AffluentAdvisors.net Serving CPAs, Attorneys & Financial Advisors with High Net Worth Clients
Affluent Advisors provides independent broker access to 200+ top rated carriers, we provide the full spectrum of individual and employer paid benefits, such as:
Health Insurance Plans with HSA & HRA Options
Disability Income Plans with Limits above $20,000/month
The accounting firm KPMG is encountering a number of obstacles as it tries to push through a $195 million settlement with wealthy investors who bought certain questionable tax shelters.
The proposed class-action settlement, which was given preliminary approval in November, is crucial to the firm's efforts to limit its exposure to potentially billions of dollars in legal claims from investors.
But at least several dozen, and perhaps hundreds, of investors, representing 30 percent of the roughly 275 claims covered under the settlement, elected by a late December 2005 deadline not to participate in the deal, according to three people involved in the proceedings.
KPMG has the right to call off the settlement if a certain number of investors opt out, according to a side letter among parties, said a lawyer who represents a former KPMG client not participating in the settlement. That threshold has not been disclosed, but 30 percent is a relatively high opt-out rate.
The proposed settlement covers four tax shelters known as Flip, Opis, Blips and S.O.S. The settlement was reached Sept. 27, one month after KPMG entered into a $456 million deferred-prosecution agreement with federal prosecutors over some questionable shelters. The settlement is intended to return to investors fees that they paid to KPMG and the law firm of Sidley Austin Brown & Wood, which wrote opinion letters blessing the shelters, and not the money that was improperly sheltered from taxes and that the Internal Revenue Service has claimed it is owed.
There are other challenges to the proposed deal. HVB, a big German bank, has filed papers objecting to a clause in the settlement as unfairly "stripping HVB of any legal claims or causes of action it may have against KPMG or Sidley Austin" in connection with the four tax shelters covered under the settlement.
HVB carried out financial transactions underpinning one of the shelters covered in the KPMG settlement. In August, Domenick DeGiorgio, a former executive at HVB, pleaded guilty to criminal charges related to questionable tax shelters, including one created and sold by KPMG.
The class-action settlement, if it gains final approval at a hearing before Judge Dennis M. Cavanaugh of United States District Court in Newark on Feb. 24, will earn Milberg Weiss $30 million in fees, on top of the $195 million for class members. Sidley Austin will pay about 20 percent of the total settlement.
Among those who have opted out, according to court papers filed recently, is J. Paul Reddam, who founded Ditech.com, a mortgage lending company now owned by General Motors. Mr. Reddam is seeking a larger, individual settlement from KPMG through his own civil case against the firm, filed in a California state court in 2004. Mr. Reddam bought three questionable tax shelters from KPMG in 1999.
Coverages and availability vary by state. Not all businesses and individuals qualify. This does not constitute legal, tax, or accounting advice or opinion. Consult with an experienced and properly licensed professional regarding the specific suitability of any planning technique.
Unless expressly stated otherwise on this website, (1) nothing contained in this website was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended; (2) any written statement contained on this website relating to any federal tax transaction or matter may not be used by any person to support the promotion or marketing or to recommend any federal tax transaction or matter; and (3) any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor with respect to any federal tax transaction or matter contained in this website. No one, without our express written permission, may use any part of this website in promoting, marketing or recommending an arrangement relating to any federal tax matter to one or more taxpayers.
