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...

OECD calls for coordinated fight against corporate tax avoidanceDavid Jolly of the New York Times reported that dozens of countries with the most advanced economies have agreed on principles for concrete action to prevent...
Plan ahead before you buy some shares in a stock mutual fund near yearend, when the fund is about to pay a dividend. It might be better to wait until after the fund goes "ex-dividend," that is, wait until after the...
AgFeed agrees to pay $18 million to settle SEC accounting fraud caseMichael Rapoport of the Wall Street Journal reported on Monday that AgFeed Industries Inc. has agreed to pay $18 million to settle US Securities and...

Already a member? log in here.

Upcoming CPE Webinars

Sep 24
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.
Sep 30
This webcast will include discussions of important issues in SSARS No. 19 and the current status of proposed changes by the Accounting and Review Services Committee in these statements.
Oct 23
Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.
Oct 30
Many Excel users have a love-hate relationship with workbook links. For the uninitiated, workbook links allow you to connect one Microsoft Excel spreadsheet to other spreadsheets, Word documents, databases, and even web pages.