Two former KPMG executives convicted of selling improper tax shelters should be sentenced to as much as 24 years imprisonment, U.S. prosecutors said in court papers on Thursday.
The sentences were proposed to a Manhattan federal court judge by the government under 2008 guidelines, which increased some of the possible penalties for white-collar crimes previously established in 2000.
Last December, a jury convicted former KPMG tax partner Robert Pfaff and former senior tax manager John Larson, as well as Raymond Ruble, a former partner at law firm Sidley Austin, on several counts for evading taxes through a vehicle known as a BLIPS tax shelter.
The government said Larson and Pfaff should face the sentencing guidelines range of about 19 to 24 years in prison. It said Ruble should face between about 15 and 19 years.
They are due to be sentenced on April 1 by U.S. District Judge Lewis Kaplan.
We recognize of course that these guidelines ranges are sobering, said the submission by prosecutors John Hillebrecht and Margaret Garnett of the U.S. Attorney's Office in Manhattan.
But we submit that the virtually unprecedented enormity of the BLIPS fraud, coupled with the pivotal roles in that fraud played by each of these defendants and the personal profit they derived from the fraud, makes a sentence with the guidelines range appropriate and reasonable.
After a two-month trial, Larson and Pfaff were convicted on 12 counts of tax evasion, and Ruble on 10 counts of tax evasion. The jury acquitted former KPMG tax partner David Greenberg.
The case was once touted as the largest criminal tax prosecution when the charges were filed in 2005, but it became much smaller after Judge Kaplan dismissed charges against 13 former KPMG executives, ruling that the government interfered with their right to counsel.
KPMG was not a defendant, agreeing in 2005 to pay $456 million to settle a federal probe.
At the trial, the government argued that between 1996 and 2005 the defendants put together tax shelters known as FLIP, OPIS, BLIPS and SOS that were designed to generate phony tax losses. But defense lawyers argued that their clients acted with good faith in their dealings.
(Editing by Phil Berlowitz)