KPMG, anticipating criminal charges would be a "Ânuclear bomb'' that would wipe out the accounting firm, pleaded with federal officials in 2005 not to indict it for selling fraudulent tax shelters, Bloomberg News reported Tuesday citing newly released internal documents.
Expecting the worst, KPMG partners sought advice from bankruptcy lawyers, Bloomberg News reported citing the internal documents written by KPMG lawyers who never expected to see them made public. The firm's attorneys told prosecutors that KPMG's demise would disrupt capital markets, leaving more than 1,000 companies without an auditor.
The argument was dismissed as "ridiculous'' by David Kelley, then the U.S. attorney in New York in charge of the case. "You are not the only firm in trouble and not just from criminal exposure,'' Kelley said, Bloomberg News reported citing the memos. "The industry is going to crap.''
Dan Ginsburg, a spokesman for KPMG, declined to comment to Bloomberg News.
In the end, the documents reveal, the U.S. Justice Department's top two officials interceded, and KPMG avoided the fate of Arthur Andersen -- which collapsed after an indictment for its role in the Enron Corp. scandal. KPMG settled with the government in August 2005, agreeing to pay a record $456 million fine, give up part of its tax practice and accept a three-year period of outside supervision, Bloomberg News reported.
-New York State Society of Certified Public Accountants
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