Big Four firm KPMG LLP, which is in talks with the Justice Department related to the agency's ongoing tax shelter probe, said that it takes "full responsibility" for the past unlawful conduct by some its former partners.
Since February 2004, the Department of Justice has been investigating some tax services that were offered by the firm from 1996 to 2002. The DOJ probe is part of a larger tax shelter investigation into the role of accounting firms, law firms, large banks and taxpayers who participated in the development, promotion and implementation of tax shelters.
"KPMG takes full responsibility for the unlawful conduct by former KPMG partners during that period, and we deeply regret that it occurred," the firm said in a statement issued Thursday.
"We remain in discussions with the Department of Justice and continue to cooperate fully in its investigation," the firm added. "KPMG looks forward to a resolution that recognizes the significant reforms the firm has already made in response to this matter while appropriately sanctioning the firm for this wrongdoing."
KPMG noted that it no longer provides the services in question. The firm said that it has also put in place a process to "ensure that those responsible for wrongdoing have been separated from the firm;" has instituted firm-wide structural, cultural and governance reforms; and has undertaken "significant change" in its business practices.
Commenting on the possibility of a settlement, Allan Koltin, a consultant to the profession and chief executive of PDI Global, said, "The good news for KPMG is that there is zero chance that the DOJ will go after them and try to bring them down. The public markets couldn't operate with only three international accounting firms."
"This is a classic game of volleyball, and the final volley will involve a much bigger check being sent from KPMG to government than is being offered up now," said Koltin. "KPMG is doing the right thing by accepting full responsibility." However, Koltin said that the firm "is quick to point out that it's for a handful of partners, distancing themselves from the wrongdoing."
"The fact is that the tax shelter program had the blessing of the board and the leadership. They're pointing the finger at the unfortunate handful, but it's not as though the firm's leadership and partners didn't know what was going on," said Koltin.
In January of 2004, KPMG announced a management shakeup that included the retirement of former deputy chairman Jeff Stein and the replacement of two of its top tax executives following Internal Revenue Service and congressional scrutiny into its past shelter activities.
The probes came after a November 2003 report compiled by a Senate Government Affairs Subcommittee showed that KPMG collected roughly $124 million in fees from shelters from 1997 through 2001.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access