Assignment on

KPMG and Tax Havens for the Rich: The Untouchables

Course code: MBA-631

Course Title: Corporate Tax Management

Submitted To
Dr. Mohammad Morshedur Rahman
Adjunct Faculty,
School of Business,
East Delta University.

Submitted By
Md. Sumon
Id: 201003106
School of Business,
East Delta University.

Date of Submission: 16th June 2020

Introduction

A story of money, secrecy and greed: a tax dodge for the wealthy dreamed up by one of the biggest
accounting giants in the world.

KPMG Canada devised what it called an “Offshore Company Structure” for a select group of rich
clients: they would claim to give away millions of dollars to a shell company supposedly out of
their control and therefore wouldn’t have to pay taxes on it.

In the U.S top KPMG officials were convicted of tax evasion schemes concocted there. But in
Canada, a different scheme led to a secret amnesty deal with the Canada Revenue Agency.

That statement by a former KPMG tax-scheme client in a CBC Fifth Estate documentary, The
Untouchables sums up why the wealthy go to expensive tax lawyers and buy their offshore
schemes. They'd rather risk doing something sketchy and pay six-figure fees than pay their share
of keeping Canada healthy, safe and prosperous.

Wealthy Canadians have more than $219 Billion parked in the top ten tax havens - and that doesn't
even count the Isle of Man where this KPMG tax scheme was created. So we know that former
client is not alone. The CBC names several high profile Canadians in their documentary,
including Order of Canada recipient and a Winnipeg confectionery giant.

But it also shows how Canada's Parliament let KPMG off the hook and failed to protect the
interests of regular taxpayers. It also exposes the secret deals negotiated by KPMG with the
Canada Revenue Agency so that none of its wealthy clients would face serious consequences for
attempting to defraud the government.

On 29 August 2005, nine individuals, including six former KPMG partners and the former deputy
chairman of the firm, were criminally indicted in relation to the multibillion-dollar criminal tax
fraud conspiracy. The nine individuals named in the indictment were:

 Jeffrey Stein, former Deputy Chairman of KPMG, former Vice Chairman of Tax Services, and
former KPMG tax partner, a lawyer with a Master's in tax law.
 John Lanning, former Vice Chairman of Tax Services, and former KPMG tax partner, a CPA
(Certified Public Accountant).
 Richard Smith, former Vice Chairman of KPMG in charge of Tax, a former leader of KPMG's
Washington National Tax, and former KPMG tax partner, a lawyer.
 Philip Wiesner, former Partner-In-Charge of KPMG's Washington National Tax and former
KPMG tax partner, a lawyer with a Master's in tax law and a CPA.
 John Larson, a lawyer, CPA and former KPMG Senior Tax Manager who left KPMG to form
a series of entities with defendant Robert Pfaff, which entities participated in certain tax shelter
transactions as the purported investment advisor.
 Robert Pfaff, a lawyer, CPA and former KPMG tax partner, who left KPMG to form a series
of entities with defendant John Larson.
 Raymond J. Ruble, also known as R.J. Ruble, a lawyer and former tax partner in the New
York, New York, office of Sidley Austin, a prominent national law firm.
 Mark Watson, former Partner-in-Charge of the Personal Financial Planning division in
KPMG'S Washington National Tax, and former KPMG tax partner, a CPA.

On 17 October 2005, another ten individuals were indicted on criminal conspiracy and tax evasion
charges:

The four tax shelters at issue were known as BLIPS, or bond linked issue premium structure; Flips,
or foreign leveraged investment program; OPIS, or offshore portfolio investment strategy and a
variant of Flips; and SOS, or short option strategies.

