How to Actually Prosecute the Financial Crimes of the Very Rich
PAUL E. PELLETIER, 19 May 2021
It was tax season 1999. I was a federal economic-crimes prosecutor in Miami, and this was the time of year my colleagues and I brought cases to deter would-be tax cheats. My target was a tax-return preparer operating out of Liberty City’s “Pork & Beans” projects, made famous in the movie Moonlight. This tax preparer had been manufacturing false W-2s and Social Security numbers so that her clients would receive an earned-income tax credit to which they weren’t entitled—amounting to more than $100,000 in bogus refunds. She eventually pleaded guilty and spent nearly three years in prison, which at the time I considered a broadly just result. She had committed a real crime against the United States.
That crime was not even one-100th as harmful as what Robert Smith, the billionaire private-equity investor, did. His tax fraud, which he admitted to, was massive—possibly the largest in history—and took place over at least a decade and a half. He went to elaborate lengths to hide more than $200 million from the IRS, which meant that he avoided at least $43 million in taxes.
Unlike the Pork & Beans case, though, Smith faced no prosecution and served no time. He hired expensive lawyers who successfully negotiated a “non-prosecution agreement,” in which Smith paid some taxes and a fine—though leaving the bulk of his billions intact—and did not have to bear the stigma of a criminal conviction.
