INTRO: Usually, car salesmen are thought to be the
slimiest and most manipulative people in the world. Aside from using pushy sales tactics
and predatory financing, car salesmen often don’t mind selling you a piece of trash.
In fact, they’ll probably do it with a smile. Considering this, I don’t think you’d
be surprised to hear that 87% of American adults dislike something about the car buying
process. Also, if you’re one of the few people who had a positive experience, many
would argue that you got taken advantage of so much that you didn’t even realize. But,
one guy named Bob Brockman actually took advantage of car dealerships so hard that they didn’t
even realize. Throughout his career, Bob sold overpriced software and hardware to dealerships
across the nation, often with multi-decade long contracts. And after he was done milking
the dealerships, Bob turned around and tried to milk the government. But this didn’t
work out too well as he was charged with the largest tax evasion charge in history. So,
here’s how Bob Brockman made billions by taking advantage of dealerships and the government,
and how he eventually got caught.
BOB BROCKMAN: Taking a look back, Bob Brockman was born
in 1941 in St. Petersburg, Florida. This was just before the US joined World War 2, so
Bob was born at the height of the war. But, this wasn’t too bad for Bob as the war would
come to an end by the time he turned 5. Anyway, his dad owned a gas station and his mom worked
as a physiotherapist, so he had a pretty comfortable life financially. This allowed him to focus
on his education and excel in school. In fact, he graduated summa cum laude, which is the
highest distinction, from the University of Florida with a business degree in 1963. Bob
was also a member of the university’s business honor society, so there’s no doubt that
he was a pretty sharp guy. Out of college, Bob got a marketing job at a Ford while also
serving in the US Marine Reserves. This didn’t last long though as Bob switched over to IBM
in 1966, and this is where he really got his foundation for selling. Bob was tasked with
the job of selling IBM’s mainframe computer services to car dealers. And out of the gate,
Bob was a star performer. Maybe it was his young ambition or his time at Ford, we’ll
probably never know, but it seemed like Bob was born to sell. Being the star that he was,
Bob knew that he didn’t really need IBM, so in 1970, he left the company and launched
his own company called Universal Computer Services. During his time at IBM, Bob had
dealt with dozens of car dealerships, and he knew exactly what they wanted: less paperwork.
So, he taught himself how to code and developed a piece of software that could synthesize
multiple financial statements into one. For people who owned multiple car dealerships,
this was a godsend. Soon enough, Bob expanded his software to help dealers with managing
inventory, generating weekly reports, and tracking sales, and car dealerships ate this
up. Bob leaned into this business over the next 20 years and he got quite rich as in
he made hundreds of millions. Up until this point, Bob hadn’t really done anything slimy
per se. Sure, he might’ve used some shady sales tactics when selling to dealerships,
but for the most part, Bob was simply offering an extremely valuable service to dealers,
and he was rewarded quite handsomely. His next business move, however, wasn’t nearly
as moral.
MASQUERADING AS FORD: In the early 1990s, Ford decided that they
were done with the IT world, so they started looking for buyers for their IT division.
Given that this was right up Bob’s alley, he made an offer for $103 million, but he
had one condition. He wanted the rights to use Ford’s logos and branding for 5 years.
Now, this was a pretty odd request, but Bob was already running a respectable software
business, and Ford probably thought that Bob simply wanted some time to rebrand the company.
So, they agreed to the deal, but this turned out to be a big mistake. You see, Bob leveraged
the trust and respect dealers had for Ford in order to sneak in extremely predatory deals.
He charged ludicrous amounts for everyday tech. This included charges such as a $12,000
fee to install a 500-megabyte hard drive or a $2400 for a printer. You would think that
dealers would’ve caught onto these ridiculous fees, but many of them didn’t look into
the fine print and simply trusted Ford because the fine print was a 12-inch thick contract.
When Bob’s 5-year license for Ford’s branding was up though, many of these dealers were
in for a rude awakening. Some of them tried to rebel against Bob alleging that he had
misled them, but Bob was well prepared for this. Any complaint from the dealers was already
accounted for in the fine print, and dealers couldn’t just wait it out given that these
contracts often extended decades. So, many of them tried to go the litigation route by
suing Bob. But this just drowned them in legal fees which were often just as bad as Bob's
fees. At the time, it wasn’t really clear how bad these dealerships were getting screwed.
Dealers that weren’t affected simply dismissed the concerns as they should’ve read the
fine print. It wasn’t until 10 to 15 years later that Bob’s damages finally came to
light as these dealerships began to file for bankruptcy and shut down due to his fees.
In 2010, for example, a Californian entrepreneur named Jay Gill decided to expand his empire
by purchasing a group of 10 car dealerships. But, when he looked into the financials of
the group, he realized that the company owed Bob $3 million and that they were supposed
to pay him $35,000 every single month. After seeing this, Jay said quote, “I know unequivocally
that I wouldn’t do business with this guy, even if it was free.” Fortunately for Jay,
he didn’t have to deal with Bob for that long as he agreed to settle half that amount,
but with fees like that, it’s no wonder why car salesmen are so pushy. If they don’t
rip you off, they can’t afford to get ripped off themselves.
