Carlos E. Kepke, Tax Fraud, California 2024

Tax Attorney Indicted in San Francisco for Facilitating Tax Fraud

A Houston-based tax attorney has been charged with conspiring with the Chairman and Chief Executive Officer of a private equity firm to defraud the IRS, according to a federal grand jury indictment.

Carlos E. Kepke, a tax attorney based in Houston, was charged with conspiracy to defraud the United States, and three counts of aiding and assisting in the preparation of false tax returns. The indictment alleges that Kepke helped Robert F. Smith, the CEO of the private equity firm, create and maintain offshore entities to conceal $225,000,000 in capital gains income from the IRS.

The indictment alleges that Kepke created a Nevisian limited liability company (Flash Holdings) and a Belizean trust (Excelsior Trust) to serve as the tax evasion vehicles. When Smith earned capital gains income from his private equity funds, a portion was deposited into Flash’s bank accounts in the British Virgin Islands and Switzerland. Smith then allegedly failed to timely and fully report his income to the IRS. Kepke allegedly assisted in the preparation of Smith’s false 2012 to 2014 tax returns.

For his services, Smith allegedly paid Kepke nearly $1,000,000 since 2007. These fees included an annual payment for Kepke to purge or “securitize” his records related to Smith, Excelsior, and Flash.

Kepke is scheduled to appear in court on April 22 before U.S. Magistrate Judge Corley of the U.S. District Court for the Northern District of California. If convicted, Kepke faces up to five years in prison on the conspiracy count and three years in prison for each count of assisting in the preparation of a false return.

IRS-CI is investigating the case, with Senior Litigation Counsel Corey Smith, Assistant U.S. Attorney Michael G. Pitman, and Trial Attorneys Lee Langston and Christopher Magnani prosecuting the case. An indictment is merely an allegation, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

According to the indictment, the conspiracy began as early as 1999 and continued until 2014. Kepke allegedly helped Smith create and maintain offshore entities to conceal his income from the IRS. The indictment alleges that Smith paid Kepke nearly $1,000,000 for his services, including an annual payment to purge his records related to the case.

Kepke’s indictment is a significant blow to those who facilitate tax fraud and evasion. The U.S. Attorney’s Office in the Northern District of California has made it clear that they will aggressively pursue those who engage in such activities.

A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

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