Practice

A pending indictment, while captioned United States v. Stein, is commonly referred to as the KPMG indictment. In a recent and widely reported decision, the Court in Stein held that the government had interfered with the constitutional rights of the defendants through policies and actions that led KPMG to decide not to pay legal fees for individuals who did not cooperate with the government or who were indicted. The most troublesome issues may arise from the substantive charges in the indictment itself. It is beyond debate that some of the charges, if proven as alleged, set out federal crimes. There is a difference between a permissible tax shelter and an abusive tax shelter. The line, however, may not be as easily seen as the government now contends. Nonetheless, the government is not without remedies in civil enforcement. It is also not without remedies in the criminal arena, where clear proof of fraud exists. The transactions that are at issue in the KPMG indictment can be described and understood, but they are by all accounts complex. Whether they operate as designed to convey tax benefits under the Code is an open issue, itself complex. Where the line between tax planning, even aggressively done, and actual fraud, cannot be clearly discerned, a criminal indictment is the wrong mechanism to sort out these issues.