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A former KPMG partner David Rivkin pleaded guilty in U.S. District Court in Manhattanin in the KPMG tax shelter fraud case on March 27, 2006, admitting he helped rich people escape millions of dollars in taxes by helping them create fraudulent documents and sham companies.
The government says the fraud let affluent KPMG clients avoid $2.5 billion in taxes. The Department of Justice has called it the largest criminal tax case ever filed.
Rivkin is among 19 people the government has charged with conspiracy for allegedly engineering a massive fraud through accounting firm KPMG. He admitted to the judge, "I knew that the losses should not have been claimed on the tax forms." He also admitted that he conspired with others between January 1999 and May 2004 to prepare and execute false documents so that clients could file false tax returns.
In pleading guilty to conspiracy and tax evasion, he also admitted that he took steps to conceal the existence of fraudulent tax shelters from the Internal Revenue Service and avoided registering the shelters with the IRS by claiming attorney-client privileges.
Rivkin signed an agreement to cooperate with prosecutors, who could then ask the judge to consider giving Rivkin a more lenient sentence rather than the years he might face in prison. Sentencing was set for Feb. 9, 2007.
According to an indictment, ex-KPMG executives teamed with a former partner at a prominent law firm and another defendant to defraud the IRS by filing false income tax returns and by concealing the tax shelters from the IRS.
KPMG is a worldwide network of professional firms providing audit, tax and advisory services. It operates in 144 countries and has more than 6,700 partners.
KPMG already has admitted helping "high net worth" clients evade billions of dollars in capital-gains and income taxes by developing and marketing the tax shelters and concealing them from the IRS. It has paid a $456 million fine, including $128 million in forfeited fees from sales of the shelters.
Nineteen people have been indicted in the case, including former KPMG senior executives like Jeffrey Stein, a former vice chairman; Richard Rosenthal, a former chief financial officer; and John Lanning, a former vice chairman for tax services.
Two people outside KPMG were indicted: Raymond Ruble, a former tax lawyer with Sidley Austin Brown & Wood, and David Amir Makov, who worked at an investment firm, Presidio Advisory Services, that collaborated with KPMG.
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