Main Theme

It is curious that the Pallister government would have hired consulting firm KPMG to provide
advice on how to manage the Province’s affairs. KPMG’s actions across the world and in
Canada—some illegal; many promoting the interests of the exceptionally rich at the expense of
the rest of us—suggest that we should be very wary of any advice they might offer.
KPMG South Africa, to take one example, is currently embroiled in a major scandal involving the
firm’s relationship with the Gupta family’s business empire. In September, 2017, Business
Leadership South Africa (BLSA) suspended KPMG’s membership, even after KPMG had fired
nine of its top executives. Several major South African companies have severed their relationship
with KPMG SA. KPMG’s Global Chairman has apologized for the firm’s failings in South Africa;
the incoming head of KPMG SA has said that “This has been like a near-death experience for
KPMG.”
KPMG South Africa was the auditor for the Gupta companies when several million dollars were
diverted to a lavish Gupta family wedding in Sun City in 2013. KPMG admitted in a September
15 2017 Media Statement that “the audit teams failed to apply sufficient professional skepticism
and to comply fully with auditing standards.” KPMG SA also provided tax avoidance advice to
Gupta businesses. Off-shore tax avoidance schemes are a specialty of KPMG. In their Media
Statement KPMG acknowledged that “it has been alleged that tax advice given to Gupta entities
involving offshore structures was illegal or improper.” The Media Statement reported that their
legal advice was that “KPMG did not act unlawfully or improperly in giving the advice,” a
statement that, given KPMG’s activities elsewhere, called to mind former President Richard
Nixon’s reassurance to Americans that “I’m not a crook.”KPMG SA did consulting work for the
South African Revenue Service (SARS), and produced a report. In their September 2017 Media
Statement KPMG acknowledged that the report’s findings “should no longer be relied upon,”
because the report has “been revealed to have been seriously compromised by the inclusion of at
least 16 points in its recommendations and findings copied and pasted from recommendations
made by SARS’ own legal representatives.
In other words, KPMG was investigating SARS, but allowed SARS’ legal firm to write the
conclusions to KPMG’s “independent” report. Closer to home, in the USA, KPMG paid a fine of
$456 million in 2005 for an illegal tax avoidance scheme, as part of a “deferred prosecution
agreement” designed to avoid an indictment. In an August 2005 statement the US Department of
Justice wrote that: In the largest criminal tax case ever filed, KPMG has admitted that it engaged
in a fraud that generated at least $11 billion in phony tax losses which, according to court papers,
cost the United States at least $2.5 billion in evaded taxes.Between 1996 and 2003, the Department
of Justice added, KPMG “conspired to defraud the IRS by designing, marketing and implementing
illegal tax shelters. “The Commissioner of the Internal Revenue Service said at the time that:
At some point such conduct passes from clever accounting and lawyering to theft from the people.
We simply can’t tolerate flagrant abuse of the law and of professional obligations by tax
practitioners, particularly those associated with so-called blue chip firms like KPMG.
In response to these findings of illegality, KPMG said in a June 2005 public statement that more
than a dozen KPMG tax officials had been fired or forced to retire, and the company has
“undertaken significant change in its business practices.” Nevertheless, in April 2017 the New
York Times reported that KPMG had fired six employees, including the head of its audit practice
in the USA, because they had been given improper warnings of impending investigations by
KPMG’s regulator, the Public Company Accounting Oversight Board. The NYT added that: “The
announcement is another potential blow to KPMG’s reputation after questions have been raised in
recent years about why it failed to uncover illegal sales practices at Wells Fargo or potential
