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Democracy, for most of its existence, has managed to coexist with oligarchy, but only on the condition that oligarchs exert their influence quietly. Citizens, including ordinary Americans, are generally willing to tolerate the super-rich, but the arrangement breaks down when a small group of exceedingly wealthy people are perceived to be distorting and impairing democracy for their own gain, disrupting the fragile illusion that they are not, in fact, running the show.
America’s oligarchs, at least historically, have kept their end of the bargain. But their accelerating wealth share and absence of serious political setbacks in recent decades have spawned a growing sense of entitlement and omnipotence—indeed, untouchability. When I started teaching a seminar on oligarchs at Northwestern University in 2007, students could barely conceive of the notion of oligarchy in America—only one hand went up when I asked whether they thought we had oligarchs or oligarchy here. By 2016, their worldview had already flipped: Only one hand went up when I asked how many students would describe our political system as a democracy.
In the interim, the Supreme Court’s rulings in Citizens United and other campaign finance cases unleashed a gusher of political spending by the richest Americans and their businesses, with each cycle setting new records. So much of it was legally untraceable that a fresh term, “dark money,” entered the lexicon. In 2012, for the first time, a major presidential candidate was bankrolled almost exclusively by a single oligarch: The late casino billionaire Sheldon Adelson kept Newt Gingrich’s foundering primary campaign alive with a $20 million infusion of Super Pac funds. Slate called it “among the largest known political donations in US history.” By November 2024, it didn’t even rank in the Top 25.
This article is adapted from The Blind Spot: How Oligarchs Dominate Our Democracy. Copyright © 2026 by Jeffrey A. Winters. Reprinted by permission of Scribner, an Imprint of Simon & Schuster, LLC.Mother Jones illustration; courtesy Jeffrey Winters
The biggest spender during the 2024 cycle, according to OpenSecrets, was Elon Musk at more than $291 million. Former Treasury Secretary Andrew Mellon’s grandson Timothy, a man few Americans knew existed, spent about $197 million, and Adelson’s widow, Miriam, ranked third with more than $148 million. All told, 100 individuals invested $2.4 billion in the 2024 election—almost half the total cost of the presidential contest and 16 percent of all federal election spending. The problem is bipartisan—oligarchs poured money in for Democrats and Republicans alike.
How did America’s oligarchs grow so willing to openly rub their wealth power in our faces? Well, a big part of it has to do with their success in neutering perhaps the greatest threat to their dominance: the ability of the government to tax them, and to hold those who cheat accountable.
Nothing embodies this atmosphere of oligarchic untouchability quite like the OffshoreAlert conferences that investigative journalist David Marchant has been running for the last quarter-century. As Jack Blum, a veteran tax compliance lawyer and investigator who has sat on Marchant’s panels over the years, described it to then Wall Street Journal reporter Jesse Drucker, the annual conferences remind him of “that famous bar in Star Wars, where they all come together—the good guys, the bad guys, the seriously guilty—and they all exchange information on neutral territory.”
On stage and in the audience are IRS special agents, representatives from the Department of Justice, officials from the Securities and Exchange Commission, CIA and FBI agents; white-collar defense lawyers and accountants from the Wealth Defense Industry; investigative reporters; private detectives for ex-spouses and business partners trying to recover offshore assets; cryptocurrency players; whistleblowers; bankruptcy attorneys; judges and prosecutors; and officials from Caribbean tax havens. A few oligarchs show up, too, and the occasional academic like me. The networking that happens at the well-attended cocktail parties is as important as the formal sessions.
The gatherings carry a whiff of risk. At one event, Marchant announced that a speaker from the previous year had been shot in the head in the Bahamas during an assets dispute. And “over the years,” Drucker wrote, “at least two speakers at Mr. Marchant’s conference have been served with subpoenas on the dais.”
IRS special agents were meant to work criminal cases like the one Blum had just laid out. He asked what the problem was. It’s “a career killer,” the agent replied.
Marchant, despite a formidable demeanor, has had to watch his own back after daring to expose the workings of offshore secrecy jurisdictions and the people who use them. “I knew the investigative journalism side was risky,” he told me when we sat down for an interview at his 2023 conference at Miami’s Ritz Carleton. “I got threatened by Russians more than once.” He sometimes got so spooked he would go sleep at a friend’s house. “It was affecting me mentally,” he admitted. “I would put my key in the ignition, and somewhere in the back of my mind I was expecting the car to blow up.”
