The New York Times carried a report on the KPMG tax shelter case. See this story in the Mar.7 Times. The main point of the story is that the former CEO of Global Crossing, Gary Winnick, who was mired in accounting scandals and his own tax shelter "investment" before Global Crossing's bankruptcy, is suspected of funding the defense of various KPMG employees who have been indicted for promoting tax shelters. KPMG itself avoided a criminal indictment through a settlement for almost $500 million and a deferred prosecution agreement in which it admitted to criminal wrongdoing with respect to four shelters. The names of 61 taxpayers who bought KPMG shleters and decided not to participate in the settlement were unsealed by the federal judge in the case last week. They apparently hope to get much more than the $700,000 per investor that they would have expected under the settlement.
Prosecutors are quoted in the story as describing the investors' defense as "playing catch me if you can with the I.R.S." The problem, of course, is that the current statutory and ethical standards permit and perhaps even encourage that kind of attitude from wealthy taxpayers who can afford to play the audit lottery game. Raising those standards is a necessary step for making lasting progress on tax shelters.
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