corruption at FIFA, the governing international body of soccer.” At the same time more than 1000
of KPMG’s female employees in the USA, current and former, are engaged in a class action gender
discrimination lawsuit against KPMG. According to a May 2016 report in the publication
Accountancy Age, “KPMG has been accused by the plaintiffs of developing a hostile work
environment in which women are underpaid and rarely promoted to leadership roles.” The article
adds that “the lawsuit contains details of how KPMG slashed [the lead plaintiff’s] base salary by
$20,000 while she was on maternity leave because she was being paid ‘too much.’” KPMG has
denied these allegations. Still closer to home, in Canada, the Canada Revenue Agency (CRA) has
offered amnesty to wealthy Canadians caught using what the CRA has described as an offshore
tax “sham” that has been designed, marketed and implemented by KPMG. Jonathan Garbutt,
described as “a veteran Bay Street tax lawyer,” is reported by CBC News to have said about this
amnesty arrangement: “It’s outrageous. The CRA appears to be saying to Canadians, ‘If you’re
rich and wealthy, you get a second chance, but if you’re not, you’re stuck.” Although the letter
offering amnesty to the wealthy tax avoiders is silent about whether KPMG will similarly be
offered amnesty, it has been reported that “experts consulted by CBC News raised concerns that
the large accounting firm, with close ties to the federal government, could also be off the hook.”
Starting in 1999, KPMG marketed the tax avoidance scheme to Canadians worth $5 million or
more. CBC News—which has done extensive research and produced an hour-long documentary
on KPMG’s tax avoidance scheme—reported in March 2017 that:
The tax dodge was based on a simple—if fictitious—idea that “high net worth” clients give away
their fortunes to an Isle of Man shell company. The money would be invested offshore and would
be returned back to Canada, again untaxed, as a so-called gift.
One wealthy family in Victoria, BC, who put $26 million into the scheme in 2002 and 2003, is
reported to have paid a mere $3049 in taxes in a 10 year period ending 2011. KPMG collected
$300,000 in fees—they reportedly take a 15 percent of all taxes that are avoided.
When the Parliamentary Finance Committee held hearings on tax evasion and avoidance, the
Director of Canadians for Tax Fairness reported that he “got a gag order.” He was prohibited from
referring specifically to KPMG—as insisted by KPMG lawyers. Prem Sikka, Professor Emeritus
of Accounting at Essex University in the UK, refers to the Big Four accounting firms, including
KPMG, as the “Pin-Stripe Mafia.” Sikka quotes a former Commissioner of the US Internal
Revenue Service (IRS) saying:
A senior tax partner at KPMG…had advocated—in writing—to leaders of the company’s tax
practice that KPMG make a “business/strategic decision” to ignore a particular set of IRS
disclosure rules. The reasoning was that the IRS was unlikely to discover the underlying
transactions and that even if we did, any penalties assessed could be absorbed as a cost of doing
business. Sikka claimed in 2011 that KPMG was “still heavily into tax avoidance,” and had an
“inventory of 500 tax avoidance schemes.”It is a splendid irony that even while helping wealthy
people and corporations to avoid paying their fair share of taxes, and taking a cut of 15 percent of
the taxes that are avoided, KPMG is busy advising governments, like the government of Manitoba,
to cut spending on public services that are important to all of us, and especially those of us who
are not wealthy enough to use off-shore tax avoidance schemes. Given KPMG’s record, of which
I am relating only a small part, why would the Pallister government have hired them to provide
advice on governing Manitoba, at a reported cost of $740,000? Either the Pallister government
knew of KPMG’s record, in which case it is difficult to know why KPMG would still have been
hired. Or the Pallister government did not know of KPMG’s record, in which case we are entitled
to ask why. Whichever is the case, we can see whose interests KPMG serves, and that should make
almost all Manitobans skeptical of their advice.

