Here's the description:
Describes the way in which "Big Four" auditor KPMG dealt with an indictment stemming from the firm's sale of tax shelters. In 2005 Tim Flynn has been KPMG Chairman for a matter of days when he learns that the government is preparing to indict the firm on charges of selling illegal tax shelters. Flynn has to decide whether to fight the charges and risk the dissolution of his firm, or cooperate with investigators, effectively keeping the firm safe but sacrificing the tax partners involved in the shelter sales. Further, the case describes the government's prosecution of former KPMG tax partners and asks students to determine whether prosecutorial tactics during the government's investigation were warranted or represented a case of overreaching.And, here's the footnote description of the authors and the caveat:
Senior Lecturer Robert G. Eccles and Research Associate Eliot Sherman of the Global Research Group prepared this case. This case was developed from published sources. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.The authors conclude:
The results of the KPMG tax shelter fraud case had significant ramifications for the way the government would be able to prosecute white-collar crime going forward. For industry observers, it also left several questions. In the case of KPMG partners’ trial, had justice been served, or violated? For KPMG, responding to the tax shelter fraud case involved many difficult decisions about how best to move past its former partners’ wrongful conduct.I think it is important to note that none of the former KPMG partners who were with KPMG when the allegedly fraudulent shelters were conceived and marketed were convicted of any crime. Two of the defendants ultimately convicted on the much diminished trial had been with KPMG prior to the date the tax shelters conceived and marketed, but KPMG successfully disavowed their connection to KPMG for purposes of imputing wrongful conduct to KPMG. So, I think it is a bit extravagant for the authors to assert without qualificaiton that the KPMG partners engaged in wrongful conduct.
Well Mr. Townsend not only is your statement correct but an understatement. America is a land of indolent fools who believe whatever the government says not withstanding the laws are incomprehensible, the government uses bribed lying criminal witnesses to make their case and the prosecutors are allowed to lie in court with no consequence. Any other characterization of the so called U.S. system of justice is pure fantasy. Of course the KPMG case was even worse as Flynn brought in GW buddy Bennett of Skadden to save KPMG. An internal Skadden memo recounting a meeting between Bennett and the DOJ quotes Bennett as telling the DOJ: “KPMG will do everything possible to help the DOJ indict (and prosecute) the former partners”. This statement as quoted in the Skadden memo came after a long discussion with the DOJ where Bennett negotiated KPMG being allowed to keep all of its government audits (10s of millions in fees) including the audit of the Treasury and the DOJ acquiescing to terminate its investigation into the 100s of other tax strategies KPMG had purveyed many of which had no economic substance at least under the standards applied to FLIPs, Blips, Opis and SOS (noting of course SOS prevailed in at least one court providing the taxpayers $60 million in deductions). Interestingly, another KPMG partner is under indictment right now for one such strategy SLOTs which was going on during KPMG’s period of monitoring by Judge Holmes. My point, sorry, is those who believe what the government says are insane, at least according to Einstein.
ReplyDeleteWell Mr. Townsend not only is your statement correct but an understatement. Of course the KPMG case was even worse as Flynn brought in GW buddy Bennett of Skadden to save KPMG. An internal Skadden memo recounting a meeting between Bennett and the DOJ quotes Bennett as telling the DOJ: “KPMG will do everything possible to help the DOJ indict (and prosecute) the former partners”. This statement as quoted in the Skadden memo came after a long discussion with the DOJ where Bennett negotiated KPMG being allowed to keep all of its government audits (10s of millions in fees) including the audit of the Treasury and the DOJ acquiescing to terminate its investigation into the 100s of other tax strategies KPMG had purveyed many of which had no economic substance at least under the standards applied to FLIPs, Blips, Opis and SOS (noting of course SOS prevailed in at least one court providing the taxpayers $60 million in deductions). Interestingly, another KPMG partner is under indictment right now for one such strategy SLOTs which was going on during KPMG’s period of monitoring by Judge Holmes.
ReplyDelete