Judge Seals Public Document in MCI/KPMG Tax Shelter Matter

One of MCI’s outside law firms mistakenly disclosed that the Securities and Exchange Commission is looking into MCI’s retention of KPMG LLP as its independent auditor, the Wall Street Journal reported.

Acting on MCI’s request, the judge presiding over the telecommunications company’s bankruptcy-court proceedings has stemmed public disclosure of a court filing by MCI’s outside law firm Piper Rudnick LLP of Baltimore that referred to the inquiry.

The inquiry involves the aggressive tax-shelter strategy that KPMG sold to MCI in the 1990s when MCI was known as WorldCom and Arthur Andersen was the company’s outside auditor. KPMG took over for Andersen in 2002 when Anderson became defunct in the wake of the Enron scandal.

The court filing in question was in the public domain for four days and was a detailed listing of Piper Rudnick’s recent billings which showed that the SEC had served "a voluntary request for information upon the company in connection with the company's retention of KPMG as its independent auditor," and that "Piper has been retained to represent the company in connection with this inquiry," the Journal reported.

On Friday, Judge Arthur Gonzalez ordered that the Piper filing, including an accompanying exhibit, be placed under seal and removed from the public record of MCI's bankruptcy proceedings, the Journal reported.

MCI had made the unusual request under seal by attorneys, the Journal reported, adding that Gonzales wrote in his Friday ruling that "any person who has received or otherwise reviewed a copy of the documents...shall not disseminate copies of such document, or the information contained therein, to any other person without further order of this court."

MCI and KPMG are fending off requests from a number of states that are questioning KPMG’s independence in remaining as MCI’s auditor. The states also seek to collect more than $500 million in back state taxes that MCI avoided paying due to the tax shelter advice it received from KPMG, the Journal reported.

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