Saturday, August 6, 2005
It appears that KPMG will avoid a criminal indictment for its sale of tax shelters as prosecutors are seeking a settlement with the firm that will likely involve a civil penalty and perhaps a deferred prosecution agreement that allows the firm to avoid the fate of Arthur Andersen. A Bloomberg story (here) indicates that the Andersen effect has been a significant concern for prosecutors and securities regulators, who would face a world with the Big Three for public accounting.
A settlement by the firm would not affect the individual partners, and an AP story (here) indicates that up to 20 former tax partners may face criminal charges related to the tax shelters. KPMG has already stated that some of its employees violated the law in a June 16, 2005 release (here) that states: "KPMG takes full responsibility for the unlawful conduct by former KPMG partners during that period, and we deeply regret that it occurred." Interestingly, KPMG has been backpedaling from that statement, at least somewhat, according to a Wall Street Journal article (here) about a law suit in Florida in which the firm responded to a discovery request about the "unlawful conduct" by "KPMG partners" by asserting that those terms are "vague and ambiguous." Reminds me of the response by a President in a deposition: "It depends what you mean by 'is'?" A settlement with the DOJ will certainly allow KPMG to survive, but it is not an end to the litigation. (ph)
See also WebCPA here. (esp)(w/ thanks to jrp)