KPMG is under fire again for its tax-shelter business.
Investors and officers of a Florida-based Internet company filed a lawsuit alleging that the Big Four accounting firm and a Chicago law firm tricked them into dumping millions into phony tax shelters during the 1990s dot-com craze, according to the Boca Raton News.
Attorneys Edward Ricci and Benjamin Salzillo allege that KPMG and law firm Sidley Austin Brown & Wood tricked their clients at Best Communications–a Web-hosting company at the time that currently exists only in name –into investing millions of dollars in a number of tax-avoidance schemes, according to the report. In just one set of transactions, the suit claims, lawyers and accountants working for the defendants got $10 million in commissions.
“This is a blatant example of late-90s pigs at the trough,” Ricci told the paper. “KPMG solicited my guys and showed them extensive data from Sidley Austin and other corporate giants to hook them. KPMG’s internal analysts knew the IRS would not approve the scheme, but the commissions were so big that they went ahead anyway.”
The paper reported that lawyers for the defendants could not comment for this article because they have not yet filed their response in court. The deadline is Aug. 17.
Two firms started by former KPMG executives, Texas-based TX Presidio Advisors LLC and Presidio Growth LLC of California, are also reportedly named in the suit.
Ricci told the paper the complaint alleges conspiracy, fraud, and legal and accounting malpractice. The suit demands unspecified millions of dollars in compensation for IRS penalties, expenses, and lost investment opportunities. “I don’t have a tight number because it will take the IRS a couple months to estimate the penalties,” he added. “I can say that it’s eight figures and climbing.”
In June, The Wall Street Journal reported that a KPMG tax shelter that the Internal Revenue Service last year declared abusive had attracted 29 prominent U.S. companies. A Senate subcommittee last November also investigated the firm’s tax shelters sold to individuals.