 A billionaire Ontario developer with an Order of Canada, a senior vice-president with

media giant Rogers Communications and the owners of Winnipeg's famed Nutty Club
 candy factory are among numerous wealthy Canadians who appear to be linked to a secret
tax dodge in the Isle of Man, according to an investigation by CBC's the fifth estate and
Radio-Canada's Enquête
 In its internal marketing pitches, KPMG solicited Canadians with a "minimum" of $5
million to invest in an "Offshore Company Structure," charging clients $100,000 simply to
start it up
 KPMG guaranteed confidentiality to these clients
 In its Isle of Man scheme developed in 1999, KPMG also promised "no tax" on offshore
investments — a scheme the Canada Revenue Agency later described as a "sham" in court
documents
 The Canada Revenue Agency eventually offered a secret amnesty to the accounting firm's
clients who had been using the scheme -- but now, some of that secrecy is exposed

In August 2005, former official of the German bank Bayerische Hypo-Und Vereinsbank AG
(HVB) Domenick DeGiorgio, who worked with KPMG to sell the shelters, pleaded guilty to tax
evasion and fraud charges. On 15 February 2006, HVB admitted to criminal wrongdoing for its
participation in the KPMG tax shelter fraud. The prosecution against the company was deferred
by agreement with the U.S. Attorney. Under its deferred prosecution agreement, the company will
pay $29.6 million in fines, restitution and penalties.

On 10 March 2006, U.S. District Judge Lewis A. Kaplan released former KPMG accounting
executive David Greenberg on $25 million bail. Kaplan's ruling reversed his previous denial of
bail to Greenberg. Judge Kaplan ordered Greenberg to live in Manhattan under electronic
monitoring until his trial for tax fraud begins, and warned his family that they would be financially
ruined if Greenberg attempted to flee the country. Kaplan also said that Greenberg's finances were
in such disarray that it was impossible to figure out where his assets were and how much he was
worth. Called a flight risk by federal prosecutors, Greenberg was the only defendant to be arrested
by authorities when the indictments were handed down in October 2005.
On 28 March 2006, David Rivkin pleaded guilty to charges of conspiracy and tax evasion in U.S.
District Court in Manhattan. "I knew that the losses should not have been claimed on the tax
forms," Rivkin told Judge Kaplan. Rivkin 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. 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.

On 27 June 2006, Judge Kaplan ruled that by threatening KPMG with indictment unless the firm
reneged on its policy of paying the defense costs of partners who were indicted for work performed
in the course of the firm's tax shelter business, the Department of Justice violated the constitutional
rights of employees. In his opinion, Judge Kaplan agreed with the defendants' contention that
KPMG was improperly pressured not to pay their legal expenses, "because the government held
the proverbial gun to its head."

In the meantime, related rulings were handed down in a civil case that had been brought against
the Internal Revenue Service in late 2004 by two Texas lawyers, Harold W. Nix, and C. Cary
Patterson. Nix and Patterson sued the IRS for refunds after the tax agency denied each of their
claims for nearly $67 million in deductions stemming from their use of the BLIPS tax shelter in
2000. Their lawsuit was thought to be relevant to the KPMG tax shelter fraud case because BLIPS
is one of the tax shelters alleged to be abusive by the prosecution in that matter. On 20 July 2006,
Judge T. John Ward of United States District Court for the Eastern District of Texas ruled that the
use of BLIPS by Nix and Patterson was essentially legitimate, because the I.R.S.'s application of
tougher Treasury Department rules in 2003 to liabilities that occurred in BLIPS was "ineffective"
and "not enforceable" because it was retroactive. The Internal Revenue Code generally prohibits
retroactive regulations. In response to this ruling, prosecutors in the KPMG case have indicated
that they will argue that the BLIPS shelter itself was technically valid, but that the way the
defendants carried it out was fraudulent. In turn, lawyers for the defendants argue that no court of
law has ever ruled that the tax shelters in question were illegal. And in February 2007, Judge Ward
essentially reversed himself and ruled the tax shelter consisted of fake bank loans and therefore
illegitimate, despite his previous ruling identified in the link above.
On 8 February 2007, Deutsche Bank reached a settlement with hundreds of investors to whom it
sold aggressive U.S. tax shelters similar to those attacked by the prosecution in the KPMG tax
fraud case. This settlement came a year after US DOJ prosecutors in Manhattan announced their
investigation of Deutsche Bank's role in questionable tax shelters.

