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Statement by IRS Commissioner Mark W. Everson

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.

Related Link: IR-2005-83, KPMG to Pay $456 Million for Criminal Violations

Page Last Reviewed or Updated: 24-Mar-2014