Tuesday, October 18, 2005

10 More Indicted in KPMG Case

TaxProf reports here that 10 more were indicted in the KPMG Case.  They provide the indictment here.  It is without doubt a sad indictment to read. The accused are highly educated individuals.  Some partners, some with masters in tax law, some lawyers and some CPAs.   

Court One alleges conspiracy, Counts 2-40 allege tax evasion, 41-44 allege evasion of Ruble's Income Tax, and 45-46 allege Obstruction of the IRS.  One has to give USA Michael Garcia some credit here for 1) indicting individuals and not proceeding the way the government did in the Arthur Andersen case; 2) in all but the last 2 counts focusing on substantive allegations as opposed to taking a "short-cut" and charging crimes like false statements or obstruction.

In reading the indictment, paragraph 58 was the most bothersome.  It states that "[t]he conspirators also attempted to conceal their fraudulent tax shelter activities by attempting to cloak communications regarding those activities and certain of the activities themselves with the attorney-client privilege, although the communications in question were not privileged." 

The attorney-client privilege has been under scrutiny in recent months.  The government has asked for waiver of the privilege in deferred prosecution agreements - something that was part of the KPMG settlement (see post here).  Groups have been vocal in opposition to the posture taken by the government. It is important to note here that the allegations in paragraph 58 do not provide a basis for the government claiming the need to pierce the attorney-client privilege.  If the allegations in paragraph 58 prove accurate, there is no attorney-client privilege.  The privilege has aways contained a crime-fraud exception. The government cannot use this scenario to justify a request of a company to waive the attorney-client privilege.

(esp)

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