Memo reveals KPMG feared total US collapse

Memo reveals KPMG feared total US collapse

Firm’s lawyer warned of disaster for Big Four

If the US Justice Department had indicted
KPMG, for selling fraudulent tax shelters the action would have unleashed a
‘nuclear bomb’ that would have left more than 1,000 companies without an
auditor, according to newly released internal documents, seen by
Bloomberg News.

The Justice Department began to investigate KPMG in 2004 over its tax shelter
schemes set up for wealthy clients.

Now memos of a meeting between the firm’s lawyer Roger Bennett and
prosecutors in March 2005 revealed that Bennett warned that an indictment could
wipe out KPMG as the Enron inquiry had done to Andersen.

Bennett told prosecutors on March 22, 2005, that if they indicted the firm a
‘death spiral’ would start ‘and KPMG will be out of business’.

He told prosecutors to ‘use a smart bomb, not a nuclear bomb’.

KPMG settled with the US government in April 2005 by agreeing to pay a $456m
(£228m) fine.

KPMG declined to comment on the documents relating to the tax shelters.

Further reading:

Former KPMG partners want case dismissed

KPMG tax shelter judge ‘can throw case out of court’

KPMG US to pay hefty fines

Related Articles

Top 50+50: Ranking reshuffle as firms break £15bn barrier

Accounting Firms Top 50+50: Ranking reshuffle as firms break £15bn barrier

4w Emma Smith, Managing Editor
Top 50+50: Eight highlights from the 2018 ranking

Accounting Firms Top 50+50: Eight highlights from the 2018 ranking

4w Emma Smith, Managing Editor
Compulsory retirement: avoiding the partner pitfalls

Accounting Firms Compulsory retirement: avoiding the partner pitfalls

2m Lewis Silkin
Mitchell Charlesworth hires two tax managers

Accounting Firms Mitchell Charlesworth hires two tax managers

2m Emma Smith, Managing Editor
Founder of Escalate on how the service is transforming the accountancy industry

Accounting Firms Founder of Escalate on how the service is transforming the accountancy industry

2m Emma Smith, Managing Editor
Top 50+50 UK Accountancy Firms 2018 – deadline extended!

Accounting Firms Top 50+50 UK Accountancy Firms 2018 – deadline extended!

3m Emma Smith, Managing Editor
CogitalGroup announces acquisition of Wilkins Kennedy

Accounting Firms CogitalGroup announces acquisition of Wilkins Kennedy

3m Emma Smith, Managing Editor
Blick Rothenberg acquires Westleton Drake

Accounting Firms Blick Rothenberg acquires Westleton Drake

3m Emma Smith, Managing Editor