Eight former tax partners of KPMG and one lawyer associated with the firm’s
tax shelter row were arraigned before a New York judge on Tuesday.
Their indictment, added to Domenick Degiorgio’s plea from a fortnight ago
(Degiorgio, worked for HVB, a bank involved with the BLIPS schemes) brings to 10
the number of people accused by the US department of justice of defrauding the
IRS.
Top of the list of KPMG partners involved in the schemes was a big prize:
Jeffrey Stein. Lawyer Stein had been deputy chairman of KPMG in the US, and his
name on the indictment was a vivid demonstration of the DoJ’s willingness to go
right to the top in its pursuit of KPMG staff.
Stein had been party to one of the more infamous exchanges of the tax shelter
episodes. During the investigation by the US Senate, emails emerged discussing
the decision as to whether or not to go ahead with the schemes.
After discussing the rights and wrongs of the scheme, Philip Wiesner had
written to colleagues: ‘I do believe the time has come to shit and get off the
pot.’ Stein had replied: ‘I think it’s shit OR get off the pot. I vote for
shit.’
Wiesner was also named in the indictment. Another lawyer, he was the
partner-in-charge of Washington National Tax during 1998 and 1999.
Alongside this pair are three other lawyers: Richard Smith, a tax partner
from 1995 to 2004, worked in Washington National Tax and was subsequently
vice-chairman of KPMG in charge of tax. Meanwhile, John Larson and Robert Pfaff,
partners of KPMG before 1997 who then went on to set up a separate limited
liability companies were, the indictment claims, the schemes’ ‘purported
investment advisers’.
Three qualified accountants were named: Mark Watson, a certified public
accountant (CPA), who worked in Washington National Tax; Jeffrey Eischeid, also
CPA and a tax partner in Atlanta (he was head of KPMG’s innovative strategies
group); and John Lanning, a CPA and at one point vice-chairman of tax services.
Lawyers for those indicted last week made two points in relation to the
schemes: that KPMG’s own admission of guilt in relation to the schemes means
nothing, since it was extracted under duress; and that the schemes were part of
normal tax planning.
The battle thus commenced promises to provoke the deepest rows about the
future of the profession in the US since Enron and Worldcom.
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