Paul L. Caron

Thursday, February 15, 2007

District Court Denies KPMG Tax Shelter Defendants Access to IRS Evidence

The district court in the KPMG tax shelter case has denied the defendants' request for IRS documents purportedly showing that some IRS personnel believed that KPMG was not required to register the tax shelters at issue.  United States v. Stein, No. S1-05 Crim. 0888 (S.D.N.Y. 2/7/07):

The parties have devoted a great deal of attention to the relevance and importance at trial of evidence, if indeed evidence exists, that some persons within the IRS believed that BLIPS did not have to be registered as a tax shelter. Defendants imply that the BLIPS registration issue is at the heart of this prosecution. Moreover, they contend that evidence that some IRS personnel believed that registration was unnecessary would confirm that the matter was unclear and, in consequence, that they could not willfully have failed to register.

To begin with, movants exaggerate the importance of this issue. While the indictment does allege that the defendants tried to conceal the true facts from the IRS and a Senate investigating committee by a number of means, failure to register shelters was only one of them and BLIPS was only one of several shelters that allegedly were not registered. Thus, defendants have blown the question of whether they were obliged to register BLIPS out of proportion to its true significance in this case....

I am unpersuaded that ordering disclosure of the remaining categories of material sought by the defendants is necessary or appropriate in the interests of sound case management.

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