After a week of intense negotiations, federal prosecutors and KPMG LLP continue to hammer out the terms of a deal that would allow the accounting firm to avert criminal indictment over its tax shelter sales in the 1990s.
Prosecutors in the office of the U.S. attorney for the Southern District of New York and lawyers for KPMG are working on procedural issues, according to sources familiar with the talks who spoke on condition of anonymity because the agreement had not yet been finalized.
The sources said the pact under consideration calls for KPMG to pay as much as $500 million in penalties and to submit to outside monitoring, among other terms. If the firm stays out of trouble for a set period of time, prosecutors would agree to drop charges against it. Any deal between prosecutors and the firm would require the approval of a federal judge.
At the same time, the government soon could unveil criminal charges against several former KPMG partners and other professionals who worked closely with them on the tax shelters, which were sold to wealthy investors between 1997 and 2001.
A Senate panel reported earlier this year that KPMG, the nation's fourth-largest accounting firm, reaped $124 million in fees from the shelter sales. Former HVB Group banker Domenick DeGiorgio pleaded guilty Aug. 11 to conspiracy and tax evasion charges in connection with the shelters, as well as personal financial improprieties.
The firm has sought to persuade senior Justice Department officials not to bring an indictment against KPMG itself, a step that could send partners and clients heading for the exits.