He’s no ideological crusader, so why subject himself to these dangers? “Fraud pisses me off,” Marchant explained. “The day that it stops pissing me off, I’ll do something else.” His investigations have been responsible for the criminal indictments of more than a dozen people—half of whom went to prison: “It’s very satisfying.”
His conferences are unique in that they offer a glimpse of the strangely direct interface between the Wealth Defense Industry and the civil servants working to enforce the laws on tax evasion and money laundering. And hanging over those enforcers, almost like a shadow attendee, is the saga of their forebear Dick Jaffe, a renowned former special agent who worked in the IRS’s Intelligence Division half a century ago. It was Jaffe’s travails that would set the tone for today’s toothless IRS and help to explain how America’s oligarchs became so emboldened.
Tax fraud in the Caribbean was rampant even back then, obvious to anyone who bothered to look—and Jaffe was looking. In 1973, he and one of his informants were investigating money laundering by organized crime figures—part of an IRS effort dubbed Operation Tradewinds—when they got hold of a client list for an American-owned, Bahamas-based entity called Castle Bank. The list, when cross-referenced with other materials Jaffe’s team obtained, amounted to a smoking gun implicating a who’s who of rich and powerful Americans who were hiding money from the taxman.
In 2022, Congress approved $46.5 billion over a decade for IRS enforcement. By March 2025, Republicans had slashed that to just under $4 billion—a 91 percent decrease.
Initially, Jaffe was celebrated within the IRS for his coup and given additional resources to build individual cases. But that was before the oligarchs he’d exposed began calling in favors. President Richard Nixon promptly installed Donald Alexander—a tax attorney who represented ultrawealthy clients and was openly hostile to enforcement—as his new IRS commissioner. Alexander proceeded to dismantle all Jaffe had accomplished, crush the Castle Bank investigation, and even target the agents who took part in it. It was an epic, in-your-face flex of oligarchic wealth power. “He was quite willing to talk about his experience and somewhat bitter about what had happened to him,” recalled Blum, who sat down with Jaffe to compare notes on offshore tax evasion not long after Jaffe was driven from the IRS.
Blum had pursued a parallel career as an attorney for Senate committees investigating white collar crimes and international tax evasion. Later, in the private sector, he advised IRS auditors and special agents and helped create nonprofits that work to combat tax fraud and secrecy in financial transactions. The way the IRS threw Jaffe under the bus, Blum told me, did not go unnoticed by his colleagues. “What that story did,” he said, “was make it impossible for IRS to deal with the problem of tax evasion by the rich for a full 20 years, if not longer.”
Blum experienced this fallout firsthand. During the 1990s, a bank client in the Cayman Islands provided him with reams of information about the activities of 20 very rich Americans who were cheating the IRS out of millions every year. The informant urged Blum to deliver the materials to the IRS in Miami, which he did. By coincidence, the special agent he met with had worked with Jaffe almost two decades earlier. “He looked at all the documents and information I had, and said to me, ‘Get out of here!’”
Blum wasn’t sure he’d heard right. He’d expected excitement, maybe gratitude. Special agents were supposed to be working major criminal cases exactly like this one. He asked the guy what the problem was. “This whole thing is a career killer,” the agent said.
Blum left the meeting dazed. “I came in with evidence, and it should have been a slam dunk, and here I’m being told to get lost,” he said.
This snubbing, ironically enough, took place during what former longtime IRS special agent Ralph Gay described to me as the Criminal Investigation Division’s “financial heyday.” Gay, whom the IRS hired only months before Jaffe’s Castle Bank breakthrough, would run into similar resistance from higher-ups. The Department of Justice, for instance, “kept throwing roadblocks up” after a Colombian money-laundering investigation he was running implicated a politically connected American bank owner—the banker was never indicted. In the mid-1990s, Gay, who’d been promoted to run the IRS’s finance division, was able to secure ample funding from Congress for CID, but only because its investigators were now focused on narcotics and foreign money laundering—not US oligarchs defrauding the treasury. Whenever the super-rich felt threatened, he recalled, “we were reined in.”
