As KPMG LLP attempts to survive as a going concern after cutting a deal with the federal government to avoid a criminal indictment in connection with its controversial tax shelter practice, the firm served up 10 additional criminal defendants for the Justice Department to indict, including the firm’s former chief financial officer and its former Associate General Counsel. Here are the previous posts on the KPMG tax shelter saga.
Federal prosecutors had a federal grand jury in New York yesterday charge the 10 defendants and the nine previous ones in a superceding indictment (copy here, courtesy of the TaxProf blog) with at least 39 counts of tax evasion and a single count of conspiracy to defraud the Internal Revenue Service. Three of the defendants are also charged with obstructing government investigations, and 17 of the 19 defendants are former KPMG tax professionals.

As noted in the previous posts, the case centers on four types of allegedly fraudulent tax shelters that KPMG promoted and sold from 1996 to 2002 to about 600 wealthy individuals, generating an estimated $2.5 billion in tax savings. KPMG copped a plea bargain with the Justice Department to avoid an Arthur Andersen meltdown, agreeing to pay about a $460 million fine, admitting criminal wrongdoing, and cooperating with the prosecutors. The latest indictment is a reflection of that cooperation.
As noted in this previous post, one small problem with all of this is that no court previously has ruled that the underlying tax strategies involved in the tax shelters are illegal, although the IRS has challenged the shelters as abusive tax-avoidance schemes.