynolds. And so he's growing pretty rapidly in the 1980s. But what really allows him to take over and become the number three, you know, software, automotive dealership company is in 1992, Brockman purchased ford motor company's in-house dealer management systems business and that's uh there's a write-up in this in auto news.com and uh ucs this is a different write-up in wards auto.com ucs acquired ford motor company's dealer computer systems in

the mid-1990s which later became the the basis for Ford's electronic parts catalog for its dealers. Late in 2006, UCS had to sell this Ford Motor dealer computer systems to a competitor after losing a licensing contract with Ford. But the point is, from 1992 to 2006, he's the guy who has Ford Motors in-house dealer management systems business software. So what that means is, if you are a Ford dealer, or if you are selling Ford parts anywhere in the country, you basically have to work with Robert Brockman. And that's what we mean when we say that this guy was kind of this Bill Gates of this one specific area of software, because he had a whole bunch of kind of different, let's say, scummy tactics that he would go through, where typically, if you're a dealership and you get software from somebody, most of his competitors offer five-year contracts. Right. He would force everybody onto 15-year contracts right he would force everybody onto 15-year contracts and so it's like once you're on a 15-year contract with this guy it

doesn't matter how shitty your product is and it's kind of again the same thing we talked about on this microsoft episode where windows was not the best operating system right microsoft word it was not you know the best anything none of this was the best it system. Right. Microsoft Word, it was not, you know, the best anything. None of this was the best. It was just Bill Gates was smart enough to get enough market penetration. Because in software, once you're like 70 or 40 or 50 or however much percent of the market, it doesn't matter if you don't have the best because a competitor, there's too much startup cost to switch over. People just have to stick with you.

Yeah. Being an industry standard makes it so that it doesn't matter how much of the industry you have. Eventually, the rest of the market will come to you. And to have a 15-year contract, I mean, that's insane. It's like a mortgage. Yeah, seriously. And just quoting from the anonymous whistleblower who we're going to talk about in more detail on part two, quote, Ford is the one company that created this nightmare. Ford was able to give Brockman 100 percent control over all their dealers. Once in control, he screwed them out of so much money it was sick. Then with the money, he started to buy companies and put others out of business. Once he acquired enough, he bought Reynolds and Reynolds and the rest is history. The dealers, I've never bought a car, but it was pretty fascinating to learn about how these dealerships and also these repair shops and all these people kind of got screwed over by this guy who recognized the role that software would play in this market

and used all these Bill Gates, Microsoft tactics to really impose himself and establish an insane degree of control over these markets. Well, I'm not buying the new Ford Bronco, that's for sure. How dare they enable a man like this? How dare a company that starts off by forcing people to be in a melting pot and gives them rags and then makes them wear suits after going into a giant wooden pot would then end up in a situation where this Robert would then swindle the dealerships? He starts recommending fish names for Ford's cars.

All right, so the new one's got to be called Seabass. recommending fish names for Ford's cars. Alright, so the new one's got to be called Seabass. The Ford ref is just like, what? Okay. I mean, I'll send it up the chain. He's just laughing about it later. I know you call it a carburetor,

but how about calling it Tuna? He writes an in-car software navigation program called Get Away With Hit and Run. But yeah, so this Ford motor deal is what really allows him to become a powerhouse in the 90s. And as mentioned, he starts buying up all the other software companies.

So, and you know, putting people on 15-year contracts and stuff. So it is just interesting where when people realize that he's shit, well, it doesn't matter because he bought out all the competitors and he's got you on a 15-year contract. So eventually it gets to the point where when you finally leave your 15-year contract with him, okay, there's one or two other options at all. And also a bunch of other subsidiary products, like other products for the dealership

are also owned by him so there's no way to avoid giving him money um and what this for deal does is as we mentioned it makes ucs uh universal computer systems the company he found it it makes it the third largest company in this dealership software space, but it also gives him enough money and enough connections to buy Reynolds and Reynolds, which is the company that in 2006 he becomes CEO of. He takes it private. And this is where they are currently saying they had no idea about any of his tax fraud or any of this stuff. But I think we'll just kind of tell that story here, and then we're going to have to continue on with a part two. But I do want to just tell a bit about what happened with Reynolds & Reynolds.

