Following on this earlier post regarding the proposed settlement, U.S. District Judge Dennis Cavanaugh preliminarily approved a proposed $225 million class-action settlement by KPMG LLP and the Sidley Austin Brown & Wood LLP law firm over questionable tax shelters that KPMG promoted and sold to hundreds of wealthy clients. Here are posts over the past year or so that chronicle KPMG’s multiple problems arising from its tax shelter venture.
Under the settlement, KPMG will pay about 80% of the settlement while Sidley Austin — which had written legal opinions supporting many of the shelters — will pick up the balance of the settlement amount. The settlement covers about 275 former KPMG tax-shelter clients. The preliminary settlement comes a couple of months after KPMG reached a $456 million settlement with the Justice Department over the same tax shelters under which KPMG avoided a criminal indictment but admitted criminal wrongdoing.

In granting preliminary approval, Judge Cavanaugh rejected objections to the settlement raised by several law firms that lead plaintiffs’ firm Milberg Weiss Bershad & Schulman LLP, KPMG and Sidley Austin had engaged in collusive settlement negotiations and that Milberg should be disqualified as lead counsel because of an alleged conflict of interest involving a former client the firm previously represented in a separate 2003 lawsuit against KPMG.
Now that preliminary approval of the settlement has been obtained, Milberg Weiss will notify all members of the plaintiff class of the settlement and the hearing on final approval of the settlement, which will occur in a couple of months. It is rare for class action settlements that are preliminarily approved not to be approved on a final basis.