CORPORATE CRIME REPORTER
Crime Without Conviction: KPMG Charged with Felony
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Corporate Crime Reporter 34(1), August 29, 2005
It is all about perception, isn’t it?
KPMG was charged today with one felony count of conspiracy.
The Attorney General of the United States said that KPMG “has admitted
to criminal wrongdoing in the largest-ever tax shelter fraud.”
Yet, there was no conviction.
There was no plea agreement.
For individuals partners or executives who commit major crimes – yes.
If there is a crime, there is an indictment.
And there is a plea agreement.
Or there is a trial.
But for major American corporations or other large entities, like KPMG, if you
commit a crime – you get a prosecution deferred.
Now, it’s almost automatic.
Ask Skadden Arps partner Robert Bennett.
He’s the king of deferred prosecutions.
At the insistence Bob Bennett, KPMG gets a deferred prosecution agreement.
Why?
Because if you indict KPMG, you might drive it out of business – a la
Andersen.
But no matter, you can charge the company with a felony.
And the Attorney General can get on national television and say that KPMG has
admitted to criminal wrongdoing.
But he can’t pursue it.
There is no doubt about it.
KPMG engaged in criminal wrongdoing.
Attorney General Alberto Gonzales said so.
But because of possible “collateral consequences,” there is no conviction.
Corporate crime is now crime without conviction.
It’s all about perception.
What collateral consequences?
What law says that if you are convicted of a crime, you are driven out of business?
When reporters walked into the 7th floor conference room at the Justice Department
for the press conference, they were handed a number of documents.
They were handed the Justice Department press
release.
This informed us that KPMG has admitted to criminal wrongdoing and agreed to
pay $456 million in fines, restitution, and penalties as part of an agreement
to defer prosecution of the firm.
The press release also informed us that “in the largest criminal tax case
ever filed, KPMG has admitted that it engaged in a fraud that generated at least
$11 billion dollars in phony tax losses which, according to court papers, cost
the United States at least $2.5 billion dollars in evaded taxes.”
Reporters were also handed a tough statement
by IRS Commissioner Mark Everson.
“Simply stated, if you had a multi-million dollar tax liability, KPMG
would find a way to wipe it out even when the firm’s own experts thought
the transactions would not survive IRS scrutiny,” Everson said. “The
only purpose of these abusive deals was to further enrich the already wealthy
and to line the pockets of KPMG partners.”
“Since the income tax first came into being under President Lincoln during
the Civil War, the wealthy have always paid more than average citizens,”
Everson said. “But not according to KPMG. KPMG’s actions were a
direct assault on our progressive system of income taxation, and, left unchecked,
would have badly eroded the faith of hard working, taxpaying Americans in the
fairness of government itself.”
“At some point such conduct passes from clever accounting and lawyering
to theft from the people,” Everson said. “We simply can’t
tolerate flagrant abuse of the law and of professional obligations by tax practitioners,
particularly those associated with so-called blue chip firms like KPMG that,
by virtue of their prominence, set the standard of conduct for others. Accountants
and attorneys should be the pillars of our system of taxation, not the architects
of its circumvention.”
They can’t tolerate this grand theft, but they did.
If they didn’t tolerate it, they would have indicted KPMG and forced a
guilty plea.
Reporters were also handed an indictment
of eight KPMG partners and an outside tax attorney.
These were the nine individuals behind the crime, prosecutors said.
The entity gets a deferred
prosecution for criminal activities.
It must pay $456 million in fines and restitution.
But there is no loss of freedom to operate.
The individuals face a loss of freedom.
That’s what prison is all about.
Why the double standard?
True the entity must hire a monitor.
In this case, former Securities and Exchange Commissioner Richard Breeden.
But who pays Breeden?
KPMG.
How much?
KPMG decides.
What documents were reporters not handed?
They were not handed a 10-page single-spaced statement of facts that laid out the criminal activity in detail.
And they were not handed the information
charging KPMG with a felony.
They came only later.
Only after the Attorney General was asked – where’s the charging
document against KPMG?
Corporate Crime Reporter
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