KPMG Case Takes Surprise Turn With Guilty Plea
One former KPMG LLP employee pleaded guilty to conspiracy and tax evasion charges in the government's criminal case involving sales of improper tax shelters.
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Monday's plea marked an unexpected twist in the case against 17 former KPMG employees, an outside lawyer and an investment adviser. David Rivkin, a former KPMG partner in San Diego, agreed to cooperate with the government as part of his guilty plea to one count each of tax evasion and conspiring to defraud the government, the New York Times reported.
"Obviously, this is a person who was in a position to know and understand the inner workings of everything, so this is good news for the prosecution," tax lawyer William B. Mateja told the newspaper. Mateja is a former Justice Department lawyer who has prosecuted fraud cases.
Internal Revenue Service Commission Mark Everson called Rivkin's plea “a very significant development in this ongoing investigation," Bloomberg News reported.
The IRS contends that KPMG sold four tax shelters that allowed wealthy individuals to avoid about $2.5 billion in taxes.
Rivkin, a 42-year-old CPA, worked in the San Diego office from July 1999 through April 2004 and was a member of KPMG's innovative strategies group, which oversaw the creation and sale of the tax shelters in question.
The Times reported that Rivkin admitted in court in Manhattan to “preparing false documents that wealthy investors used to file improper tax returns, to asserting improperly that the documents were cloaked in rules governing confidentiality of communications with clients, and to concealing the existence of the questionable shelters from the Internal Revenue Service and Senate investigators.”
Rivkin told the U.S. District Court Judge Lewis A. Kaplan: "I knew that the losses should not have been claimed on the tax return. I signed opinion letters knowing them to be false."
He also told Kaplan that he conspired to help rich clients “keep the money for themselves instead of paying taxes they owed.”
Kaplan said that Rivkin's sentence would depend upon his cooperation with prosecutors, who are also looking into other accounting firms, banks, law firms and others that assisted KPMG in its tax shelter business. The Department of Justice considers the KPMG case the largest criminal tax case ever.
The firm itself has already agreed to pay $456 million to avoid prosecution. Rivkin faces up to five years for each count of conspiracy and tax evasion.