Hartford, Conn. (April 19, 2004) -- The Hartford insurance company confirmed that it received a subpoena from California's Franchise Tax Board related to certain transactions proposed by Big Four firm KPMG, which has been under scrutiny for its role in selling abusive tax shelters.
As WebCPA reported last week, the FTB, the department that administers state personal income and corporation taxes for the state of California, subpoenaed two major insurance companies that it says may have insured certain abusive tax shelters against government enforcement actions.
While the board didn't disclose which companies it subpoenaed, The Hartford and American International Group Inc. were named in a November report to the U.S. Senate Government Affairs investigations subcommittee on tax shelters sold by KPMG in the late 1990s and early 2000s.
"The Hartford has received a subpoena from California's Franchise Tax Board related to certain transactions proposed by KPMG," Cynthia Michener, a spokeswoman for the firm, told WebCPA. "We intend to respond appropriately."
Michener noted that, "The Hartford offers tax liability insurance but does not insure tax shelters."
"The tax liability insurance offered by The Hartford is a business insurance coverage that affords peace of mind if tax money and interest is determined to be owed from a bona-fide business transaction, such as a spin-off or reorganization," she said. "To our knowledge, we have never insured a tax product promoted by KPMG."
A spokesman for AIG told WebCPA, "The company, as a policy, doesn't comment on the status of regulatory proceedings or litigation."
The subpoenas demanded the names and addresses of all California residents, persons with mailing addresses in California, and businesses doing business in California who were issued insurance policies or who sought to procure policies for tax liability, fiscal event, tax indemnity or any similar product from 1999 through 2002. They also require the insurance companies to provide documents pertaining to the marketing, sales and issuance of the tax liability insurance policies, "particularly as they may relate to the proliferation of abusive tax shelters."
The FTB says abusive tax shelters are estimated to cost the state from $600 million to more than $1 billion annually.
-- Melissa Klein Aguilar
