Federal prosecutors will not bring criminal charges against Ernst & Young for the firm’s sale of legally questionable tax shelters -- although that news probably brought little comfort to the four current and former partners of the Big Four firm who were indicted on charges of tax fraud conspiracy.

The E&Y employees -- Robert Coplan, Martin Nissenbaum, Richard Shapiro and Brian Vaughn -- were indicted by a federal grand jury on charges of conspiracy to defraud the Internal Revenue Service, tax evasion, making false statements to the IRS, and impeding and impairing the lawful functioning of the agency.

According to the indictment, the quartet worked together as part of a tax shelter group formed by the firm in 1998. It was there that prosecutors allege that the employees developed and marketed tax shelter transactions based on false and fraudulent factual scenarios to be used by wealthy individuals. The filed charges focus specifically on the group’s use of the so-called Cobra (currency options bring reward alternatives) shelter.

In addition, Coplan faces charges of destroying documentation when he learned of a pending IRS audit of a transaction; while he, Nissenbaum and Shapiro also face charges of implementing a tax shelter in 2000 to evade their own taxes and those of eight other E&Y partners. According to court documents, that shelter allowed the group of 11 partners to escape payment of about $3.7 million in taxes.

In 2003, Ernst & Young reached a $15 million civil settlement with the IRS over its shelters, but within a year, Manhattan prosecutors began their own criminal investigation.

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