Judge Is Asked to Deny Bail to Former KPMG Partner

A federal prosecutor Wednesday asked a Los Angeles judge to deny bail to a former KPMG accounting firm partner indicted in a sweeping tax fraud case, calling him a flight risk and a “danger to the community.”

David Greenberg, 46, was one of 10 former KPMG executives indicted Monday in connection with the design and marketing of alleged phony tax shelters. He was the only defendant to be arrested by authorities.

U.S. District Judge Andrew J. Wistrich said he was inclined to set bail, but did not have enough information to determine an amount. He kept Greenberg in custody and asked the defense to provide more details on his finances at a hearing today.

Prosecutor Sandra Brown of the U.S. attorney’s office said the government’s move to deny bail was based on statements from an unindicted co-conspirator in the case, who is now cooperating with the government.

Greenberg told this witness that, if indicted, he would “take $15 [million] to $20 million that I have in an account in my ex-wife’s name that no one can touch, and I’m taking off,” Brown said at the hearing. She did not identify the person by name.

Brown contended that Greenberg was a danger because he had urged a second unidentified government witness to lie to prosecutors. Releasing Greenberg, she said, would allow him to tamper with other witnesses.

Greenberg’s attorney, John Nassikas, said that the government’s witnesses were unreliable. He denied that his client’s ex-wife, Laura Greenberg, had a secret account with $15 million to $20 million.

Laura Greenberg attended the hearing but did not testify. She sat next to her ex-husband’s pregnant fiancee, Jane Holtel.

Nassikas pointed to the two women and other members of Greenberg’s family in attendance, including his 22-year-old daughter and his father, as a sign of Greenberg’s strong ties to the community. Family members declined to comment.

In her argument to deny bail, Brown said that Greenberg no longer lived in his own home and had misled Justice Department investigators about his residence. Although he surrendered his passport to the Justice Department in August, she said, he did not tell prosecutors that it was a newly issued replacement passport for one he claimed to have lost.

Brown also said Greenberg had unspecified assets in both the British Virgin Islands and Spain.

Nassikas said that Greenberg was a “long-term guest” at the Four Seasons hotel in Newport Beach, but said companies and trusts controlled by Greenberg and his ex-wife owned homes in Newport Beach, Irvine and Florida with a combined value of at least $12 million that could be pledged as collateral for bail.

Nassikas said in court papers that Greenberg disclosed his overseas assets as well as his U.S. real estate holdings during a series of interviews with authorities in August that were aimed at assuring the government that Greenberg had “every intention of confronting and vigorously challenging any charges against him.”

The attorney also suggested that alleged contradictions by his client may be the result of faulty notes taken by the government during the three days Greenberg voluntarily discussed the case with prosecutors.

Greenberg is accused in a 70-page indictment of being part of a conspiracy that generated at least $11 billion in phony tax losses for wealthy people.

The 10 people indicted in the case this week followed the Aug. 29 indictment of eight other former KPMG executives and one outside attorney.

KPMG agreed to pay a $456-million fine to avoid criminal prosecution, which might have put the Big Four accounting firm out of business.

The 18 other individuals are expected to appear in New York on their own recognizance for arraignment Monday.

According to federal sentencing guidelines, each of the individuals charged in the case could face more than 30 years in prison if they were given maximum sentences.

Judge Wistrich said he needed to know more about Greenberg’s finances to set bail. He ordered Nassikas to return to court today with a detailed accounting of Greenberg’s assets and those of his ex-wife, as well as those for other individuals who would be willing to pledge their homes or money to guarantee that Greenberg would show up at trial.

Wistrich also said he would require Greenberg to swear that he had no passport other than the one he had surrendered to authorities.