In the last round of prosecutions in relation to dodgy tax shelter activities, eight former KPMG staff were indicted while the companty itself orchestrated a deal for deffered prosecution which included paying a nearly half-billion dollar fine. Early articles had mentioned that twenty or so former KPMGers were under investigation. I guess now we will soon know the fate of the other twelve:

KPMG Prosecutor Says at Least 12 More Face Indictment

Bloomberg
Sept. 6 2005
By David Glovin

The prosecutor handling the case against eight former KPMG LLP executives charged with fraud stemming from the sale of abusive tax shelters said ``at least a dozen'' more people will be indicted. "We do plan to add additional defendants, at least a dozen,'' Assistant U.S. Attorney Justin Weddle said in Manhattan federal court today, where the former executives entered not guilty pleas. KPMG spokesman Tom Fitzgerald declined to comment. A former lawyer with Chicago-based Sidley Austin Brown & Wood LLP also pleaded innocent.

Weddle said a new indictment could be filed within three months. He said it would include new tax evasion charges against the existing defendants. U.S. District Judge Lewis Kaplan, who's presiding over the case, urged Weddle to charge the additional defendants by Oct. 17. Kaplan scheduled a trial for May 1.

Last week, KPMG, the fourth-largest U.S. accounting firm, agreed to pay $456 million to avoid prosecution over its sale of abusive tax shelters, ending the largest criminal tax case ever filed. The firm, which earned about $115 million in fees from the shelters, admitted that they generated at least $11.2 billion in phony losses and cost the U.S. government at least $2.5 billion in revenue.

Under the deferred prosecution agreement approved by U.S. District Judge Loretta Preska, KPMG must submit to oversight by an independent monitor for three years. KPMG admitted it committed fraud in designing the shelters sold to 601 wealthy clients and said it tried to conceal the shelters from the Internal Revenue Service.

20 Defendants

Charges will be dropped if the firm complies with the agreement, which remains in force through the end of 2006. Failure to comply would expose KPMG to criminal prosecution. The eight former KPMG executives named in the indictment unsealed on Aug. 29 are Jeffrey Stein, John Lanning, Richard Smith, Jeffrey Eischeid, Philip Wiesner, John Larson, Robert Pfaff and Mark Watson. Also indicted was attorney Raymond J. Ruble, a former partner at Sidley Austin.

Defense lawyers facing the prospect of a criminal trial involving more than 20 defendants said at today's hearing that they may file legal requests seeking more than one trial against smaller groups of former executives. Smith's lawyer, Robert Fink, said he would ask Kaplan to dismiss the charges because they're too vague. "You can't experiment criminally with what's unclear civilly,'' he said after the hearing.

Kaplan said he might require separate trials if the government returns a new indictment after Oct. 17. Prosecutors need to simplify the case, he said, warning that a prolonged tax trial may confuse and bore jurors. "The name of the game is to boil it down and move it,'' Kaplan said. "The idea of a three- or four-month tax trial -- well, it's a daunting prospect to the people who are going to get jury notices.''

The former executives were freed on bonds ranging from $300,000 to $3.5 million. Weddle said Stein, KPMG's former deputy chairman, and Smith, a senior official in the tax department, were leaders of the scheme and face 25 years in prison if they're convicted.

The original article appears here.

-- MDT

Labels: KPMG