The U.S. Senate Permanent Subcommittee on Investigations has launched an investigation into the potentially abusive tax shelter schemes marketed and sold by Big Four firms Ernst & Young and KPMG. The agency has requested documents from the firms relating to the shelters.

The investigation follows on the tails of a similar investigation into the validity of tax shelters being conducted by the Internal Revenue Service. In addition, both KPMG and E&Y are facing lawsuits from clients who have participated in shelters that have been found by the IRS to be illegal tax evasion strategies.

The Senate subcommittee claims the two firms have participated in schemes to help hundreds of companies and individuals avoid paying income taxes through their participation in improper tax shelters. A spokesman from E&Y indicated that the firm is cooperating with the Senate subcommittee, while KPMG refused comment about the investigation.

The Permanent Subcommittee on Investigations has a broad jurisdictional mandate to investigate government operations and national security issues as well as matters relating to the efficiency and economy of operations in all branches of the U.S. government. The agency's colorful past included the anti-communist investigations of the 1950s performed under the leadership of then Subcommittee Chairman Senator Joseph R. McCarthy and the 1960s hearings on racketeering headed up by Subcommittee Chief Counsel Robert F. Kennedy.