Ernst & Young LLP will pay $123 million to resolve a U.S. tax-fraud probe as part of a non-prosecution agreement, according to a statement by the Manhattan U.S. Attorney’s Office.
The accounting firm “admitted wrongful conduct” by its partners and employees in connection with four tax shelters from 1999 to 2004, according to yesterday’s statement. About 200 Ernst & Young clients used the shelters to try to avoid more than $2 billion in taxes, prosecutors said.
In addition to the money and the admissions, Ernst & Young agreed to a series of permanent restrictions on its tax practice and will continue to cooperate with the government’s tax-shelter investigation. The firm’s cooperation began in 2003, according to the statement.
In exchange, prosecutors agreed not to charge the firm in connection with the case. The non-prosecution agreement doesn’t cover individual Ernst & Young partners and employees, according to the statement.
“Ernst & Young is pleased to put this matter from a decade ago behind us,” spokeswoman Amy Call Well said in an e-mailed statement. “As the settlement with the U.S. Attorney’s office recognizes, these activities represent an isolated period in the firm’s long history of providing ethical and professional tax services.”
Ernst & Young settled an IRS examination in 2003, paying $15 million and agreeing to improve its internal quality monitoring system, according to the firm.
Last year, BDO Seidman LLP agreed to pay $50 million in a deferred prosecution deal. In 2010, Deutsche Bank AG reached a $553.6 million non-prosecution agreement with the U.S. KPMG LLP settled a tax shelter investigation for $456 million in 2005.
Donna Guerin, a former partner with the law firm Jenkens & Gilchrist, pleaded guilty in September to one count of conspiracy and one count of tax evasion for her part in what prosecutors have called the biggest tax-fraud prosecution in history.
Prosecutors claimed Guerin helped run a 10-year tax shelter scheme that cost the U.S. $92 million in lost taxes. She was sentenced yesterday to eight years in prison and ordered to pay $190 million in restitution by U.S. District Judge William Pauley in Manhattan.