The WSJ reports today that the DOJ is threatening individual partners and KPMG the entity with indictments regarding the sale of abusive tax shelter products and (of course) obstruction of justice.  These musings may be designed to elicit a settlement from KPMG because indicting KPMG may be a little like catching a tiger by the tail.  If KPMG is treated with the same fate as Arthur Andersen, then the number of large public accounting firms will drop to three, bad news after SOX created a string of work for public accounting firms.  So, even if KPMG is more worthy of indictment than Andersen, the firm may escape simply by virtue of being second.  Prof. Ribstein and Prof. Bainbridge have also weighed in here and here.

I am intrigued by the fact that a company may be sufficiently innovative and entreprenurial to create a legal scheme designed to reduce taxes, but when the scheme is later declared "abusive," the company can then be served with a criminal indictment.  Was the scheme clearly abusive from the beginning?  Did the scheme clearly violate a tax code provision, regulation, bulletin, revenue ruling or private letter ruling?  Did KPMG attempt to get a private letter ruling?  I get the feeling that we encourage tax accountants and tax attorneys to distinguish themselves by being creative with tax planning, but if they get to creative and cost the treasury too much money, then we threaten indictments.

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