The IRS says its criminal investigations unit today has “about 2,100” armed special agents, which is less than two-thirds the 1996 peak and roughly the same number as it had during the 1970s. In other words, the federal government is devoting about the same amount of resources to investigating major tax crimes, money laundering, and bank secrecy that it did a half-century ago, even though the number of taxpayers is vastly larger, the ranks of the ultra-rich more bloated, and the Wealth Defense Industry at full maturity.
“It’s not good enough to have a bicycle chasing a Ferrari. You’ve got to deflate the bicycle’s tires to cripple it.”
There has been pushback from time to time against the forces of oligarchy. In 2022, under President Joe Biden, Congress approved an $80 billion increase in IRS funding over a decade, with more than half of it slated to restore the agency’s ability to go after the super-rich. This victory was short lived. By March 2025, Republicans had slashed that $45.6 billion enforcement budget to just under $4 billion—a 91 percent decrease. A month later, the agency was ordered to abandon rules requiring that certain lucrative tax shelters be reported, making the work of overwhelmed auditors vastly harder. The result: another $100 billion that America’s wealthy would never pay.
On Biden’s watch, the IRS had also set up a unit to audit complex partnerships that the Wealth Defense Industry uses to obscure its clients’ tax obligations. In September 2025, Jesse Drucker, now at the New York Times, reported that “nearly the entire senior team of IRS lawyers with partnership expertise has left the agency, an unusual mass exodus even for a new administration.”
By early 2026, the IRS was a more debilitated institution than at any time in over a century.
The lack of political will to meaningfully pursue rich tax evaders has created, within oligarchic circles, something akin to a highway that has posted speed limits, but where the people with the hyper-luxury cars know there are no police, speed traps, or cameras. The most daring and reckless are free to drive as fast as they like with impunity. Or, as Blum more colorfully cast the government’s self-imposed ineptitude: “It’s not good enough to have a bicycle chasing a Ferrari. You’ve got to deflate the bicycle’s tires to cripple it.”
The IRS publishes data each year on the tax gap, the difference between the estimated amount due and what it collects. This is noncompliance, and the numbers are staggering. The agency estimated that the gap for 2022, the most recent year available, was $696 billion—roughly the combined 2024 budgets for the departments of Agriculture, Education, Homeland Security, State, and Treasury. But that’s a gross underestimate, because in the realm of offshore tax havens, the IRS is flying blind. “The projections do not fully represent noncompliance,” the IRS report gingerly admits, “because data are lacking.” Charles P. Rettig, the IRS commissioner in 2021, put the gap at about $1 trillion per year, significantly greater than America’s bloated defense budget. For perspective, the 1975 tax gap was only $40 billion. In short, even as the ability of the government to collect taxes owed has declined enormously, the ability of certain Americans to evade them has exploded.
Noncompliance is not an option for most people. Not only do our employers report our earnings to the IRS, but they also withhold taxes from our paychecks and forward the money to Washington. Only 1 percent of wage earners misreport their income, because they will be caught. Audits of ordinary workers are entirely computerized, meaning “there’s a limited ability for you not to do the right thing when you have a W-2,” a retired special agent told me. The vast majority of US taxpayers “don’t have an opportunity to cheat.”
The lion’s share of the tax gap is caused by Americans who make money from money. There is no third-party reporting, so they can structure and hide their income as they wish. IRS data show that the misreporting and noncompliance rate for people in this category shoots up to 55 percent. The agency estimates that three-quarters of the tax gap is due not to corporations, but to individuals gaming the system.
In this tug of war between the oligarchs and the tax collectors, the latter are disadvantaged in almost every conceivable way. The Wealth Defense Industry has endless time and money to serve its clients, but the civil servants working to keep those clients honest have vanishingly little of either. Congress imposes a three-year statute of limitations on tax enforcement, which kneecaps the ability of the IRS to complete complicated audits and investigations. Agents don’t want to tackle those cases “because they won’t be fast, they are difficult, and it takes a lot of time and energy,” a former IRS executive told me. “And frankly, after a year-and-a-half of working a case, the agent gets tired of it, and they’re like, oh, I just want this to be over with.”
The extraordinary complexity of tax returns for the super-rich makes auditors reluctant to dig deeply. A successful auditor “has to be somebody that’s aggressive,” the former executive noted, but aggressive auditors and special agents aren’t the norm nowadays. “Sometimes, I feel like they just want to hit their metrics and targets. How quickly can I deal with this so I can move on to the next one and make my boss happy?” she said. “So, do they tackle those high-wealth people very often? Probably not.”
