8 May Be Charged in Probe of KPMG
Eight former KPMG executives are expected to be indicted within days by U.S. authorities over past sales of tax shelters by the Big Four accounting firm, which itself has reached a settlement agreement, a lawyer involved in the case said Wednesday.
KPMG has “reached a deferred prosecution agreement,” said Robert Fink, an attorney whose firm is representing one of the former KPMG executives in the case.
“Within days ... there will be a number of individuals -- that are no longer employed, but they were high-level individuals at KPMG -- that will be indicted,” Fink said in an interview, adding that he expected eight indictments.
A KPMG spokesman declined to comment, as did a spokesman for the U.S. attorney’s office in New York.
Federal authorities have been investigating tax shelters sold between 1996 and 2002 by KPMG. The firm has cooperated with the probe. It issued a public apology in June after making staff changes and undertaking internal reforms.
The settlement with KPMG could require the firm to pay a fine of $300 million or more, as previously reported, and to submit to outside monitoring of certain operations, while allowing the firm to avoid a criminal indictment.
The U.S. Justice Department wants to avoid a replay of an unrelated 2002 indictment that brought down former accounting giant Andersen in a case stemming from the Enron Corp. scandal.
Consequently, the KPMG probe is focusing on indictments of individual executives, said Rutgers University Business School accounting professor Jay Soled.
“My reading of it is they’re looking to take out a few people and make examples of them,” Soled said.
The indictments and KPMG’s agreement with federal prosecutors will mark a turning point in a wide-ranging government probe of tax shelters that have cost U.S. taxpayers billions of dollars over the years, Soled said.
One executive involved in the KPMG case, Domenick DeGiorgio, has pleaded guilty to charges brought against him this month by the U.S. attorney in New York.
DeGiorgio worked for Germany’s Hypovereinsbank between 1996 and 2003. As co-head of HVB financial engineering, he supervised its tax shelter business, including “bond linked issue premium structure,” or BLIPS, transactions, according to court documents.
BLIPS was a tax shelter developed and sold by KPMG to 186 wealthy individuals, said an April report on tax shelters by the Senate Permanent Subcommittee on Investigations.
