KPMG to Pay $456 Million for Criminal Violations

The United States Government alleges KPMG and its partners committed tax-shelter fraud by selling illicit deals and then misleading the IRS about the transactions it orchestrated for wealthy individuals between 1996 and 2003.
KPMG admitted to criminal tax fraud and agreed to pay $456 million in penalties. The US Government will defer prosecution and drop the case after Dec. 31, 2006, if KPMG stays out of the shelter business and cooperates with prosecutors in related cases.

The shelters were called BLIPS, FLIP, OPIS, and SOS. All were allegedly designed to create phony losses that investors could use to reduce their taxes. For example, BLIPS — “Bond Linked Issue Premium Structures” — were sold to at least 186 wealthy individuals and generated at least $5 billion in tax losses.

A client would borrow from an offshore bank to buy foreign currency from the same bank. Roughly two months later the client would sell the currency back to the lender, creating what the government contends was a phony tax loss that the client could then deduct from his capital gains and income from other investments.

SOS was a similar but more complex currency deal; FLIP and OPIS involved investment swaps through the Cayman Islands, a well-known tax haven. The IRS contends that all these loans and investments were risk-free, sham transactions designed solely to reduce taxes — to the tune of nearly $12 billion in phony losses that cost the Treasury $2.5 billion.

Source : Businessweek
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Sarang is one of the first forensic accountants in the country who worked extensively with the law enforcement agencies across the country to solve the fraud problems. He is a Certified Anti Money Laundering Expert. He worked in the shipping industry before joining Riskpro and is instrumental in exposing the Trade based money laundering cases for the banking sector. He investigated numerous Ponzi Schemes for the Government of Maharashtra and presented in the court of laws as the expert witness to justify the findings of the reports.