As a year unlike any other draws to a close, Forbes takes a look at the biggest scandals billionaires found themselves facing, from tax evasion to alleged financial fraud to a billionaire spat between neighbors featuring the Gilligan’s Island TV show theme song.
President Trump’s tax bombshell
Number one with a bullet. The New York Times achieved in September what was starting to seem impossible: they got hold of Donald Trump’s tax returns, and what they found was a doozy. Most outrageous, perhaps, was the revelation that in 2016 and 2017, the billionaire paid just $750 in federal taxes. And, for almost two decades before that, Trump paid nothing in federal taxes due to massive losses racked up by his businesses. At the time, the Trump Organization claimed most of the Times’ facts were inaccurate, and that Trump had paid millions in personal taxes to the federal government. In 2021, we will be watching to see what happens with a nearly $73 million refund Trump got from the Internal Revenue Service, because it’s under audit—and, if decided against him, means the one-term president could owe $100 million (the refund plus interest and penalties)—to say nothing of his other debts, totaling some $900 million.
Robert F. Smith’s massive tax evasion
Smith, a private equity CEO and the wealthiest Black man in America—who notably paid off student loans for the entire graduating class at Morehouse College in 2019—lost the respect of many when he confessed in October to “an illegal scheme to conceal income and avoid taxes” and paid a hefty fine to settle the matter. That month, federal officials disclosed that Smith admitted to parking $200 million in offshore accounts and criminally evaded paying taxes on it for 15 years—from 2000 through 2015. Smith entered into a non-prosecution agreement with the Department of Justice and agreed to pay $139 million in penalties to the IRS—the largest tax fine ever. He also agreed to help the IRS reel in Texas-based billionaire Robert Brockman, Smith’s former client at Goldman Sachs and reportedly the initial investor in his Vista Equity private equity firm. Brockman was charged in October with hiding $2 billion from tax officials in offshore accounts, perhaps the largest tax evasion scheme in history. When asked about the tax matter at the New York Times online Dealbook conference in mid-November, Smith referred to it as a mistake, saying, “A big part of life is that if you make mistakes, you have to in some way clarify them, clear them up and get beyond them.” In late November, Smith’s cofounder and close friend Brian Sheth told Forbes he was leaving Vista Equity, ending the partnership the two men formed in 2000.
Luckin Coffee’s fabricated revenues
With the goal of growing bigger than Starbucks in China, Luckin Coffee listed its shares on the Nasdaq in May 2019 and proceeded to wow investors with its growing revenues. The Chinese coffee chain attempted to grab market share by offering discounts such as “buy one and get two free” deals. Shares soared and in early March, Luckin Coffee CEO Jenny Zhiya Qian was briefly a billionaire alongside Luckin’s founder and chairman, Charles Zhengyao Lu. Until short seller Muddy Waters Research alleged fraud at Luckin, and shares began to fall. In April, the company announced that an internal probe found that Luckin’s chief operating officer Jian Liu, along with several subordinates, had faked $310 million in transactions. By the end of April, Luckin chairman Lu was $1 billion poorer; as the stock fell further, his net worth dropped to a current estimated $800 million. Qian’s fortune fell below $1 billion by the middle of March. On December 16, Luckin Coffee agreed to pay $180 million to the U.S. Securities and Exchange Commission as a result of its investigation into the fabricated revenues. The company did not admit or deny the allegations made by the SEC, and no individuals were charged in the matter.
