Treasury Admits Mistake in Naming KPMG's Tax Clients

In a letter to the editor of the Wall Street Journal, Treasury Department General Counsel David D. Aufhauser admitted that prudent measures to protect taxpayers' privacy were not in place when the names of KPMG's clients were revealed by the Department of Justice (DOJ) last week. "The absence of such measures," he said, "is inexcusable."

In an editorial published on July 17, 2002, the Wall Street Journal said the IRS was "out of control" when it presumed the right to gratuitously humiliate innocent taxpayers in the process of auditing, suing and penalizing tax cheats. "These individuals are accused of no wrongdoing," wrote the Journal. "Their only sin is that they are clients of KPMG, the accounting firm currently doing battle in court with the IRS."

Mr. Aufhauser said the Treasury Department agrees that no taxpayer should be "gratuitously humiliated" in court proceedings. Normally, he said, Treasury takes purposeful measures in Tax Court to preserve confidences. But this case was different in that it involved the seeking of information through an administrative summons. He claims KPMG and BDO Seidman both defied the summons with a dubious assertion of common law privilege. When KPMG submitted a "privilege log" that identified clients of the firm, the IRS asked the DOJ to enforce the summons and submitted the log in support of its federal court petition. The DOJ subsequently disclosed the log in support of the IRS's petition.

Although he emphasized that the naming of names is not a violation of law, Mr. Aufhauser promised that, "all future referrals from Treasury to Justice will require appropriate protections, unless the interests of justice clearly dictate otherwise."

-Rosemary Schlank

You may like these other stories...

At long last, the Obama administration issued draft instructions along with revised draft tax forms that provide companies guidance on how to comply with the Affordable Care Act’s (ACA) employer mandate.The US Treasury...
Treasury Secretary Lew to speak on tax reform, inversionsDamian Paletta of the Wall Street Journal wrote on Friday that Treasury Secretary Jacob Lew is planning a September 8 speech about a controversial corporate strategy...
The IRS requires most freelancers and other self-employed individuals to use the cash method of accounting, under which income isn't counted until cash, a check, or an e-payment is received, and expenses aren't...

Already a member? log in here.

Upcoming CPE Webinars

Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 10
Transfer your knowledge and experience to prepare your team for the challenges and opportunities of an accounting career.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.
Sep 18
In this course, Amber Setter will shine the light on different types of leadership behavior- an integral part of everyone's career.