KPMG is set to pay a settlement of around $500m (£278m) to the US Department
of Justice within the next fortnight over its sale of abusive tax shelters.
But Accountancy Age understands that the deal is unlikely to lift
the threat of indictment from some of the key individuals involved in creating
and marketing the products.
With the lawyer in charge of investigating the firm David Kelley, attorney
of the Southern District of New York due to leave office in September, an
announcement of the deal is imminent, according to figures close to the case.
The news will bring to an end a long-running row over the shelters, which had
threatened the Big Four firm’s audit business. An indictment would have raised
serious concerns among blue-chip audit clients, as firms guilty of felonies are
prohibited in many states from holding audit licences.
But the threat of a criminal prosecution has receded over the summer. The
Department of Justice is thought to have come under pressure to cut a deal with
KPMG to stave off the threat of another big accounting firm collapsing.
The tax shelter row has alarmed authorities on both sides of the Atlantic,
fearful of the prospect of the conflicts of interest likely to be generated by
only three big audit firms.
The penalty will be around twice the fees that KPMG earned from the shelters,
and will be paid for entirely by the US firm.
With news of the investigation having been public for almost 18 months, KPMG
is certain to have created provisions for a sizeable penalty, especially as the
final figure always looked likely to exceed any monies available through
commercial insurance or offshore captives.
The USfirm is also likely to face independent monitoring. The settlement will
involve a ‘deferred prosecution’ agreement that could see the firm put on
probation for up to 18 months, according to reports in New York.
The firm has already said that it ‘takes full responsibility for the unlawful
conduct by former KPMG partners’ between 1996 and 2002. In June it said it no
longer provided the services in question, severed ties with those responsible
for the schemes and reformed its governance procedures.
The Department of Justice is expected to turn its attention to some of the
key partners involved in setting up KPMG’s shelters. It is also looking at other
who are thought to have promoted similar schemes to clients.
Both Ernst & Young and PricewaterhouseCoopers have already settled
investigations into tax shelters. Deloitte is the only one of the Big Four
unaffected, saying that it has no similar issues in the US.
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