Food & Drink

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. 

Leon Black’s personal financial ties to Jeffrey Epstein

In October, a New York Times report revealed that Black, the billionaire founder of private equity and investing firm Apollo Management, paid disgraced financier Jeffrey Epstein about $50 million for personal financial advice between 2012 and 2017. The time period is notable: it means Black engaged Epstein’s services long after Epstein was convicted in 2008 of an underage prostitution charge in Florida, in a sweetheart plea deal worked out between him and U.S. attorneys that enabled Epstein to serve what many believe was a light prison sentence in a county jail. Black quickly expressed regret for his association with Epstein since his 2019 arrest, said that Epstein never did business with Apollo, and claimed he was “unaware” of Epstein’s alleged sex ring of underage girls. (Epstein died by suicide in a Manhattan jail in August 2019 while awaiting trial.)

Jack Ma’s Ant Group IPO shelved in a power grab

China’s financial regulators hit pause in November on fintech company Ant Group’s $35 billion IPO on the Hong Kong and Shanghai stock exchanges—just days before the company was slated to go public in the world’s largest public offering. Ma, cofounder and chairman of Chinese e-commerce giant Alibaba, is the largest individual shareholder in Ant Group, an arm of Alibaba that enables online payments and makes consumer loans. The Shanghai stock exchange cited “significant change” to the regulatory environment as the reason for halting the IPO, but offered few additional details, according to Bloomberg. About a week prior to the announcement, during a conference in Shanghai, Ma blamed China’s financial regulations for stifling innovation. The Wall Street Journal reported that Chinese President Xi Jingping personally killed the IPO in retaliation for Ma’s criticism. In late December, Chinese regulators announced an antitrust investigation into Alibaba, and recommended Ant Group self-implement financial regulations amid a larger desire in Beijing to limit technology firms’ growth and power.

Markus Braun, Wirecard and the missing $2 billion

The CEO of German payments firm Wirecard was likely a billionaire in February this year, but not on March 18, when Forbes finalized the 2020 list of the World’s Billionaires. Don’t expect Braun to join the billionaire ranks anytime soon. In June, news broke that Wirecard could not account for about $2 billion of funds. Braun soon resigned as CEO, as the accounting scandal struck a blow to the company’s stock. In late June, Braun was arrested and charged with allegedly inflating Wirecard’s sales and balance sheet with fake transactions to improve its profile with investors. He denies any wrongdoing, and is being held in a Bavarian prison while Munich prosecutors complete their investigation. The company eventually admitted that the missing $2 billion was likely money that it never had. Wirecard shares took a beating, falling nearly 90% the week after the funds were reported missing. His 7% stake in Wirecard, had he held onto it, would have been worth just $4 million as of late December.

Bill Gross, a noise complaint, and the Gilligan’s Island theme song

The oddest story on this list. Billionaire bond investor Gross calls the tony California community of Laguna Beach home, and a case of unneighborly relations between him and tech entrepreneur Mark Towfiq wound its way through Orange County Superior Court this year, making headlines along the way. Towfiq alleged that Gross and his “life partner,” the tennis player Amy Schwartz, harassed him by playing the Gilligan’s Island theme on repeat at ear splitting volume late at night. Gross, meanwhile, claims Towfiq was the one harassing him and Schwartz, by recording them with his iPhone, actions Towfiq defended as collecting evidence of the loud music. The whole spat appears to have sprung from a blue glass Chihuly sculpture Gross installed near the two men’s shared property line and covered with protective netting, which Towfiq said was unattractive and blocked his view of the ocean. A judge ruled on December 23 that Gross and Schwartz had harassed Towfiq, and issued a civil harassment order that bans the couple from playing music while they themselves are not outside. In a statement to Forbes, Gross said he and Schwartz were “disappointed in the outcome, and will of course abide by the terms of the court’s decision.” They promised they wouldn’t play loud music—but say they “will continue to dance the night away, Gilligan’s Island forever.”

Products You May Like

Leave a Reply

Your email address will not be published. Required fields are marked *