REGARDING KPMG CORPORATE FRAUD CASE
DELIVERED AT THE JUSTICE DEPARTMENT
Monday, Aug. 29, 2005
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. 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. 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.
Today’s actions demonstrate our resolve to hold accountable those
who play fast and loose with the tax code. At some point such
conduct passes from clever accounting and lawyering to theft from the
people. 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.
I want to thank Attorney General Gonzales and the Justice Department
for its strong partnership with the IRS in combating abusive tax
shelters. Beyond today’s announcement of the deferred prosecution
and indictments, I want to stress the cooperation between the Justice
Department and the IRS in civil enforcement litigation. I would
like to note, in particular, that when KMPG and others raised false
claims of privilege to resist legitimate IRS requests for documents,
the Justice Department’s Tax Division successfully defended the IRS
right to these materials. Also, during this investigation, the
IRS and Southern District of New York together broke new ground on the
use of parallel civil and criminal enforcement. Simultaneous with
this criminal investigation, the IRS collected over $4 billion dollars
of unpaid taxes through a series of large-scale civil settlement
initiatives on abusive transactions, including Son of Boss.
Turning to today’s actions, I want to first thank David
Kelley. David, you have been a strong guiding hand and have
brought us to where we are today. I most especially want to
commend the tireless efforts of Shirah Nieman and her entire
team. The IRS is proud to be a part of this landmark
investigation.
At the IRS itself I would like to note the contributions of our
Director of Professional Responsibility, Cono Namorato, and John
Klotsche, my senior advisor. I would also like to thank our
criminal investigators and revenue agents whose efforts were led by
Lori Lachapelle and Michael Halpert. The team of IRS agents and
Justice Department prosecutors made great personal sacrifices to
complete this investigation.
Finally, I would be remiss were I not to mention the important work
of the Senate Permanent Subcommittee on Investigations led by Senators
Norm Coleman and Carl Levin, and in particular the excellent staff work
of Elise Bean, Leland Erickson, Robert Roach and Ray Shepherd.
Thank you.
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