NEW YORK (AP) - A judge, saying he wanted to send a message to “quick-buck artists,” handed down stiff sentences Wednesday to two former executives and a lawyer with accounting firm KPMG for helping rich people evade more than a billion dollars in taxes.
U.S. District Judge Lewis Kaplan sentenced former KPMG executive John Larson to more than 10 years in prison; a fellow executive, Robert Pfaff, received more than eight years.
The judge said Larson, 57, and Pfaff, 58, were “centrally involved” in the brazen tax shelter scheme “that didn’t pass the smell test from Day 1.” He gave lawyer Raymond Ruble, 63, a term of 6 1/2 years in prison.
The judge said he hoped the sentences “will say to quick-buck artists, ‘Not so fast.’”
The men were convicted in December of multiple counts of tax evasion. The government alleged they used tax shelters marketed by KPMG LLP to help wealthy clients make it appear they had sustained large tax-deductible losses; the men would collect 7 percent of whatever amount their clients saved.
“There was a lot of concealment,” the judge said. “These defendants were intimately involved in seeing that the loan documents were carefully constructed to conceal the true nature of the loans.”
At one time, 19 defendants were charged in the case, which the government announced as a major strike against fraud and touted as the biggest tax fraud case in U.S. history. But charges against most were dismissed after the judge concluded the government had unfairly blocked the company from paying their legal fees.
The government suffered another setback in December, when a defendant portrayed as a key player, former $500,000-per-year KPMG partner David Greenberg, was acquitted. Greenberg had been kept in jail for five months after his arrest and was required to wear electronic monitoring for 2 1/2 years afterward.
At sentencing Wednesday, defense lawyers asked the judge for leniency, arguing their clients were the victims of overzealous prosecutors seeking to scapegoat their clients for widespread accounting fraud.
“I’d asked you to put some brakes on them,” said Larson’s attorney, Steven Bauer.
Larson and Ruble declined to speak. Pfaff sought to assure the judge he wouldn’t flee if allowed to remain out on bail pending appeal, saying, “I cherish my country … and, more importantly, I love my wife and family.”
The judge immediately jailed Larson and Pfaff after the government argued they had the incentive and means to flee. He ruled that Ruble could remain free while appealing the case.
Larson was fined $6 million, and Pfaff was fined $3 million; no fine was announced against Ruble.
KPMG has signed a deal admitting its role in the tax shelter scheme. The firm avoided criminal prosecution by cooperating with authorities but was fined $456 million, including $128 million in forfeited fees from sales of the shelters.