For accountants, lawyers and financial executives whose role in the sale of some questionable tax shelters has been under federal investigation, the stakes have suddenly risen sharply.
With a bank executive’s guilty plea last week to a charge that he conspired to commit tax shelter fraud, federal prosecutors have put considerable pressure on potential defendants who worked at KPMG, the accounting firm that sold the shelters, and at the banks and law firms involved. Now prosecutors have a cooperating witness who may be able to incriminate others – creating an incentive for some to cut their own deals with the government.
“Getting one person to cooperate is clearly the first step,” said Daniel J. Horwitz, a former assistant district attorney who is now at Carter, Ledyard & Milburn in New York. He added: “Typically, in a case where the government has a menu of people to choose from, they can play people against each other, so that the first people in the door are the ones that will get the benefit of a cooperation agreement. And for those who don’t cooperate, as they say in the business, the train may have left the station for them.”