SOUTH CAROLINA DEPARTMENT OF REVENUE
Contact: Stephanie Jones
Phone: (803) 898-5287
For Immediate Release: August 29, 2005
SCDOR Applauds IRS and DOJ Action on KPMG
COLUMBIA, S.C. – The Justice Department and the Internal Revenue Service (IRS) today announced that KPMG, whose activities with illegal tax shelters first came under scrutiny by the South Carolina Department of Revenue, has admitted to criminal wrongdoing and agreed to pay $456 million in fines, restitution and penalties as part of an agreement to defer prosecution of the firm.
In addition to the agreement, nine individuals – including six former KPMG partners and the former deputy chairman of the firm – are being criminally prosecuted in relation to the multi-billion dollar criminal tax fraud conspiracy.
The indictments related to four tax shelters, two of which were FLIP and OPIS.
South Carolina Department of Revenue Director Burnet R. Maybank, III applauded the IRS and the Department of Justice for their actions.
"Over the past two years, the South Carolina Department of Revenue has strived to hold the firm and its employees accountable for their illegal actions," said Maybank. "We commend the Justice Department and the IRS for their unwavering commitment to ending the abusive use of tax shelters."
"Today's actions further confirm that the Department of Revenue was on target with its efforts," he continued.
Maybank noted that some seven months ago the South Carolina Department of Revenue had filed proposed debarment proceedings under IRS Circular 230 against six of the nine individuals named in the indictments relating to the sale of FLIP and OPIS tax shelters to residents of this state. (The South Carolina Department of Revenue also named another seven former KPMG employees who were not included in the indictment.) These included:
· Jeffrey Stein, former Deputy Chairman of KPMG, former Vice Chairman of KPMG in charge of Tax, and former KPMG tax partner;
· John Lanning, former Vice Chairman of KPMG in charge of Tax, and former KPMG tax partner;
· Jeffrey Eischeid, former head of KPMG's Innovative Strategies group and its Personal Financial Planning Group, and former KPMG tax partner;
· John Larson, a former KPMG senior tax manager;
· Robert Pfaff, a former KPMG tax partner; and
· Raymond J. Ruble, a former tax partner in the New York, NY office of a prominent national law firm.
Indicted former KPMG partner Jeffrey Stein was successful last month in obtaining a Temporary Injunction from South Carolina State Circuit Court Judge Allison Lee prohibiting the Department of Revenue from moving forward on its ethics investigation. The effect of the injunction was to prohibit the Department of Revenue from proceeding against the six individuals listed above (together with another four.)
Judge Lee's injunction did not, however, prohibit the South Carolina Department of Revenue from filing an ethics complaint against three others named in the original proposed Notice. These include:
· Carolyn B. Branan, former KPMG partner in Charge of Southeast PFP (Personal Financial Planning) for the years at issue; Partner in Federal Tax Practice;
· Jeffrey Martin, Esquire, CPA, currently Vice President /Senior Advisor for First Union N.B. – Personal Financial Consulting Division; and
· William L. Spitz, former KPMG partner at the Greenville, S.C. office.
Maybank noted that a decision would be made in September regarding whether the Department of Revenue would file permanent debarment proceedings against these three individuals.
Maybank stated that South Carolina had recovered millions of dollars in lost tax revenue from the sale of FLIP and OPIS and other tax shelters to wealthy individuals and had commenced an ethics investigation into KPMG's actions almost two years ago.