Despite nearly 20 years in this business, I never fail to marvel at the adroitness of large companies at spinning what basically amount to civilized executions at the top levels of management.
Whether they refer to it as a soon-to-be-former executive “spending some more time with their family,” or choosing to “pursue personal business interests,” it inevitably means that a beefy-necked security guard stood nearby while said executive tearfully cleaned out their desk, registered with their local unemployment office and embarked on the next phase of their life.
It’s not clear to me how the KPMG communications department explained last month’s executive shakeup — if at all — to members of the Fourth Estate or even folks surfing their Web site, because the most recent release details KPMG International’s revenues, not the revolving door in the executive suite. But I digress.
The recent shakeup at the Big Four firm saw the firm’s No. 2 man, vice chairman Jeffrey Stein, take “retirement” at the burned-out age of 49, while Jeff Eischeid, the head of the firm’s financial planning practice and a staunch defender of KPMG’s tax products strategy, was placed on “administrative leave.”
Another casualty, Richard Smith, the head of tax services, has assumed “different responsibilities” in that department. For those without a thesaurus of big business terms, this is corporate America’s version of a cop or fireman being placed on “modified” duty during the course of a sensitive investigation.
When the heat of a searing Senate subcommittee hearing on the firm’s marketing of aggressive (read abusive) tax shelters began to give chairman Gene O’Kelley and his partners second-degree burns, most observers of the profession expected a housecleaning of some notable degree.
During those hearings, Sen. Carl Levin, D-Mich., wondered aloud if “anyone at this firm is capable of telling the truth,” when he failed to receive what he considered suitable answers to his questions.
And since Stein, a 21-year veteran of the firm with a no-nonsense management style was, not coincidentally, the highest individual in the firm linked to the foot-in-the-door method of selling the firm’s questionable tax shelters, it was better than even money that he would be the one consigned to commit corporate seppuku.
To be fair, KPMG was the not the only firm to be taken to task for selling tax shelter products, as Ernst & Young, PricewaterhouseCoopers, Grant Thornton and BDO Seidman have all come under fire from the Internal Revenue Service. And last year Ernst & Young coughed up $15 million to settle an IRS probe into its selling of tax shelters.
But for KPMG, the tax shelter nightmare unfortunately doesn’t quite disappear with new nameplates.
The firm also has an IRS inquiry to deal with related to its promotion of tax shelters, in addition to mounting litigation from a line-up of angry folks who are staring at likely audits as a result of purchasing the firm’s tax products.
But if I’ve learned anything covering business in two decades, it’s that a change in upper management doesn’t always equate to a change in culture.
And since there’s an excellent chance that most of the KPMG folks are far brighter than me, it would be interesting to see if they instill that philosophy into their culture as aggressively as they once did the marketing of tax shelters.
Bill Carlino
Editor-in-Chief
