Former KPMG tax partner Robert Pfaff has been indicted on new charges alleging he participated in a tax shelter scheme involving the Big Four firm and a company located in Saipan in the Northern Mariana Islands.
Pfaff, 57, has been facing charges in another tax shelter case claiming he and other KPMG employees marketed the shelters to wealthy individuals. Pfaff was one of four remaining defendants in the case, including another former KPMG partner and a former senior tax manager, as well as a former attorney at the law firm of Sidley Austin. However, 13 other defendants had their charges dismissed last July after a judge faulted prosecutors for pressuring KPMG to avoid paying for their legal expenses. Prosecutors are appealing that ruling.
In the latest case, Pfaff is charged with participating in a conspiracy between 1993 and 2002 to defraud the IRS by concealing fee income he received from tax shelter transactions and with conspiring to defraud the Saipan company of the right to the honest services of its employees. He allegedly shared tax shelter fee income with company officers who did not disclose the secret payments to the board of directors.
Pfaff was accused of receiving more than $3.75 million from the scheme, which he used to buy a home in Englewood, Colo., his mother's home in Wisconsin, and various automobiles, including a Porsche for himself, a Mercedes Benz for his sister and a Subaru for his wife. The indictment also alleges that he used the money to purchase interests in mutual funds, to fund trusts for his children, to make gifts to family members, to pay initiation fees at his country club, renovate and landscape his home, to pay dentist bills, and to purchase a Steinway piano and Hawaiian artwork.
Pfaff faces up to five years in prison on the conspiracy count, and three years in prison on the IRS obstruction count. He also faces, on each of the counts, a fine of the greater of $250,000 or twice the gross gain or loss from the offenses.
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