The IRS “audit roulette” revolver has more than 100 chambers, and the unlucky chamber doesn’t even contain a deadly bullet. It’s more like a peashooter.
Willingness is only the first obstacle. Because when an intrepid IRS auditor is inspired to wade through boxes and boxes of records, and detects substantial tax problems, the oligarchy class has near-endless resources to fight back. Billionaires can afford to hire the nation’s most high-powered tax attorneys and, if targeted, unleash them upon the IRS. Their strategy is to barrage the enemy with issues and objections so as to run out the clock. “Those people have the capacity to drag on these investigations, civilly or criminally,” a retired special agent with long experience observed, and “eventually they go into settlements, and they may be paying less simply because it’s settling.”
The oligarchs are represented by major law firms that bring in legions of former IRS agents and federal prosecutors to assist in the defense. “There’s a revolving door,” Blum confirmed. “That’s where the money is.” Indeed, nearly all of the former IRS special agents and prosecutors I interviewed for my book joined private tax defense practices after leaving the agency. Doesn’t that feel like going over to the dark side, I asked one of them. “No, no, no, no,” he exclaimed. “Everybody realizes that’s what basically happens.” Jeffrey Marcus, a former federal prosecutor who switched sides, drew a laugh at the 2017 OffshoreAlert conference when he joked, “as a defense lawyer, I just want to note that one man’s crook is another man’s client.”
The targeted oligarch’s defense team presents the IRS and Justice Department with the certainty of an exhausting battle, whereupon a delicate dance ensues—each side probing the other’s strengths and weaknesses—to reach a settlement everybody can live with. There are two sides to the tax practices of big accounting and law firms. The first, blandly called “tax planning,” is to create complex and often opaque legal structures to minimize what clients can get away with paying. The other side, “tax controversy,” kicks in when extravagant tax planning lands a client in legal trouble.
A veteran East Coast defense attorney who represents wealthy clients in tax disputes explained to me how it works. First, she and the government lawyers tussle over dozens, sometimes hundreds, of questions and technicalities. When the IRS is worn down, tensions are rising, and it looks like the dispute might end up before a judge, she will say something like, “I think you’ve got litigating hazards and I’ve got litigating hazards. I think it’s 50-50. Let’s split the baby.”
The mind-numbing arcana of the tax code—to which the Wealth Defense Industry has contributed over the years—helps speed the process along. “The tax laws are sufficiently complicated and sufficiently screwed up so that there’s plenty of wiggle room,” Blum explained. If the sides can agree on a split, the oligarch’s unpaid taxes just got cut in half. The auditors are happy because they collected some revenue—a career success. The bosses are pleased because they’ve put a tiny dent in the tax gap. And the oligarch, who often comes out ahead thanks to the investment gains on all those deferred taxes, can write a check and forget it ever happened. “If you settle, there is never any record or revelation that there has been a tax issue,” the defense attorney explains. “It’s completely private.”
The odds of a 0.0001 percenter ever having to write that check were always low, and they have dropped even lower as Congress has slashed the IRS’s resources over the decades. “It’s audit roulette,” said one retired special agent. For most of his career, this agent told me, super high-income individuals were audited at an annual rate of about 2 percent. During the last decade, the rate dropped to well below 1 percent. Which means the audit roulette revolver has more than 100 chambers, and the unlucky one doesn’t even contain a deadly bullet—it’s more like a peashooter.
The rare cases that aren’t settled end up in a specialized venue, Tax Court, where they are overseen by a judge trained in the byzantine world of the federal tax code. The goal of these civil proceedings is to determine the meaning of given sections of the code and whether taxes and penalties are owed. The battles are highly technical, the evidence and arguments arcane, and every word of every ruling gets larded into the appendices of the tax code, further deepening the complexity problem for the enforcers while opening up new avenues for the cheats.
The biggest winner is the US Wealth Defense Industry, which rakes in tens of billions of dollars in fees every year to protect—and expand—the fortunes of its upper-crust clients. On the very rare occasions when an oligarch ends up in criminal court, their savvy lawyers and accountants can mystify their audience into submission. Criminal tax cases are not overseen by specialized judges, and unless a guilty plea is negotiated, a jury of 12 ordinary citizens is tasked with passing judgment based on a legal narrative so convoluted that even assistant US attorneys and expert witnesses struggle to understand the intricacies. “We teach our agents to treat a jury—and I know this sounds terrible—but you treat a jury like eighth graders,” a former IRS special agent told me. “I’ve heard that lately they’ve actually lowered it to sixth grade.”
