The Texas State Board of Public Accountancy has stayed its license suspension of KPMG LLP in connection with the Big Four firm’s sales of questionable legal tax shelters.In a consent order approved by the board, KPMG’s license was suspended for five years -- although the stay order means that the firm will be placed on probation for the next three years.
Penalties were issued on 96 violations of the state’s Public Accountancy Act at $1,000 per violation, the maximum fine allowed under Texas law at the time of the violations. KPMG was also required to pay the board $3,842.45 in administrative costs.
The board’s action is based on admissions KPMG made in a deferred prosecution agreement with the U.S. Department of Justice in August 2005, concerning the tax shelters it designed, implemented and marketed between 1996 and 2002. The firm has blamed the preperation of the returns on former executives, who are facing a federal trial in New York later this year.
Under the agreement, KPMG admitted that through the actions of former partners and employees it prepared fraudulen tax returns for clients; drafted false statements to support the tax shelters; issued opinions that were false; concealed the tax shelters and the facts regarding them from the Internal Revenue Service; failed to locate and produce documents sought by the IRS, and misrepresented to the IRS KPMG’s role in creating the tax shelters.
KPMG employs over 400 CPAs in six offices across Texas. If at any time during the probationary period KPMG is convicted of not complying with the terms of the agreement, the firm’s license to practice in Texas will be suspended.
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