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PLEA DEAL ILLUSTRATES TAX SHELTER INDICTMENTS

January 12, 2007

A plea agreement this week illustrates how the government's case in the indictment of former KPMG partners isn't simply a matter of criminalizing an aggressive tax position. The government's case alleges the use of straw men, non-existent transactions, and falsified documents used to mislead IRS agents investigating the shelters. From the Statement of Information for the guilty plea($link):

In particular, I was instructed to falsely misrepresent that one of the David Greenberg's tax shelter transactions was an investment transaction that I had devised and implemented with the client in December 2000, in truth and in fact, the transaction under investigation was a David Greenberg tax shelter, and the transaction was in fact never entered into by the client. I was instructed to conceal the fact that the client never entered into any transaction in 2000 or at any other time and conceal that David Greenberg and I agreed to back date documents to make it appear that the client made an investment in 2000. As directed by Greenberg ,* * * and * * *, when interviewed by the Special Agent and in the presence of * * *, I lied to the Agent to conceal the true facts of the transaction..

The case of the KPMG ex-partners has been controversial, especially the way the government bludgeoned KPMG to cut off legal fees to the defendants by threatening to indict the firm itself. The prosecution has been on the defensive procedurally, but this plea shows that the defendants still face very serious charges.

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