Former KPMG executives convicted in US tax shelter case

18 December 2008

A New York federal jury has convicted two former KPMG executives and a lawyer while acquitting a fourth man who was jailed for four months, on federal charges bought against them for selling illegal tax shelters that helped their clients dodge hundreds of dollars in tax payments.

The trial which took just two months to conclude, was once billed as the biggest tax-shelter case in the US, and went awfully wrong for the prosecutors, who had initially brought charges against 17 ex-KPMG executives including the company's deputy chairman and two others for helping wealthy Americans evade taxes to the tune of $2 billion.

The jury of nine women and three men found former KPMG executives, Robert Pfaff and John Larson and former Brown & Wood lawyer, Raymond Ruble guilty on multiple counts of tax evasion but acquitted David Greenberg, who had been jailed for three months and monitored electronically by having electronic bracelets tied to his ankles.

Last year, the prosecution messed up the case and the District Attorney had to dismiss charges against 13 ex KPMG executives when they violated the defendant's right to seek counsel by forcing the company to withhold attorney fees.

This ruling was also upheld when the state filed an appeal. Earlier in January 2007 KPMG was not named a defendant when it agreed to pay $456 million to settle the federal probe.

Prosecutors said that in 1996, KPMG executives extended their business by selling tax shelters that would reduce the tax liability of a customer with no risk, as it just created paper losses to reduce taxes and went on to help more than 600 clients evade taxes.