Accounting Firm Apologies
RENEE MONTAGNE, host:
On Fridays, we focus on money issues.
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MONTAGNE: One of the Big Four accounting firms has apologized for selling illegal tax shelters to wealthy clients. The apology from KPMG comes at a time when federal prosecutors are said to be trying to decide whether to issue a criminal indictment in connection with the sales. NPR's Jim Zarroli reports.
JIM ZARROLI reporting:
Unlike other big accounting firms, KPMG denied for a long time that the tax shelters it sold between 1996 and 2002 violated the law. Then last year the company transferred some senior executives who were involved with tax operations and yesterday the firm acknowledged that some of its partners had indeed sold illegal shelters. KPMG said it deeply regretted their conduct and it said it had taken stringent measures to make sure the same thing doesn't happen again.
The products sold by KPMG had names such as FLIP, OPIS and BLIPS. They were extraordinarily complicated but US officials say they had no other purpose but to shelter money from taxes. US officials say many millions of dollars were put into the shelters. The wealthy individuals who purchased them received letters from law firms assuring them they were legal, but after the Internal Revenue Service began investigating tax shelters, the purchasers often learned they had to pay taxes anyway, and a number have since gone on to sue KPMG. Yesterday The Wall Street Journal reported that the Justice Department is weighing whether to bring criminal charges against KPMG. There was speculation yesterday that KPMG's apology could be a precursor to some kind of deal with the government that allows it to escape criminal charges. The Justice Department refused to comment on the case.
Jim Zarroli, NPR News.