Ex-Tax Partner Pleads Guilty
By Paul Davies and David Reilly
The Wall Street Journal
Tuesday, March 28, 2006
Just days before a key court hearing to determine whether to
dismiss the KPMG LLP tax-shelter case, one of the 19
defendants pleaded guilty Monday to conspiracy and one
charge of tax evasion in exchange for federal prosecutors
dropping other charges against him.
David Rivkin, a tax partner in KPMG's San Diego office from
July 1999 to April 2004, originally faced 39 counts of tax
evasion for his role in a tax-shelter scheme in which he
helped nine wealthy individuals avoid paying a combined $235
million in taxes. The government alleges the tax-shelter
scheme generated about $2.5 billion in illicit tax savings.
Mr. Rivkin is one of 17 former executives at the giant
accounting firm to be charged in connection with the sale of
the questionable products. The other two defendants are an
outside lawyer and investment adviser who helped KPMG
structure and sell the products.
Mr. Rivkin's plea deal is expected to increase pressure on
the other 18 defendants scheduled to go to trial in the fall
in what is seen as one of the most complex and wide-ranging
tax cases ever brought by federal prosecutors. New
York-based KPMG last year reached its own deal with
prosecutors, agreeing to pay $456 million and admit criminal
wrongdoing as part of a deferred-prosecution pact. The pact
allowed the firm to avoid a criminal indictment.
Under terms of his deal with prosecutors, Mr. Rivkin, 42
years old, faces as many as five years in prison for each
count but is expected to receive a reduced sentence for his
testimony against other defendants in a trial expected to
start in September. He remains free on bail and is
scheduled to be sentenced next February.
It isn't clear how much light Mr. Rivkin will be able to
shed on actions by more senior KPMG employees, because he
was less involved with the shelters than some others
charged. Other KPMG employees charged in the matter include
Jeffrey Stein, the firm's former deputy chairman; Richard
Smith, former vice chairman for tax; and John Lanning,
former vice chairman for tax services.
A certified public accountant, Mr. Rivkin worked in
California at the firm's Innovative Strategies group, which
designed and marketed tax-shelter products for individual
clients. That unit's chief was Jeffrey Eischeid, who also
has been charged in the case.
In court Monday, Mr. Rivkin said that, in April 1999, he and
other KPMG employees attended a meeting in Dallas where they
were trained in the sale and marketing of tax-shelter
schemes known as a Bond Linked Issue Premium Structure, or
BLIPS, and Offshore Portfolio Investment Strategy, or OPIS.
The shelters were to be marketed as long-term investments,
but the real purpose was to generate "phony tax losses," Mr.
Rivkin said. He added that the shelters were "designed and
approved" by senior partners at KPMG and that he was given a
list of people with incomes of more than $20 million on whom
Mr. Rivkin's plea came just three days before lawyers for
the other defendants are scheduled to argue before U.S.
District Judge Lewis A. Kaplan on motions to dismiss the
charges against their clients.
Paul Davies at
email@example.com and David Reilly at