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The audit firm reportedly fires a "rising star" and two board members in connection with the shelters, which are being investigated by the U.S. attorney's office.
Stephen Taub, CFO.com | US
May 2, 2005
KPMG LLP fired a senior executive and two partners in moves tied to the scrutiny the Big Four firm is facing concerning its tax-shelter business, according to The Wall Street Journal.
The senior executive is Richard Smith, a partner since 1995 and head of the firm’s tax-services division since 2002. In January 2004, the accounting firm had said Smith was taking on "different practice responsibilities," according to the paper.
"Literally, the day before [his firing,] he was a rising star," Robert S. Fink, Smith's lawyer, told the Journal. He added that the Justice Department's U.S. attorney's office has "indicated to me that they believed indictments will be coming down," but the authorities haven't said that his client would be among those indicted. Fink also said that Smith has been cooperating with the authorities.
KPMG also booted two partners who had sat on its 15-member board, according to the report. They were David Brockway, a national partner in charge of the Washington, D.C., tax practice, and Michael Burke, a managing partner in Los Angeles.
The U.S. attorney's office in Manhattan has reportedly been investigating KPMG since February 2004 for its sale of tax shelters in the 1990s and as recently as 2002. The Senate Permanent Subcommittee on Investigations, which held hearings on the issue in 2003, concluded in a report that the firm was an "active and, at times, aggressive" promoter of tax shelters to individuals and corporations, according to the Journal. The newspaper noted that the Internal Revenue Services later found that the shelters promoted by the firm were potentially illegal or abusive.
Burke referred a call from the paper seeking comment to KPMG's public-relations group. Brockway's did not immediately return a call from the newspaper, which also reported that a spokesman for the firm said it doesn't discuss personnel matters.