On 23 May 2007, the Second Circuit dismissed a complaint against accounting firm KPMG to
recover fees and expenses arising from criminal tax fraud charges involving former KPMG
partners and employees. The court held that the district court, which presides over the criminal
case, erred in extending "ancillary" jurisdiction to the civil dispute between the defendants and
non-party KPMG. Treating KPMG's appeal as a petition for writ of mandamus, the court issued
the writ, vacated the district court's orders, and dismissed the civil complaint.

On 17 July 2007, Judge Kaplan dismissed charges against 13 former KPMG employees, ruling
that he had no alternative because the government had strong-armed KPMG into not paying the
legal fees of defendants and had violated their rights. "This indictment charges serious crimes.
They should have been decided on the merits as to every defendant," Kaplan wrote. "But there are
limits on the permissible actions of even the best prosecutors." Barring KPMG from paying its
former employees' legal bills "foreclosed these defendants from presenting the defenses they
wished to present, and, in some cases, even deprived them of the counsel of their choice. This is
intolerable in a society that holds itself out to the world as a paragon of justice," Kaplan wrote in
his ruling. Kaplan's decision did not affect the prosecution of R.J. Ruble, a former law partner
at Sidley Austin LLP, and three former KPMG partners, including David Greenberg, who worked
in the firm's Orange County office and released KPMG from any obligation to him when he left
its employ. John Larson and Robert Pfaff, the other two former partners still facing charges, left
KPMG eight years before the criminal action was filed and did not initially seek to have the
accounting firm pay their legal bills.

On 20 August 2007, the prosecutors announced that one of the aiders and abettors of tax fraud,
David Amir Makov, agreed to plead guilty and cooperate with prosecution of his former
colleagues. In the preceding week, the federal court in Manhattan received $150,000 from Mr.
Makov as part of a bail modification agreement that allows him to travel to Israel. Because Makov
never worked for KPMG, he was unaffected by Judge Kaplan's dismissal of charges against 13 of
his codefendants.
On 10 September 2007, Makov entered a guilty plea to one information count of conspiracy. He
agreed to pay a $10 million penalty and provided new details on those involved. Makov gave a
brief explanation on the workings of BLIPS, or Bond Linked Issue Premium Structure, which he
said he helped create. In previous hearings, Judge Kaplan had chastised prosecutors for failing to
explain clearly how BLIPS worked. According to Makov's testimony, the BLIPS shelters were
created to generate artificial losses that were then used by wealthy investors to offset gains in
legitimate income. The shelter involved a purported investment component as well as banks,
extending purported loans to investors. According to prosecutors, BLIPS were marketed and sold
around 1999 and 2000 to at least 186 wealthy investors and generated at least $5.1 billion in phony
tax losses. The Presidio entities that Makov formed, owned and operated with co-defendants
Robert Pfaff and John Larson, both former KPMG employees, made at least $134 million selling
BLIPS. The IRS regards a tax shelter as abusive if it has no legitimate business purpose or genuine
economic substance, in contrast to real loans, with money at risk, or real investments. According
to Makov, although BLIPS were created on paper to look like seven-year investments, they
involved neither real loans nor real investment components. "There was no economic substance,"
Makov testified. "Instead, we created the appearance of economic substance, rather than the
reality." Makov claimed that although he initially thought that BLIPS were legitimate, "as part of
the deception" he was eventually "asked by representatives of Bank A," among others, "to come
up with an investment rationale." He added that he was "clearly told by Bank A, KPMG" and
others "that the loan was not at risk." According to The New York Times, people close to the case
have identified "Bank A" as Deutsche Bank AG. The bank has not been charged but is expected
to reach a settlement with the government. A graduate of the Harvard Business School and a one-
time employee of Long-Term Capital Management, prior to founding Presidio around 1999,
Makov worked at Deutsche Morgan Grenfell, an investment banking arm of Deutsche Bank AG.
Makov was originally charged with dozens of counts of fraud, tax evasion, and conspiracy, with
each count carrying five years in jail. Prosecutors are expected to drop all of the other charges if
he cooperates throughout the trial.

