KPMG-the largest tax-fraud case in U.S. history
The charges against KPMG under the deferred prosecution agreement were based on the premise the organization was helping the rich clients to evade taxes. The tax evaded amounts $2.5 Billion, but they agreed to pay $456 million in penalties. KPMG and the government got into an agreement whereby complying with the terms agreed upon it will not face criminal charges. In the year 2005, the nine parties involved in the multi-billion tax fraud were. The individuals include; Jeffrey Stein, former Deputy Chairman; KPMG, the former tax services Vice Chairman John Lanning, Richard Smith, the former KPMG Vice Chairman in charge of Tax. Philip Wisner, former Partner-In-Charge of KPMG’s Washington National Tax, John Larson, a lawyer, former KPMG Senior Tax manager, Robert Pfaff, a lawyer, former KPMG tax partner, Raymond J. Ruble, a lawyer and a former tax partner in the New York, Mark Watson, former Partner Charged with of the Personal Financial Planning division in KPMG’S Washington National Tax. The shelters, which were in issue, were the BLIPS (bond linked issues of premium structure); FLIPS (foreign leveraged investment program); OPIS (offshore portfolio investment strategy and a variant of Flips, and SOS (short option strategies).
In 2005 former official from German bank Bayerische Hypo-Und Vereinsbank AG (HVB) Domenick DeGiorgio, working with KPMG in selling the shelters, confirmed to the charges of fraud and tax evasion. In 2006, HVB agreed with the criminal action for its involvement in the KPMG tax shelter fraud. The U.S Attorney deferred the case by agreement with the company to pay $29.6 million in penalties. In March 2006, former KPMG accounting executive was freed by U.S District judge on court bail of $35 million. The precedent denial of the bail to Greenberg was overturned by the judge’s ruling. He was then to stay in Manhattan under strict monitoring. The family was warned if he escaped from the country they will be ruined economically while awaiting his trial. A civil case brought not in favor of the IRS in late 2004 by lawyers Harold W. Nix and C. Cary Patterson, which was connected with the rulings of the case, was handed down to it. They had to sue the IRS for repayment after the tax agency deprived of their claim for $67 million in a deduction from applying of the BLIPS in 2000. The KPMG tax cover scam case was applicable to the court case, for this was a tax shelter supposed to be offensive by suit, in 2006. Use of BLIPS was lawful as it was ruled by the judge because the I.R.S.’s submission of tough Treasury Department rules in 2003 to liability in BLIPS was futile and unlawful. In August 2008, the unlawful charges against the 13 KPMG former executive were dismissed by the Court of Appeals of United States. The dismiss was based on that the defendants were interfered by the prosecutor as they rushed them to abstain paying legal fees. On that day, Deputy U.S. A.G Mark brought forward new trial rules which meant in not disciplining companies for not being cooperative in catering to their employees' attorneys.
In December 2008, the judges closed in the KPMG tax shelter case. They concluded that, it was impractical to conclude that KPMG decision was against the law, in helping the rich to reduce their taxes because they did not hide it from the Internal Revenue Service or others.
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