The New Year began with a symbolic victory for Big Four firm KPMG, as a federal judge here dismissed a criminal conspiracy charge against the U.S. arm of the Big Four firm for conspiring to sell illegal tax shelters.The charge was dropped after prosecutors said that the firm had met its obligations under a deferred-prosecution agreement struck with the government roughly 18 months ago.
"Today's dismissal of the charge reflects our commitment to full and continuing compliance with the agreement we made with the government," KPMG chairman Timothy P. Flynn said, in a statement. "We regret the past activities that led to these charges."
Under the DPA, the Big Four firm agreed to pay $456 million and submit to oversight by an independent monitor, who will remain in place until September 2008. The firm was also required to admit that it defrauded the government and the Internal Revenue Service with the creation of false tax returns; assisted high-net-worth clients in evading federal income tax by creating, selling and implementing fraudulent tax shelters; and knowingly issued opinions about the tax shelters that contained false information, among other admissions.
The IRS claimed that the shelters cost the service some $2.5 billion in revenues.
But not everyone's legal woes are over. Criminal charges are still pending against 16 former KPMG executives, as well as an outside investment advisor and a lawyer for the firm. The trial is scheduled for September.
Thus far, four defendants in the pending trial have pleaded guilty in connection with the sale of the controversial shelters.
In December, Utah businessman Chandler S. Moisen pleaded guilty to one count of tax fraud conspiracy and one count of wire fraud, and waived his right to a trial. Moisen is expected to testify against the defendants.
In addition to Moisen, former KPMG partner David Rivkin and Domenick DeGiorgio, a former executive at a German bank, pled guilty to fraud, conspiracy and tax-evasion charges.
More recently, ex-KPMG accountant Steven Acosta pleaded guilty to charges of conspiracy, tax evasion and obstruction of an IRS investigation. Acosta said that he helped one of the indicted former KPMG executives to sell the shelters. Although Acosta did at one time work for KPMG, he wasn't among the former executives of the Big Four firm who were indicted in late 2005.
Also, Michael Grandinetti, a resident of the Northern Mariana Islands, a U.S. territory in the Pacific, entered a guilty plea of lying to federal investigators. According to reports, while working as a senior executive at an investment corporation, he secretly shared in millions of dollars in fees to promoters of illegal tax shelters.
