Nine former KPMG execs charged as accounting firm agrees to pay fine in tax shelter probe

Sunday, August 28th 2005, 8:08 am
By: News On 6

NEW YORK (AP) _ Criminal charges were brought against nine former KPMG executives as the accounting firm itself agreed on Monday to pay $456 million and admitted wrongdoing to settle a federal probe into tax shelters it sold its clients.

An indictment was unsealed in U.S. District Court in Manhattan charging the nine men with conspiracy for designing and marketing fraudulent tax shelters to help wealthy individuals avoid paying taxes.

Those charged included Jeffrey Stein, who was named deputy chairman of KPMG in April 2002. He was one of five lawyers charged in the indictment.

The indictment said that from 1996 through at least 2003, the men defrauded the Internal Revenue Service by creating the fraudulent tax shelters.

Federal prosecutors agreed not to prosecute the firm unless it violates its agreement with the government, which bars it from committing further wrongdoing.

KPMG also agreed to submit to an independent monitor.

The firm admitted it designed and marketed fraudulent tax shelters and tried to conceal them from the Internal Revenue Service, a federal prosecutor said in court.

Judge Loretta Preska of Manhattan federal court said KPMG's board had unanimously agreed to the deal.

Federal prosecutors had filed what is known as a criminal information charging the firm with conspiracy and other crimes, but agreed not to seek a grand jury indictment.

KPMG lawyer Robert Bennett declined comment outside court but said the company planned a statement later.

The investigation centered on a type of tax shelter marketed by KPMG in the late 1990s that allowed its clients to report tax losses to offset big profits elsewhere, thereby avoiding paying taxes.

KPMG stopped providing the shelters in 2002. In June it said that some of its former partners had engaged in ``unlawful conduct'' and pledged to cooperate with the Justice Department.

Attorney General Alberto Gonzales and Manhattan U.S. Attorney David Kelley and Internal Revenue Service Commissioner Mark Everson planned an afternoon news conference in Washington.

KPMG was eager to avoid a criminal indictment of the company. Another major accounting firm, Arthur Andersen, which had Enron Corp. as a client, was decimated after prosecutors charged it with obstruction of justice.

The Supreme Court reversed Andersen's conviction earlier this year.