In the rare criminal tax case, jurors are tasked with following a legal narrative so convoluted that prosecutors and expert witnesses struggle to understand it.
Prosecutors also have to get past the public’s dislike of the IRS. Seat a juror who resents the taxman, and they “may pull the trigger for the taxpayer and vote for acquittal,” said a different former special agent. The combination of public mistrust and technical complexity gives the Wealth Defense Industry a near-impenetrable shield for their richest clients.
“The American criminal justice system is a British antique from the 16th century,” Blum told me. It works beautifully, he said, for the theft of a cow off the village commons: “Everybody in the village knows what a cow is, and everybody in the village has a pretty good idea whose cow it is—probably by name.” But a criminal tax case might involve “a Scottish limited partnership, a trust in an offshore jurisdiction, a moving trust—I can go on and on about the devices, foundations, all sorts of things to conceal ownership and hide the way things move,” Blum said. “You’ve got to prove this stuff to a group of people who have never heard of half of it.”
Meanwhile, “you’ve got a paper trail that is a bloody nightmare and the typical prosecutor looks at that and says, ‘Dear God, what am I going to do with all this paper? And the jury, before we go very far, is going to hate me.’”
The government’s unwillingness to hold oligarchs to account matters, and not just because a few rich guys get off scot-free. Our current predicament—laws are ignored and allegations of high-level corruption are becoming the norm—is intimately connected to a series of prominent victories by the rich against the government, showing others it’s possible to beat the system, and here’s how it’s done. This has eliminated the single most important weapon in any law enforcer’s arsenal: deterrence. Because, as one former special agent put it, with tax evasion, “you’re not going to prosecute your way out.”
The array of “aggressive” but technically legal tax avoidance schemes available to America’s super-rich is so extensive that it’s baffling anyone would resort to outright tax evasion, which is illegal. That is, until you consider how easy it has become for them to get away with it. If investigators identify 30,000 people committing tax evasion, “you can’t do 30,000 cases and put 30,000 people in jail,” the same former special agent said. “You have to make examples of certain folks.”
Pursuing oligarchs is frowned upon, so IRS special agents aim lower. “Typically, it’ll be a dentist who had an offshore account somewhere and they can nail him in no time.”
This is the exemplar theory of law enforcement, a concept Blum learned from Leon Radzinowicz, the renowned Cambridge University criminologist. By Radzinowicz’s estimate, about half the people in a given society follow the rules, largely because that behavior is instilled in them. Another 40 percent will commit a crime of self-interest if they’re sure they can get away with it. The remaining 10 percent, according to Radzinowicz, are sociopaths, fools, and people who will do anything for cash. It’s that wavering 40 percent one needs to target—the more they fear prosecution, the more likely they are to do right. But “if they believe they can get away with it, Katie bar the door!” Blum said.
Go after 2 or 3 percent of the lawbreakers hard enough, the theory goes, and most of the would-be criminals will fall in line. But in the sophisticated realm of offshore finance, “the whole concept just collapses,” Blum told me.
Our system has gotten so bad at uprooting and punishing major tax evaders that a kind of reverse exemplar theory has come into play. An oligarch who is tempted to evade taxes will look at the landscape and reasonably conclude that their chance of ever seeing the inside of a jail cell is basically zero.
Instead of pursuing actual oligarchs, the IRS and the Justice Department favor “open and shut” cases involving affluent professionals. “Typically, it’ll be a dentist who had an offshore account somewhere and they can nail him in no time,” Blum said. Such indictments are often announced in advance of tax filing season as “an exemplar of prosecution,” he explained, but the oligarchs can’t relate: “What it discourages is a lot of other dentists.”
