There are certain things in life that I’ve never had reason to be concerned with. The regular maintenance schedule of a Bentley, to name one, and, well, the concept of tax shelters to name another.

I’ve never been inconveniently cold-called during dinner, or Web spammed, by either a Bentley dealership or an accounting or legal firm peddling tax shelters.

More suitable candidates for each high-end product could easily be found on a recent list compiled by the Internal Revenue Service of the 400 wealthiest taxpayers. They account for more than 1 percent of all income earned in the U.S. during 2000, with an average income of $174 million - nearly four times the average in 1992. In fact, you needed to generate $68.5 million just to qualify for the roster - a tier that kept me quite safe from consideration.

However, the data does not include the names of folks who used tax shelters to cut their reported incomes.

Just ask the former chief executive of telecommunications concern Sprint. According to reports, William Esrey earned upwards of $150 million from stock options - a sure bet to land him on that list - but a tax shelter from Big Four firm Ernst & Young allowed him to delay reporting those enormous profits for about 30 years. Unfortunately, he was forced to resign when his tax shelter became the focus of an IRS probe, a probe which E&Y just coughed up $15 million to make go away.

In what has been a bumpy few months for the Big Four, it turns out that E&Y rival KPMG is staring down a high-intensity tax shelter probe of its own, which includes the requisite lawsuits as a result.

Some clients filed suit against the firm over a tax shelter product it sold them about five years ago, which, as anyone knows, is not exactly precedent-setting.

However - and this is a big however (just ask the KPMG legal team) - a pair of recently disclosed e-mails reveal that the firm was aware of potential pitfalls in the tax shelter, titled FLIP, as much as a year earlier.

But the saga continues.

A senior manager filed suit against KPMG in Los Angeles Superior Court for placing him on administrative leave after he refused to endorse a pair of allegedly illegal tax shelters sold to a client.

And just when the firm thought it was safe to go back in the water, a Seattle client has accused KPMG, among others, of selling him a tax shelter that he thought would slash his taxes after he received some $18 million in capital gains. He charged that the shelter ultimately wound up costing him millions and thrust him under the glare of federal tax audits. To right these alleged wrongs, he is seeking $25 million in damages.

But tax shelters are going to receive more unwelcome publicity in the coming months than any firm wants.

Nobody has ever accused me of being a futurist - for one thing, good ones probably earn enough to warrant tax shelters or Bentleys - but I’ll say for the record that current events surrounding tax shelter products are a harbinger of what’s to come.

As if, in this climate of corporate reform and oversight, the Big Four didn’t already have enough to worry about.

Add one more to the list.

Bill Carlino

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