Washington (Jan. 2, 2003) -- In another blow to large accounting firms who sell million-dollar tax shelter advice to their clients, a federal judge has ordered KPMG to hand over documents to the court that the firm initially refused to give to the IRS, arguing that doing so would violate client confidentiality.According to a report in the Wall Street Journal, the court analyzed a sampling of 30 documents KPMG wanted to withhold, and said only four could be deemed privileged. "The court is not confident that KPMG’s privilege log is supportable," Judge Hogan said in his order.

All of the documents KPMG withheld from the IRS must now be turned over to the court and a magistrate will examine all of the documents, submit a report and recommendation to the court and then the court will decide whether or not the documents should be handed over to the agency.

KPMG spokesman Bob Zeitlinger noted that the court’s action is not the final word on the subject. "Based upon the Court's ruling, there is not yet a final determination in this matter," Zeitlinger said. "The IRS enforcement proceeding is ‘held in abeyance,’ pending the outcome of the magistrate's findings."

-- Tracey Miller-Segarra

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