In 2006, Reynolds & Reynolds was a public company. It announced that it was becoming a private company through a $2.8 billion acquisition by Universal Computer Systems, which again surprised people because Reynolds & Reynolds was the larger company. You would think Reynolds & Reynolds would be acquiring UCS. Right, right. With the combined organization in 2006, they had a 40% market share in the dealer management systems sector. That's just from Wikipedia there. Their main competitor, ADP, also had about a 40% share as of 2006. So you can see where two companies each have a 40% market share. There's no real competition here in this space,

especially when you're on a 15-year contract with the guy. But it is just interesting where this capital, this $2.8 billion that he gets to acquire Reynolds & Reynolds, some of it came from Vista Equity, Robert F. Smith's private equity firm that he set up, helped set up to do tax dodging. And then I believe, Steve, you were saying the other little chunk of change came from our good friends and extremely reputable European financial institution, Deutsche Bank. Yeah. In that 2006 deal with the merger of UCS and Reynolds, it was partly financed by a syndicated

loan done by Deutsche Bank Securities Incorporated according to the court indictment. Deutsche Bank wasn't indicted for anything, but they were just mentioned as supplying over the course of the years that this was going on a couple billion worth of debt to them. So they syndicated a loan in 2006 and then they also refinanced it partially in 2010 yeah and we'll talk more on part two about deutsche bank also gets involved in a very strange uh deal that they put together. We mentioned this donation, this promised donation to Center College in Kentucky that was later withdrawn. This was also like a

financing deal for Reynolds & Reynolds. It later got scuttled, but Deutsche Bank was involved in that. According to the 8K documents of this takeover, apparently also Goldman Sachs Capital Partners were involved, as well as, as we mentioned, Vista Equity Partners and Deutsche Bank. They all kind of go in this deal together. But it's interesting where he buys it in 2006 for $2.8 billion. He takes it private, so it's very hard. You can't really get financial information out of it after that. But he's later in 2012 trying to shop it around for about five billion

but he does not ultimately sell it which is you know i'm sure a massive disappointment to the board of directors over there right now that he didn't jettison that right he had a chance but so we're going to continue this story on the Patreon. We're going to talk about kind of what he does with Reynolds and Reynolds, the reputation he gets. We're going to talk more about this anonymous whistleblower. He actually tries to sue a whistleblower at his own company, a blogger named The Trooper. He goes all the way to the Texas Supreme Court to try. He sues Google to get this blogger's identity. The Texas Supreme Court throws it out. But, you know,

this guy is like such a control freak, such a weird libertarian, like this donation to Central College we keep talking about. He apparently wanted to set this up to provide scholarships to people in like entrepreneur and job creating fields. So, you know, his entire idea is this really kind of insane Ayn Rand view of the world, which is what leads him to treat people like assholes and to not pay income tax for 20 years. But I want to just talk, and I kind of close out here by mentioning one Glassdoor review from Reynolds and Reynolds that I think encapsulates his entire takeover of Reynolds and Reynolds and gives us some pretty good insight into both his personality,

his management techniques, and the kind of person he is, even though he's so mysterious. But I think this is a pretty good look in. This is a Reynolds and Reynolds Glassdoor review from a 10-year employee who gave it one star. And the title is, quote, Great Growing Company Until Bob Brockman Took Over. Wow. So, again, this guy had been working there for 10 years.

And then in 2006, Bob Brockman took over. Where do i start after hours quote desk inspections by management no raises for years and years the ceo would call quote all hands meetings to tell us who to vote for in local and national elections uh upper management wears badges that say quote executive on their shirt. So employees can show appropriate respect. No hard drives. Everything is stored on common drive so it can be reviewed in case someone decides to do something personal on their work computer.

If your resume is found on a job site, you are fired immediately. The absolute worst work environment with a culture of fear and bullying that I have ever seen. And then his recommendation is time to retire, Mr. Brockman. Please sell this company and you and all of your minions can let this company be great again. And some good news for that anonymous Glassdoor poster. It is time for Bob Brockman to retire. Retire to Club Fed where he will likely spend the rest of his life wonderful but so we will continue the story on part two on the patreon we will talk more in specific about some of these bill gates techniques that we've mentioned

bob brockman using we will talk about uh this anonymous whistleblower in a little more detail. We mentioned there the CEO of the company telling people who to vote for in local elections. We'll talk a bit about Bob Brockman's political donations, and we will tell the story of his mysterious donation, but not a donation, to Center College in Kentucky. But I want to thank you for listening, and I do urge all of you to avoid fish-based nicknames in your future and upcoming tax scams. Thank you for listening as well as reviewing our show. We're putting our episodes on YouTube

with footage of people touching the Wall Street Bulls bowl, so if you want to check that out, feel free, as well as some many more fun things down the line. And with that, this has been Grubstakers. I'm Yogi Poliwal. I'm Stu Jeffers. I'm Sean P. McCarthy. We're writing a software program called Bad Jokes for our podcast.

All right, thanks for listening. We'll see you on Patreon. Goodbye.