Federal prosecutors in New York have charged Robert Pfaff, 57, of Englewood, CO, a former partner at KPMG, with conspiracy to defraud the United States and to commit tax evasion and wire fraud, and obstructing and impeding the Internal Revenue Service (IRS) by concealing fees he and others received for setting up tax shelters for various clients. The indictment charges Pfaff and co-conspirators with hiding millions of dollars in fees by transferring the money from bank accounts in the U.S. and the Northern Mariana Islands into Philippine bank accounts. Pfaff and others later requested that an unnamed co-conspirator in the Philippines distribute the money to Pfaff and others at a Saipan company.
According to the criminal indictment, Pfaff received more than $3.75 million in fee income for his participation in the shelters.
The defendants are also accused of falsifying documents to make it appear that the fee income was actually a series of loans, income that Pfaff did not report on his tax returns. The documents were created after the IRS had launched an investigation into the shelter transactions.
The indictment further alleges that Pfaff made false statements regarding an IRS audit in 2003 and filed false and fraudulent tax returns for tax years 2001 and 2002 according to BusinessWeek. He concealed the income from both KPMG and the Board of Directors of the Saipan company.
Pfaff and three others still face charges of conspiracy and multiple counts of tax evasion stemming from a prior case against 19 defendants, 17 of whom were former KPMG executives, related to tax shelters. The case against 13 of these individuals was dismissed last July after U.S. District Judge Lewis A. Kaplan in Manhattan found that prosecutors violated their rights to counsel by putting undue pressure on KPMG not to advance them defense costs. Two others have pleaded guilty to the charges.
The new case against Pfaff has been brought before a different judge, The New York Times says, and if Pfaff is tried and convicted on these charges before the earlier case is brought to trial in September, it could affect the outcome of the earlier tax shelter case.
If convicted on both of the new criminal counts, Pfaff could face eight years in prison and fines Reuters reports.