In an interesting development, U.S. District Judge Vaughn R. Walker in San Francisco stayed a series of civil lawsuits over the legality of some KPMG LLP tax shelters pending the outcome of parallel criminal proceedings against certain of the individual defendants in New York. Prior posts on the KPMG tax shelter cases are here.
Normally, it’s the defendants who are facing criminal charges in parallel criminal proceedings who seek a stay of the civil lawsuit over the same subject matter. The argument in favor of a stay is that a defendant should not be required to choose between asserting the privilege against self-incrimination, on one hand, and effectively defending a civil lawsuit, on the other, while a criminal investigation of the subject matter involved in the civil lawsuit is ongoing.
However, in these particular cases, Presidio Growth LLC, an advisory firm that had been set up to help KPMG market some of the tax strategies at issue in the criminal case, had filed the civil lawsuits requesting a declaratory judgment that certain of the tax shelters at issue in the criminal cases were legitimate. A victory for Presidio in the civil cases would have given the defendants in the criminal proceedings ammunition to argue that the civil court ruling establishes that reasonable doubt exists over the illegality of the tax shelters that are at the core of the criminal indictment. As a result, the Justice Department — rather than the individual defendants facing the parallel criminal proceedings — asked Judge Walker to stay the civil lawsuits pending the outcome of the criminal proceedings, and he granted the prosecution’s request.
Again, what is the prosecution afraid of? Having to deal with a well financed defense on the legality means they likely won’t be able to coerce more accountants to plead guilty to previously undefined crimes and through their plea agreements, create “evidence” of crimes and intent.
Gee what do prosecutors hate so much about accountants these days that they are hell-bent on destroying their lives and putting them in jail? When will they start turning their focus on government accountants who defined and enforced “rules” that were obviously so flawed that people following those rules are being imprisoned right and left. Better yet, when will they start looking at themselves and admit they are imprisoning people who are innocent just because the public seems to be enjoying the show?
Watch your children and lock your doors ladies and gentlemen, there are a whole lot of accountants out there and only a handful have been imprisoned by the federal government (so far anyway).
Tom,
FJO apparently has little experience with accountants.
My first major run in was with a big 8 firm, during the s&l wars. The issue was adequacy of loan loss reserves. Representing a major shareholder and director, we were more than a little p. o’d when we learned that the accountants had destroyed all work papers, notes, etc., of all conversations with management and directors
Over the next few years, reports of major accounting firm wrongdoing mounted and mounted until in 1998 I gave a major cle program prediciting that within 3/5 years a major accounting firm would fold for crimes related to document destruction. Events proved me correct, but it was a very easy call.
If one actually wants to learn, you will find that even following a GAAP is no defense to an accountant being convicted of securities fraud, with good reason. the 2d Circuit resolved that point somplace in the 400s in F.2d.
This “case” means nothing. For starters, the IRS in a civil case is entitled to discovery of the defendants to prove knowledge and intent, which obviously would not be possible–they will claim the 5th. How then could one argue that a different case, incomplete viz evidence, proves anything? Obviously, it only “proves” something to someone who has an agenda.
All we can conclude is that FJO has been well taught in the right wing tools of propoganda.
See How to demonize a judge in twelve steps. http://www.pointoflaw.com/archives/001822.php
What is truly extraordinary about the piece is that FJO nevers mentions Bush. After all, he is the person responsible for the conduct of the prosecution, via his attorney general.
If you are going to have any modicum of intellectual honesty, your pieces should not start out, “the prosecution.” They should say, “The President’s policy, faithly executed by Attorney General and Deputy Attorney General (Criminal Division) is wrong.
After all, this is a Whitehouse that sticks it fingers into even the minutae of solicitor general briefs to the Supreme Court.
John, you generalize with regard to accountants far too much. Even the partners involved in Andersen’s troubled accounts were a small percentage of the partners in the firm, and the ones that were truly involved in wrongdoing was even smaller still.
However, you are correct about the Bush Administration’s Justice Department. It has been generally deplorable.