Even as Robert F. Smith — the Columbia Business School MBA whose $5.2 billion worth makes him the richest Black man in America — promised to pay off the entire Morehouse College Class of 2019 tuition debt in a commencement address to the Atlanta, Georgia HBCU last year, he was under a Justice Department investigation for crimes stemming from his use of offshore tax havens, according to a Bloomberg report today (August 21).
Smith, founder of the private equity firm Vista Equity Partners who earned his MBA from CBS with honors in 1994, has been under FBI and IRS scrutiny for four years, Bloomberg and other news outlets are reporting, as authorities try to determine whether he failed to pay taxes on about $200 million in assets flowing through “offshore structures.” His gift to Morehouse, a historically black men’s college that he did not attend, was initially valued at about $10 million, though at the time Smith was reported to have promised the college up to $40 million. Bloomberg reports that Smith’s total gift to the Morehouse graduates and their families ended up being $34 million.
Bloomberg reports that the legal matter “hinges largely on whether Smith was actually the beneficial owner of Caribbean entities that received proceeds from his company’s first private equity fund” in 2000, adding that some of the proceeds “eventually flowed through the offshore entities into a U.S. charitable foundation where Smith is president and founding director.”
NO CHARGES FILED AGAINST SMITH YET
The son of educators who started his career as a chemical engineer for Goodyear and Kraft, Smith used his MBA with a specialty in finance to transition to Goldman Sachs before launching San Francisco-based Vista Equity in 2000. The investment firm boasts capital commitments of $65 billion and focuses on investing in software and technology-enabled businesses.
The charitable foundation that is drawing federal scrutiny is the Fund II Foundation, which has given millions to such organizations as the United Negro College Fund and the Susan G. Komen Breast Cancer Foundation. Smith has not been charged in the case and it is possible authorities will decide he has not broken any laws, and that the proceeds in question were always headed for charity. The 57-year-old is “trying to persuade the Justice Department to forgo criminal charges and resolve his case with a civil settlement,” Bloomberg reports, because a conviction could mean either prison or the relinquishment of his position in Vista Equity, or both.
Bloomberg reports that the investigation was not publicly known until a February court hearing in Bermuda, when a Justice Department spokesperson stated that prosecutors think as much as $1.5 billion worth of revenue was hidden from the U.S. government — a “record-setting” amount.
‘THE OPPORTUNITY YOU ACCESS SHOULD BE DETERMINED BY THE FIERCENESS OF YOUR INTELLECT’
Speaking to more than 300 Morehouse students in May of last year, Smith quoted Martin Luther King Jr. and urged the students to use “creativity” and “grit” in their future endeavors.
“My family is going to create a grant to eliminate your student loans,” Smith told them. “You great Morehouse men are bound only by the limits of your own conviction and creativity. When Dr. King said that the ‘arc of the moral universe bends toward justice,’ he wasn’t saying it bends on its own accord. It bends because we choose to put our shoulders into it together and push.
“Where you live shouldn’t determine whether you get educated. Where you go to school shouldn’t determine whether you get textbooks. The opportunity you access should be determined by the fierceness of your intellect, the courage in your creativity and the grit that allows you to overcome expectations that weren’t set high enough.”
Before Smith’s Morehouse announcement, he donated $1.5 million to Morehouse for scholarships and the development of a new park. In 2016, he pledged $50 million to Cornell University, one of his alma maters, to support its chemical and biomolecular engineering school, as well as black and female engineering students. Three years ago, he signed the Giving Pledge, an effort spearheaded by billionaires Warren Buffett and Bill and Melinda Gates to enlist wealthy Americans in giving away half of their fortunes. He’s also one of the founding donors of the National Museum of African American History and Culture, committing $20 million to the museum before its opening.