Fraudulent Tax Shelters KMPG Goes Down Hard
Below is a MRR and PLR article in category Finance -> subcategory Taxes.
Fraudulent Tax Shelters: KPMG Faces Severe Consequences
KPMG, one of the largest accounting firms, has pleaded guilty to employing fraudulent tax shelters that defrauded the government of $2.5 billion. As part of the agreement, KPMG will pay a $456 million fine, while nine of its executives remain under indictment.
The Son of Boss Tax Shelters
From 1996 to 2003, KPMG promoted a tax strategy known as the Son of Boss. This scheme created artificial tax losses for wealthy individuals looking to offset tens of millions of dollars. Despite warnings from its internal tax attorneys about potential fraud and criminal charges, KPMG continued to endorse the strategy. As a result, participants have returned over $3.7 billion to the IRS.
Consequences for KPMG
The plea agreement has significant repercussions for KPMG, highlighting the gravity of its actions. The penalties include:
1. A $456 million fine.
2. A permanent ban on offering tax services to wealthy individuals.
3. A permanent prohibition from participating in any pre-packaged tax strategies.
4. A ban on charging a contingency fee for their services.
5. Three years of oversight by a government-appointed monitor.
6. A requirement to fully cooperate with the government in the prosecution of individual KPMG employees.
Ongoing Indictments
While KPMG has accepted responsibility, it has not shielded its employees, leaving them to face legal consequences individually. Those indicted, all former employees, include:
1. Jeffrey Stein, former Deputy Chairman and Vice Chairman of KPMG.
2. John Lanning, former Vice Chairman in charge of Tax.
3. Richard Smith, former Vice Chairman in charge of Tax and leader of KPMG’s Washington National Tax.
4. Jeffrey Eischeid, former head of KPMG’s Innovative Strategies and Personal Financial Planning Groups.
5. Philip Wiesner, former Partner-In-Charge of Washington National Tax office.
6. John Larson, former senior tax manager.
7. Robert Pfaff, former tax partner.
8. Mark Watson, former tax partner in the Washington National Tax office.
Conclusion
KPMG's pursuit of profit through dubious tax shelters has led to severe repercussions, both financially and reputationally. This case serves as a stark reminder that not all publicity is beneficial, and ethical practices must guide business decisions.
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