Accountant Pleads Guilty in KPMG Shelter Case
By Lynnley Browning
New York Times
Thursday, January 11, 2007
A California accountant pleaded guilty yesterday to charges
of conspiracy, tax fraud and obstructing a federal
investigation, and pledged to help prosecutors as they
conduct a widening criminal investigation of questionable
The accountant, Steven Michael Acosta, entered his plea in
Federal District Court in Manhattan, becoming the fourth
person to do so in the inquiry.
Mr. Acosta, 49, of Pasadena, Calif., is a relatively minor
figure in the investigation, which has led to the indictment
of 16 former employees of the accounting firm KPMG. The
inquiry has also ensnared Deutsche Bank, Germany’s largest
bank, and other banks, accounting, law and investment firms.
But his plea may have significant consequences for one of
the 16 KPMG defendants, who are scheduled to stand trial in
September. That defendant is David Greenberg, a former
partner in KPMG’s Los Angeles office.
In his plea before Judge Denny Chin, Mr. Acosta read a
statement that provided explicit details about Mr.
Greenberg’s role in questionable tax shelters and his close
work with Mr. Greenberg.
Calls late yesterday to the lawyer for Mr. Greenberg were
not immediately returned for comment.
Mr. Acosta’s statement also made references to his and Mr.
Greenberg’s work with a bank in New York. That bank is
Deutsche Bank, according to a person briefed on the
inquiry. The criminal investigation of Deutsche Bank over
its work with questionable tax shelters grew out of the
indictment of the former KPMG employees, which itself grew
out of a criminal inquiry into KPMG itself.
A Deutsche Bank spokesman did not return calls late
Kevin Downing, a special assistant United States attorney in
Manhattan who is helping to oversee the investigation, told
Judge Chin yesterday that Mr. Acosta’s actions were “part of
a much larger conspiracy,” including one involving the KPMG
Mr. Acosta pleaded guilty to four charges of conspiracy to
defraud the United States, tax evasion and obstruction of
the Internal Revenue Service and aiding in the filing of
false tax returns and acting corruptly on behalf of himself
and others from 1999 to 2004. He faces as much as 16 years
in prison and substantial fines. He will be sentenced next
In his statement. Mr. Acosta described how Mr. Greenberg
paid him $600,000 to pose, at different times, as an
independent hedge fund manager and as an independent
investment adviser before clients to whom Mr. Greenberg sold
a bogus tax shelter known as SOS, or short options
strategy. Mr. Acosta also signed questionable trade
documents and other papers on behalf of a bank that were
used as part of the shelters.
He said that Mr. Greenberg designed SOS, and on several
occasions signed Mr. Acosta’s name to various documents used
to carry out the shelter transactions. Some of the
documents were signed after the transactions were carried
out. Mr. Acosta, who said that he knew the shelters were
invalid in the eyes of the IRS, also admitted to using SOS
to cheat on his personal income tax returns in 2000 and
2001. Mr. Acosta also said that at Mr. Greenberg’s request,
he lied to an IRS agent about his and Mr. Greenberg’s roles
with the shelters.
Mr. Acosta worked for KPMG as a tax manager in Los Angeles
until 1991, then became an insurance agent.
“I have no experience in investments,” he said yesterday in