Jury selection for the KPMG tax shelter fraud trial began on 9 October 2007. However, on 18
October 2007, Judge Kaplan postponed indefinitely the trial set to begin in five days, discharging
jurors he had already selected to hear the case, and removing Steven Bauer of Latham & Watkins,
a lawyer for former KPMG executive John Larson. The government had previously asked the
judge to decide whether Bauer should be removed because he worked as a lawyer for Makov and
may have a conflict of interest. Larson had declined to waive his right to have an attorney free of
conflicting interests. Kaplan ruled to disqualify Bauer as trial counsel for Larson and pledged to
address the issue of whether Latham & Watkins should also be disqualified if Larson seeks to be
represented by another lawyer at that firm.

On 28 August 2008, the U.S. Court of Appeals for the Second Circuit upheld the dismissal of
criminal charges against 13 former executives at KPMG. The Court held that the government
prosecutors "unjustifiably interfered with defendants' relationship with counsel and their ability to
mount a defense, in violation of the Sixth Amendment...." by pressuring KPMG to refrain from
paying their legal fees. Separately on the same day, Deputy U.S. Attorney General Mark Filip
announced new prosecution rules aimed at not penalizing companies as non-cooperative for
protecting attorney-client material or paying for their employees' attorneys in probes. "No
corporation is obligated to cooperate or to seek cooperation credit by disclosing information to the
government," Filip said at a press conference at the New York Stock Exchange. "Refusal by a
corporation to cooperate, just like refusal by an individual to cooperate, is not evidence of guilt."

On 15 October 2008, opening arguments began in the trial of David Greenberg and Robert Pfaff,
former KPMG tax partners; John Larson, former KPMG senior tax manager; and Raymond Ruble,
a former partner at law firm Sidley Austin. The four defendants are charged with conspiring to
evade taxes for more than 600 clients in a case that was touted as the largest criminal tax
prosecution when it started in 2005 with 19 defendants but is being tried on a much smaller scale.
Assistant U.S. attorney John Hillebrecht told the jury in Manhattan federal court that the four men
lied and cheated "by making the tax bills of some of our nation's richest citizens disappear." In
turn, Larson's defense lawyer, Thomas Hagemann, stated that his client believed in good faith that
what he did was allowed under the law, openly conducted his dealings, and acted with "good faith
disclosure". Hagemann called David Makov, a former colleague of Larson, turned one of the
government's main witnesses, "a liar and perjurer". The trial is expected to last three to four
months.

On 24 November 2008, two of the remaining four defendants, former KPMG tax partner Robert
Pfaff and former senior tax manager John Larson, filed a motion to dismiss the charges against
them or declare a mistrial. The motion said that during the trial prosecutor’s elicited testimony
from a witness accusing Pfaff and Larson of concealing information from KPMG and its tax
department to obtain KPMG approval for BLIPS, thus transforming a tax fraud conspiracy with
KPMG against the IRS into an honest services fraud conspiracy against KPMG. The motion said
the defense had received no notice of such a change in the prosecution's theory and could not
prepare a defense and so sought to have the judge to dismiss the indictment or grant a mistrial. The
motion claimed that the government’s alleged deceitful procurement of KPMG's confidential tax
returns through a parallel civil tax fraud investigation by the DOJ was a violation of due process.
The defendants relied on three cases where district courts dismissed indictments or suppressed
evidence "where the Government has brought a civil action solely to obtain evidence for its
criminal prosecution or has failed to advise the defendant in its civil proceeding that it
contemplates his criminal prosecution." (Two of these cases were later reversed on appeal.) The
prosecution responded that the government has always alleged, and still contends, that KPMG as
an entity was a conspirator, not a victim of any kind of fraud. "That for a period of time there was
an effort to keep certain facts from certain individual KPMG employees is of no moment
whatever," the government said. Judge Kaplan rejected the motion, finding that neither of the
circumstances invoked by the defendants applied to their case: "Defendants do not deny that there
was a bona fide civil investigation, they complain merely that there was a criminal investigation
as well. And defendants, who were not the targets of the civil investigation, do not claim to have
been deceived by the government." In a footnote, the court notes that the defendants relied in part
on the fact that four of the now-dismissed defendants had given deposition testimony while
unaware of the criminal investigation. Judge Kaplan added that they "do not suggest that the
government deceived these individuals," suggesting perhaps that if the government had engaged
in some deceptive conduct, the defendants' motion might have had more traction.

