KPMG back in the dock
March 20, 2008
Barely a week goes by without some salacious news about our friends at KPMG. This week it is the turn of ex-KPMG partner Robert Pfaff’s turn to spend time in the dock. The court documents are well worth the reading because apart from detailing the extent of Pfaff’s alleged fraud, they also show how stupid or should I say arrogant, the man was in the way he spent the profits he derived. For example, the government accuses Pfaff of buying property and vehicles, both of which are easily traceable. If found guilty, Pfaff will be facing a bill of $1.84 million.
What struck me was the extent to which he implicated others in his crimes. According to the indictment, no less than seven other individuals were involved, illustrating well the fact that large scale tax fraud requires the active participation of many players. Needless to say, the US government knows where to first point the accusatory finger.
In a twist to the earlier events, the US government is coming back for a second bite of the cherry. In the second indictment:
The former KPMG partner is charged with “participating in a conspiracy to defraud the IRS by [allegedly] concealing fee income received by [the accused] and his co-conspirators from tax shelter transactions.” He is “also charged for [allegedly] conspiring to defraud a company located in Saipan …. of the right to the honest services of its employees, by sharing tax shelter fee income with officers of that company who failed to disclose those secret payments to the Saipan Company’s Board of Directors.”
as reported by White Collar Crime Prof Blog. The author ponders whether the US government is hoping to use the second indictment to put pressure on Pfaff to turn government witness. According to Business Week:
The new indictment appears to be an attempt by the U.S. Attorney’s office in Manhattan to bring Pfaff to trial before three other remaining defendants in a separate, closely watched tax-shelter fraud case here.
This turn of events is worrying. We already know how hard it is to get convictions for tax fraud and very often, cases are settled before they reach a full trial. I can only assume the US government lawyers want to be sure they have a rock solid case against other defendants. That is always helped when someone confesses and implicates others on the back of a guilty plea.
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