These cases tend to be relatively simple, so as not to confuse prosecutors, judges, and jurors. The disputed sums rarely exceed a couple million bucks. And though the defendants may be 1 percenters, they won’t be walking into court with a phalanx of 14 lawyers from three powerful firms. This narrow prosecutorial focus explains why the number of criminal prosecutions for federal tax evasion is so miniscule (only 615 cases in 2024), why the success rate is so high (around 95 percent, with many pleading guilty), and why it is so rare to see a real oligarch in the dock, much less convicted. “I used to tease the prosecutors—please send me the list of all the billionaires currently serving jail time,” a former IRS special agent who worked on some of the biggest tax evasion cases in US history told me. Their response: “crickets.”
For the rare oligarch who gets into serious tax trouble, the IRS and the Department of Justice have proved reluctant to pursue criminal prosecutions. Attorneys often whittle strong cases down to minor civil charges, and the oligarch goes back to making billions after paying back taxes and penalties. This get-out-of-jail-free card erodes public trust in democratic institutions while emboldening other oligarchs to attempt ever-grander schemes.
Consider the case of Sam and Charles Wyly, whose initial fortune derived from their Texas data processing company, University Computing. In 2015, the IRS announced it would seek a staggering $3.2 billion in back taxes, interest, and penalties from Sam and the estate of his brother, who died in 2011 after his Porsche collided with an SUV. The brothers had evaded taxes for decades, committing their crimes, as Forbes noted, via “a tangled web of offshore trusts.” They also had used their wealth to influence elections to the benefit of Republican candidates. In 2004, most notably, they helped derail the presidential campaign of Sen. John Kerry by bankrolling the notorious “Swift Boat Veterans for Truth” ad.
Wyly, whose lawyers whittled his $2 billion IRS tab to just $300 million, replied with an emphatic “no” when asked if he had regrets or would do anything differently.
Sam, the surviving brother, spent millions building his defense team. It was money well spent. After a marathon four-year civil trial, his own $2 billion share of the IRS tab was reduced to $1.1 billion. “Let’s see how much of the $1.1 billion tax bill winds up getting paid,” a skeptical financial analyst wrote. Those doubts were justified. In the end, Wyly settled with the IRS for only $300 million, an 85 percent discount on the original amount. He was never charged with a crime or even faced the threat of incarceration.
The case contains important lessons for understanding oligarchic power, and the role of the Wealth Defense Industry in making tax fraud possible and profitable. First, thanks to what the government called a sprawling “scheme of secrecy,” it was not the IRS but a group of computer wizards combing through data at a third-party financial institution who exposed the Wylys’ illegal activities. Second, the brothers’ high-priced advisers had combined secrecy and complexity in an effort to protect them: The brothers controlled 16 trusts in the Isle of Man, along with dozens of accounts and “48 corporations from Nevada to the Cayman Islands.” Unable to access information about offshore accounts or sort out who owned what, the only way the IRS could hope to bring a case was through informants or random luck.
The brothers’ use of professional wealth defenders also gave them a so-called reliance defense. Sam Wyly maintained that he was just following the advice of his lawyers and accountants, and it was all too much for him to understand. The litigation was so complex that one court ruling ran to 459 pages. Wyly replied with an emphatic “no” when asked if he had regrets or would do anything differently. And who can blame him? He sidestepped $1.7 billion in unpaid taxes and penalties and walked away a free man. Even his reputation was shielded in part by privacy provisions that bar the government from commenting on the situations of individual taxpayers.
So much for the exemplar theory.
The audacity of the oligarchs in their legal skirmishes with the government can verge on mind-blowing. Take the private equity billionaire Robert F. Smith. In 2020, the Department of Justice issued a criminal indictment of Smith’s business mentor, billionaire Robert Brockman, who made his fortune leasing software and computing terminals to auto dealerships. The government alleged Brockman had engaged for decades in a tax evasion scheme that concealed “approximately $2 billion in income from the IRS” in secret accounts and structures in Bermuda, Switzerland, and elsewhere.
Smith, who also was deeply embroiled in the scheme, was able to secure a nonprosecution agreement—which is “unheard of” in such cases, a special agent with extensive knowledge of the situation told me—in exchange for his cooperation against Brockman, whom the DOJ saw as the bigger fish. (Brockman, who would plead not guilty on all counts, died in 2022, at age 81, before the government could put him on trial.)
When it became clear the feds were onto their illegal enterprise, Smith rushed to file for amnesty through the Offshore Voluntary Disclosure Program—an escape valve the IRS set up in 2009 after Blum flushed out the names of nearly 4,500 wealthy Americans evading federal taxes through the Swiss bank UBS. But with Smith and Brockman already under investigation, the application was rejected.
