Some wealthy Americans who paid millions in fees to two of the Big Four accounting firms to set up tax shelters are suing the firms after the Internal Revenue Service denied the tax savings that they had been promised.
Although only a few lawsuits have been filed, tax experts and lawyers handling these cases said they expected a flood of similar cases as the I.R.S. stepped up its hunt for tax cheating by hundreds and perhaps thousands of executives, business owners, athletes and entertainers with big incomes.
Two firms being sued, Ernst & Young and KPMG, offered shelters that they said would make taxes on salaries, stock option profits and capital gains from the sale of a business either shrink to pennies on the dollar or disappear.
The fees and savings on taxes can be enormous. Ernst & Young charged some clients $1 million just to hear a sales pitch, according to court papers. And the firms made millions from the sale of each shelter. The shelters allowed accounting firms, their clients and the law firms that blessed the deals to share money that otherwise would have gone to the government.
This is no longer legally justifiable tax avoidance, but industry-wide tax fraud. The sheltered (i.e., stolen) money rightfully belongs to citizens.
The Bush administration's isolation and public crucifixion of Andersen, designed to move the spotlight away from the actual Enron perps who contributed lavishly to several Bush campaigns, also conveniently served to destroy the auditor of Halliburton, whose questionable accounting practices occurred while Dick Cheney was its CEO in the late 1990s. It also managed to avoid any real reform of the accounting industry, thereby prolonging a bearish crisis in the stock markets when more Americans own stock than ever before.
