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Accounting firm reaches deal with government in tax fraud case

An accounting firm has admitted its part in a large-scale tax fraud investigation and reached a deal with the government to pay $50 million in a deferred prosecution agreement. BDO USA, formerly BDO Seidman, admitted to assisting wealthy taxpayers in fraudulent tax shelter transactions meant to defraud the IRS from some $1.3 million in income taxes.

The charge of tax fraud conspiracy leveled against BDO will likely be dropped in six months, so long as the accounting firm meets all the requirements of the deal reached with the government. This means continued cooperation in the investigation, along with implementing a compliance and ethics program within the company. California accounting firms may well wish to make sure they have similar programs in the wake of this incident.

A U.S. district judge authorized the agreement between the government and BDO. He called this the biggest tax-shelter fraud case in American history. Several people, including one BDO executive, were convicted last year of tax fraud, conspiracy, and various other charges. Convictions against three of them were thrown out after the revelation that a juror had been deceitful concerning her past.

The district judge’s decision does allow for the government to retry those defendants should it choose to do so. A fourth defendant’s conviction stands firm since his attorneys purportedly had facts about that juror’s background, which they did not disclose to the court. A fifth defendant was found not guilty of the charges leveled against him.

Tax fraud is certainly a serious allegation in California and anywhere across the country. However, as in this case, every defendant accused of this crime has the right to a fair trial and should be considered innocent until proven guilty. Some, on the other hand, may choose to do as BDO did in this case and reach an agreement with the government. Either option is a valid choice and must be decided on an individual basis after consideration of all relevant facts and circumstances in relation to the applicable laws and pending charges.

Source: Los Angeles Times, “Judge OKs deal between BDO USA and U.S. in tax-evasion case,” June 13, 2012