Billionaire Robert Smith Tries to Reassure Wary Vista Investors in Key Fund Raise

(Bloomberg) -- Robert Smith, billionaire co-founder of Vista Equity Partners, is putting in more face time with investors and apologizing as he tries to raise his private equity company’s biggest ever fund just over a year after admitting to multi-million dollar tax evasion.

Smith, 58, has been working the phones and attending presentations with investors who had not previously been given time with him, according to people familiar with the conversations, who asked not to be identified discussing private matters. In some of the meetings, Smith said he was sorry for becoming embroiled in the scandal and said that similar lapses of judgment wouldn’t be repeated, some of the people said. 

These efforts come at a pivotal time for Vista and are likely to play a role in whether the firm, which manages $81 billion for public pension funds and other wealthy investors, is successful in reaching its aim of more than $20 billion for its flagship software buyout fund. 

Smith signed a non-prosecution agreement in October last year that allowed him to avoid prison and keep running his private equity firm. In exchange he had to admit he had committed crimes, pay $139 million and cooperate against a close business associate indicted in the largest tax-evasion case in U.S. history—Texas software mogul Robert T. Brockman. Brockman, 80, was in court this week for a hearing about whether he understands the complex case against him after his lawyers said he has dementia.

A representative for Smith and Vista declined to comment. 

U.S. pension funds are among investors weighing whether to continue giving Vista money, the people said. That’s in part because they are concerned about how giving retirement money to a tax evader might be perceived, the people said. Some are also taking pause after the departure of several senior Vista executives, including co-founder Brian Sheth, people briefed on those discussions said. 

Some investors have already exited Vista’s current funds by selling in the secondaries fund market, citing the tax issues as the reason, according to a person with knowledge of the trades.

One adviser to U.S. public pension funds said that while Smith’s legal troubles did not automatically mean they would advise investors against backing Vista, it is a prominent feature of due diligence on the firm. There are also concerns that Smith may have to devote time to participate in the prosecution of Brockman.  

To be sure, it is early days for the flagship fund. The firm raised $2.3 billion in October for a credit fund, beating its original target by $800 million. Despite the concerns, Vista is still seeing strong interest for the new fund, according to people familiar with the fundraising. 

Smith has built a reputation as a savvy dealmaker and generous philanthropist. Last week in Berlin, Smith was on stage at the SuperReturn conference for a 30-minute Q&A with Yann Robard, managing director at Whitehorse Liquidity Partners. Robard praised him several times for his success building Vista. The tax issue was not discussed.

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