DOCUPAD: As you would guess, the entire fiasco with
Ford wasn’t the best for Universal Computer Service’s public reputation. So, Bob started
looking to rebrand himself in the 2000s, and the perfect opportunity came in 2006 when
he got the opportunity to sell his company to Reynolds and Reynolds. Similar to UCS,
Reynolds and Reynolds had been selling software to auto dealers since the 1980s. They had
mostly grown their software empire through a bunch of acquisitions and offering to buy
UCS was just another one of their routine acquisitions. I don’t think they did much
due diligence as a simple glance at Bob’s history would probably off-put most people.
Nevertheless, Reynolds and Reynolds went ahead and purchased UCS for $2.8 billion, and as
you would guess, in Brockman fashion, there was a critical contingency for the acquisition.
Bob stipulated that he must be made CEO of the merged company for the acquisition to
be completed. Reynolds agreed and it didn’t take long for Bob to start ruining Reynolds’
reputation either. First of all, he went ahead and implemented some smaller rules that were
annoying but not too bad. He refused to hire smokers and forced all employees to get an
annual physical to maintain health insurance. Some of his other policies, however, were
much more damaging. About ⅓ of Reynolds’ revenue was from General Motors through their
Integrated Dealership Management program. Considering how integral GM was to the business,
you would think that Bob would treat them very well. But, in 2007, GM ended up filing
a lawsuit against Reynolds accusing them of refusing to make requested changes to the
software. Reynolds ended up settling with GM a year later which ended the GM partnership.
Somehow, Reynolds had already lost their biggest customer just two years after Bob took over,
but Bob didn’t care as he had his eye on a much bigger prize. In 2007, a company called
Coindata came out with a product called DocuPAD. DocuPAD is basically a large tabletop tablet
that eliminates the need for paperwork when selling a car. This makes it much easier for
car salesmen to upsell customers on insurance programs and amenities that they simply don’t
need. Despite the appealing product, most car dealerships avoided the system given that
it was extremely expensive. Coindata charged $10,000 to set up each system and then an
additional $1000 every month as a maintenance fee. And if the dealership wanted to modify
anything, they were charged an extra $297 for each modification. Coindata had a tough
time getting dealerships to pick up these tabs, but Bob wasn’t worried about that.
In 2009, he offered to form an exclusive marketing partnership with Coindata, and over the next
two years, they revamped the system. In 2011, the duo came out with a new DocuPAD, and with
Bob at the wheel, these sold like hotcakes. It’s still not clear if these systems are
actually worth it for dealerships, but there was no question that they were worth it for
Bob.
TAX EVASION: By this point, Bob was raking in billions,
and though his business could be labeled as immoral or unethical, it definitely wasn’t
illegal. It would’ve been in Bob’s best interest to keep it this way, but unfortunately,
it didn’t take long for greed to get to him. In the late 1990s, an investment banker
from Goldman Sachs named Robert F. Smith reached out to Bob. Originally, he offered to buy
out UCS from Bob, but Bob turned the script on Robert. Bob offered to help Robert start
up a new investment bank called Vista Equity Partners with $1 billion. But, in return,
Bob wanted Robert to help him set up a foreign trust that didn’t report to the IRS. Technically,
there were legal ways to accomplish this and legitimate reasons to do so, but I think it
was pretty clear that Bob was going to use this for illegal purposes. Nonetheless, this
was an opportunity of a lifetime for Robert, so he took Bob up on this offer. The Department
Of Justice has since labeled this deal as evidence of conspiracy and scheme and artifice
to defraud. So, here’s how the fraud worked. Bob owned a charitable trust called Eugene
Brockman that was based in Bermuda. This charitable trust owned a holding company called Spanish
Steps Holdings registered in Nevis. And Spanish Steps Holdings owned a company called Point
Investments which was registered in the British Virgin Islands. And Point Investments was
investing in Vista’s foreign fund. Bob used this convoluted string of companies to funnel
money offshore and avoid taxes. Bob and Robert got away with this for decades, but eventually,
the IRS caught on. Robert didn’t resist the IRS much and quickly turned on Bob. When
he took in the investment from Bob, he knew this could eventually happen, and he was prepared
for it. Robert worked with the IRS to give them all the information they needed, and
he happily paid the $139 million fine for his involvement in the scheme. From his perspective,
the deal with Bob was well worth it. Vista Equity Partners had grown to $86 billion in
assets under management which made Robert worth $8.9 billion. Considering this, a $139
million fee wasn’t that bad. As for Bob, his lawyers tried to argue that he was suffering
from dementia and that he couldn’t serve jail time, but courts dismissed this argument
in November. We still don’t know what the final sentence is going to be, but it’s
probably not going to be that forgiving. At this point though, it doesn’t really matter
that much. Bob is already 80 years old, so he’s already avoided paying for his crimes
for most of his life. Aside from this, the latest accounts suggest that Bob is worth
$4.7 billion. So, even if he was charged a multi-hundred million dollar fine or even
a billion-dollar fine, it wouldn't actually hurt him that much financially. Really, the
worst punishment he could get at this point is being forced to live out his last days
in jail, and that might very well end up happening, but we’ll just have to wait and see. What
do you guys think should be Bob’s punishment? Comment that down below. Also, drop a like
if you’re glad that Bob gave car dealers a taste of their own medicine. And of course,
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