1 December 2008 marked the expiration of the deadline for the federal prosecutors to
seek certiorari by asking the United States Supreme Court to reconsider the 28 August 2008 2nd
Circuit appeals court's decision that upheld the 17 July 2007 ruling by Judge Kaplan in
the Southern District Court of New York, dismissing criminal charges against 13 of the 19 original
defendants.

From 8 to 10 December 2008, the jury heard closing arguments in the KPMG tax shelter case.
Raymond Ruble's lawyer Jack S. Hoffinger told jurors that it was impossible to conclude that the
defendants purposefully tried to break the law in helping at least 600 wealthy people trim their
taxes since they did not try to hide what they were doing from the Internal Revenue Service or
others. "What do we have, a massive suicide pact?" he asked. He said that the defendants would
not have designed something criminal and then "put it out there so that the IRS will see it, the
government will see it and we will end up in court charged with a crime." Assistant U.S. Attorney
Margaret Garnett retorted that the defendants created tax shelters that were actually shams meant
to appear to be legitimate investments: "These defendants sold these so-called investments for
years and years and not a single one of these defendants' clients ever made a dime of profit." She
said that the only purpose of the fraudulent tax shelters marketed from 1997 until 2000 was to
"generate artificial tax losses to evade millions and millions of taxes." She speculated that the
defendants may have had a false sense of safety from the law, and claimed that "their greed and
ambition overcame their sense of right and wrong."

On 18 December 2008, lawyer Raymond Ruble, who once was a partner at Brown & Wood, was
convicted on 10 counts of tax evasion while investment consultants Robert Pfaff and John Larson
were convicted on 12 counts. They were acquitted of conspiracy. David Greenberg, deemed by the
prosecution an "ongoing danger to the community" and a flight risk, was acquitted of all charges.
Greenberg was jailed for five months and required to wear electronic monitoring for two and a
half years afterward. His acquittal came as a result of Steve Acosta, a key government witness,
being "utterly incapable of giving a straight answer on cross-examination", as conceded by
Assistant U.S. Attorney John Hillebrecht in closing arguments. Acosta had pleaded guilty to
conspiracy and tax evasion in a cooperation deal aimed at leniency at sentencing. He was released
from federal prison on November 22, 2010.[14] Judge Kaplan ordered that electronic monitoring
begin for Pfaff at his Golden, Colo., home and for Larson at his New York City home, though the
judge said he would reassess the need at a bail hearing next month, especially after what happened
with Greenberg. Six people, including former KPMG tax partner David Rivkin; David Amir
Makov, a one-time currency and fixed-income derivatives trader at Presidio; and Domenick
DeGiorgio, a former managing director at German bank HVB, or Bayerische Hypo &
Vereinsbank, have pleaded guilty to criminal charges in the matter.

Some of KPMG's tax shelter clients are now suing KPMG for liability exposure.
Learning

Offshore Company for a selected group of rich client’s intention to tax evasion.

Rich people & company always intention to tax evasion.

People always trust auditor. Stakeholder are believing that the audit report is accurate. People
believe audit firm is natural. But KPMG has fraud with people and Government.

So, now people are not fully believes the KPMG audit report.

Audit firm like KPMG must maintain tax authority rules & regulations. The government must
justify audit reports. Then the audit firm will not be able to cheat. And government force to
maintain tax rules and regulations. Further audit firm violate any rules, then government take
action.

It is hard to build trust, but easy to break. Truth is never a secret.