HMRC tax evasion raid of former KPMG partners was ‘publicity stunt’

A HMRC investigation into the suspected tax evasion of four former senior KPMG partners has been slammed as a “publicity stunt”, the High Court has heard.

In November 2015 officials from the tax authority visited the Big Four firm’s Belfast city centre office and detained the men on suspicion of evading taxes.

Unlawful warrants

Eamonn Donaghy, Jon D’Arcy, Paul Hollway and Arthur O’Brien, all former partners at the firm were arrested last year, but have never been charged with any wrongdoing.

The four have now made an application to the High Court for a judicial review into how HMRC obtained the warrants to search their homes and offices; with their legal team claiming that HMRC’s actions in obtaining the warrants was unlawful.

Barry Macdonald QC, one of the barristers involved in the case said: “HMRC obtained these warrants in circumstances where they misrepresented the relevant facts.

“They effectively concealed the existence of relevant correspondence and misled the judges into believing that [the four men] had failed to provide all the relevant information.”

Their lawyers also contended that the government department failed to note the four men’s cooperation into the matter before the warrants were granted, arguing that the judges who granted the warrants did not have all the significant information they needed at the time. The court heard that HMRC wrote to the men thanking them for their cooperation.

Publicity stunt

The legal team for the former partners also contended that the whole affair was used as an opportunity to attract positive publicity for HMRC. The government department has recently enhanced its crackdown on financial crime, both domestically and internationally.

“These applications for search warrants, both of the houses and of the office, was actuated by an improper, collateral purpose.

“This was essentially a publicity stunt rather than a valid, genuine application for warrants to obtain documentation,” continued Macdonald, adding that the arrests have “wrecked the careers” of the former partners.

Mr Macdonald also presented details of a statement of complaint lodged by HMRC in order to obtain the warrants.

It read: “This case provides an opportunity to arrest and prosecute four high-profile individuals who are involved in a substantial attack on the revenue system.”

‘Administration leave’

D’Arcy served as chairman of KPMG’s Belfast office where he lead the audit and transaction services teams, while Donaghy was head of the firm’s tax practice in Northern Ireland.

O’Brien formerly served as an audit and advisory partner and Hollway was head of corporate finance at KPMG in Ireland.

In addition to their posts at KPMG, all four men are directors in a property investment company called JEAP, which sustained significant losses when the property market crashed in 2008.

At the time of the men’s arrest, KPMG confirmed that it had placed all four men on “administration leave”, but in February this year the partners confirmed that they had all retired.

A full hearing into HMRC’s actions will take place in October.

HMRC has declined to comment on the High Court case. Accountancy Age has contacted KPMG for comment.

The Big Four accountancy firm has come under heavy scrutiny in recent days. Five additional women have joined the ongoing $350m (£243m) class action gender discrimination lawsuit against KPMG, while its Canadian arm recently received two complaints which accuse the firm of setting up offshore tax structures in the Isle of Man to help its wealthy clients avoid paying taxes.