Wednesday, August 10, 2005

More KPMG Tax Shelter Dirty Laundry Aired

Much of the attention paid to KPMG's abusive tax shelters involved individual clients of the firm, many of whom were officers at corporations that were audit clients.  A Wall Street Journal story (here) discusses sales of shelters to corporations to lower their tax liabilities, and notes that two senior partners in the tax division were involved in the marketing of the shelters, including e-mails urging other partners to contact firms and secure agreements as soon as possible.  KPMG has worked feverishly to avoid a criminal charge, and the article indicates that negotiations have progressed to the point that the a deferred prosecution agreement is in the works that will involve a penalty of $400 to $500 billion and restrictions on the firm's tax work.  As the government digs through KPMG's tax shelter business, the question is whether the firm really deserves a pass on prosecution.  The Arthur Andersen effect is likely to provide a shield from a full-scale criminal case because the cost of reducing the field of public accounting to a Big Three is too great, but the practice restrictions on the firm may prove to be a significant cost and could result in a substantially diminished number four. (ph)

Investigations, Tax | Permalink

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