KPMG ‘co-operated’ by not paying legal fees

A lawyer representing KPMG has told a judge in Manhattan that the firm
stopped paying legal and consulting fees to its former deputy chairman in an
effort to convince prosecutors the firm was cooperating with their investigation
into questionable tax shelters.

Jeffrey Stein, the deputy chairman in question, along with 15 other former
KPMG partners, are facing trial over their alleged involvement in the tax
shelter scheme which the government claims cost it $2.5bn (£1.34m) in lost tax

Joseph Loonan, general counsel for KPMG, testified this week that a letter he
wrote to Jeffrey Stein in March 2005 was to tell him his legal and consulting
fees would be stopped in order to ‘have the government believe we were
co-operating with them’.

The judge is trying to determine whether federal prosecutors improperly
pressured KPMG not to pay the legal fees of 16 of its former executives in an
effort to avoid prosecution.

The defendants argue that without the financial backing of KPMG they are
being deprived of their rights to a fair trial and legal representation.

Last August KPMG paid $456m (£244m) and admitted to criminal wrongdoing to
resolve a federal probe into the shelters.

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