KPMG is Subject of DOJ Investigation, KPMG Responds
The firm’s efforts to market four questionable tax products was the focus of a two day Senate hearing late last year. A investigation panel of the Senate Governmental Affairs Committee took more than a year to examine the role of accounting firms, law firms, banks and investment advisers in creating and selling tax avoidance schemes.
The report and testimony focused largely on one KPMG product known as BLIPS -- Bond Linked Issue Premium Structure. Marketing began in 1999, and continued until September 2000, when the IRS listed it as potentially abusive. Senate investigators estimate it generated $80 million in fees for KPMG from 186 clients. It lost the U.S. Treasury more than $1.4 billion, the report says.
In January of 2004 the firm announced new management  to tax services operations and stated that the firm "is dedicated to leading the effort to return credibility to our profession and restore investor confidence in the capital markets."
KPMG said in an earlier statement that they no longer use any of the questioned tax strategies, which “represent an earlier time at KPMG and a far different regulatory and marketplace environment.” The firm said it had overhauled its tax products and had stopped several controversial marketing practices.
KPMG LLP issued the following statement. KPMG LLP can confirm that the firm has been informed that the United States Attorney's Office in the Southern District of New York has commenced an investigation in connection with certain tax strategies.
It is our understanding that the investigation is related to tax strategies that are no longer offered by the firm.
As previously announced, KPMG has taken strong actions as part of our ongoing consideration of the firm's tax practices and procedures, including leadership changes announced last month and numerous changes in our risk management and review processes.
We have assured the U.S. Attorney's office that we intend to cooperate fully in this matter.