New York (May 25, 2004) – Federal prosecutors have impaneled a grand jury as part of a new criminal probe into Big Four firm Ernst & Young’s promotion of potentially abusive tax shelters, according to published reports.

Neither the U.S. District Attorney’s Office for the Southern District of New York, which is leading the investigation, nor the Department of Justice would comment on the probe, and its scope is unknown. It is not clear, for instance, if it is aimed at the firm as a whole, or only at individuals.

A spokesperson for Ernst & Young, confirming a report that had appeared in Monday’s Wall Street Journal, would only say that the firm was cooperating with the investigation.

The probe follows the launch of a similar investigation of tax shelters at fellow Big Four firm KPMG that was launched in February, and comes just 10 months after Ernst & Young settled a tax shelter probe by the Internal Revenue Service. E&Y paid $15 million as part of the civil settlement, though it admitted no wrongdoing.

With various branches of the federal government cracking down hard, the major accounting firms have scaled back or eliminated their involvement in the sale and promotion of tax shelters. Ernst & Young, for instance, broke up the unit that sold its most aggressive shelters.

-- WebCPA staff

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