Their advisers proffered another strategy: a sudden and generous campaign of high-profile philanthropy. The idea originated with Evatt Tamine, a Bermuda-based attorney who also was implicated in the evasion scheme and, like Smith, cut a nonprosecution deal with the feds. Tamine counseled Brockman and Smith that they might deflect negative legal consequences by appearing to be as charitable as possible. “These activities would work as a strong barrier against an attack from the IRS,” he told them in a memo.
Smith agreed to “abandon” the $182 million in tax deductions he’d claimed, brazenly, when he used money he’d withheld from the treasury for his philanthropy binge.
The billionaires paid heed. Prior to his death, Brockman gave $25 million to the Baylor College of Medicine and millions more to Centre College and Rice University. Smith launched a much more aggressive campaign in 2016, four years before DOJ indicted Brockman and publicized its arrangement with Smith, who admitted to lying to the IRS and using offshore accounts to evade taxes for 15 years. Smith used the untaxed proceeds of his evasion scheme to set up a charitable foundation and even claimed a tax deduction for doing so. He donated $50 million to Cornell, his alma mater—which named its school of chemical and biomolecular engineering in Smith’s honor—followed by $30 million more.
His extensive bio on the school’s website makes no mention of Smith’s offenses, even though half of the latter donation came in well after they were made public. The university has showered him with alumni awards and continues to herald him as a “Proud Cornellian.”
Smith’s pre-emptive reputational cleanse continued with a $20 million donation to the Smithsonian’s National Museum of African American History and Culture. “We kept wondering, who is this Robert Smith?” the museum’s director of development told the Washington Post. Still largely unknown to the public, Smith made national headlines in 2019 when, while giving the commencement address at Morehouse College in Atlanta, he told the 400 elated graduates that he would be paying off their student debt—$34 million in all. He also gave tens of millions to Carnegie Hall, the Susan G. Komen breast cancer research foundation, and the National Park Foundation. Another Post article cites tax experts saying that “if the money in the offshore entities was going to good causes, the tax evasion might strike prosecutors and juries as less wrongful.”
Of course, if the oligarchs simply paid all their taxes, the government would have hundreds of billions more dollars every year to fund national parks, museums, the arts, universities, scholarships, medical research, and programs to address yawning social and economic inequalities—goals the public has long supported. Instead, the tax gap they helped create gives lawmakers a rationale (soaring deficits!) to slash spending for those public goods. The result is a society that provides for its citizens only what the wealthy and politically connected will allow—a reflection of the enormous power residing in the hands of the few.
The Brockman–Smith case was a public relations disaster from almost every angle. The biggest criminal tax fraud case in the nation’s history, it could have been a shining moment of IRS and DOJ achievement and a fearsome deterrent—an exemplar par excellence. Instead, the government flailed. Brockman never saw justice, and US attorney David Anderson was left with his excuses. “It is never too late to do the right thing,” he’d said in his press release. “Smith committed serious crimes, but he also agreed to cooperate.”
And who wouldn’t cooperate if it negated any criminal consequences and the only punishment was paying the original tax plus some fines? Smith—who used some of his ill-gotten gains to buy two personal ski properties, luxurious homes in California and Colorado, and a commercial property in France—agreed to pay $139 million in back taxes and penalties. He also agreed to “abandon” the $182 million in deductions he’d claimed, brazenly, when he used money he’d withheld from the treasury for his philanthropy binge. But these are rounding errors for a man with a $10 billion fortune.
Americans, by and large, imagine their government as a behemoth with overwhelming power and resources, and for them it is. For the oligarchs, it’s a different story. They can rest assured, knowing the government is no match for their wealth, their political investments, and the savvy professionals on their payrolls. IRS special agents devote years of their lives to cases like Brockman–Smith, only to be devastated by the outcomes. One special agent who worked the case told me he was glad to have been a part of it, but the roller coaster of soaring hopes and gut-wrenching disappointments was a lot to take. “If you asked me would I do it all over again,” he said, “the answer would not just be no, but hell no!”
Evasion roulette. It’s a game well worth playing, if you can afford it.
This article was adapted from Jeffrey Winters’ book The Blind Spot: How Oligarchs Dominate Our Democracy, which goes on sale this week.
