Prison Sentence and Fine for KPMG Tax Avoidance Case
An US appeals court has upheld the tax avoidance case by employees of KPMG.
KPMG is one of the Big 4 firms which are supposedly the dominant players in its audit market.
The appeals court has upheld the conviction of a lawyer and two former employees of KPMG over illegal tax shelters. It has however overturned the $6m (£3.8m) fine that had been imposed on one of the defendants of the case.
In December 2008, former KPMG senior tax manager John Larson and former KPMG tax partner Robert Pfaff were found to be guilty on 12 counts by a tax court.
All the 12 counts that the defendants were found guilty of were related to tax evasion.
Former lawyer Raymond Ruble was also found guilty of 10 counts related to tax evasion.
According to a report by Reuters, the defendants were found guilty of promoting a tax shelter for clients who earned upwards of $20 million. The tax shelter was known as BLIPS. Its aim was to help the clients eliminate income or capital gains for tax purposes.
All the three defendants will have to serve prison time.
Larson has been fined $6 million while Pfaff has been fined $3 million.
Another KPMG partner was acquitted by the jury.
The latest ruling found Larson’s fine to be too high, though it upheld the prison sentences and convictions. The judges cited that a fine above $3 million could not be supported as there was a lack in jury findings and thus ordered that the fine be recalculated.
The convictions are a part of a probe to find out whether wealthy clients of the accountancy firm were given questionable tax shelters.
In August 2005, KPMG entered into a $456 million agreement with the government with to avoid possible prosecution.