KPMG Tax Case Expected to Widen

Federal prosecutor says that a superseding indictment may name another 12 individuals and bring new charges against the current defendants.
Stephen TaubSeptember 7, 2005

The lead prosecutor in the KPMG tax-shelter case has said he will probably indict another 12 individuals during the next few weeks, according to press reports.

On Tuesday, nine individuals were arraigned in a Manhattan federal court, including eight former KPMG partners and an outside lawyer who worked with the firm, on charges that they conspired to defraud the Internal Revenue Service through the creation and sale of abusive tax shelters.

Assistant U.S. Attorney Justin Weddle said that a superseding indictment naming additional defendants would also likely include additional charges, including obstruction of justice and tax evasion, against the original nine individuals, according to The Wall Street Journal. The newspaper stressed that Weddle did not identify the individuals who are likely to be charged in the future.

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According to The New York Times, Weddle also said at the arraignment that he believes the current nine defendants used allegedly fraudulent KPMG shelters to reduce their personal tax bills.

The nine defendants, all of whom pleaded not guilty, were released on their own recognizance and have two weeks to meet additional bond requirements, reported the Journal. The highest bond, $3.5 million, was set for former KPMG deputy chairman Jeffrey Stein, reportedly described by prosecutors as one of the leaders of the alleged conspiracy to sell fraudulent tax shelters.

Last year, the newspaper also noted, Stein received a severance payment of more than $9 million even after he learned he was under criminal investigation. Stein’s attorney reportedly said that KPMG, under pressure from the government, reduced the severance package, but the attorney did not offer details.