A series of setbacks have effectively left US Federal prosecutors with no choice but to drop their last chance to revive criminal tax-shelter proceedings, once labelled as the biggest in history, against 13 of the 19 original defendants.

Most of those charged were from KPMG, including a former vice chairman of the firm, who were indicted in 2006 on charges of conspiracy, tax evasion and fraud in relation to the most aggressive tax shelters sold to wealthy Americans over the late 1990s through early 2000, according to reports in The New York Times. They will walk away from the case unpunished.

Two defendants have already pleaded guilty and the four remaining are now standing trial in Federal District Court in Manhattan in a case which has been reduced to a shadow of its former self.

In 2006, Judge Lewis Kaplan of Federal District Court in Manhattan threw out charges against the 13 defendants, on the grounds that prosecutors had violated their constitutional rights by pressuring KPMG to stop paying their legal fees. The dismissal was upheld in August by an appeals court.

Further reading:

Court upholds dismissal of KPMG partner charges

Read The New York Times story