U.S. News

Ernst, Deutsche May Face Fines in Tax Shelter Case: WSJ


Ernst & Young and Deutsche Bank could face monetary sanctions rather than criminal charges in a U.S. tax shelter probe, The Wall Street Journal reported on Thursday, citing unnamed sources.

U.S. prosecutors charged two current and two former partners of the accounting firm on Wednesday with tax fraud conspiracy arising out of the sale of tax shelters.

The indictment came after years of investigations into the sale of aggressive tax shelter strategies. Sixteen former partners at rival "Big Four" firm KPMG are also facing trial in September.

Ernst & Young is discussing settlement options that would probably fall short of an indictment, but include monetary sanctions, the paper said.

Prosecutors are also continuing their probe into Deutsche Bank, which is alleged to have helped arrange financing for tax-shelter products, the paper reported.

Ernst & Young was not immediately available to comment.

Deutsche Bank spokesman John Gallagher declined to comment.

In a statement on Wednesday, Ernst & Young said it had made changes to its tax practice.

"The individuals who were indicted are two former partners and two partners who have been on administrative leave," Ernst & Young spokesman Charles Perkins said. "They were part of a small group within the firm, disbanded years ago ... Ernst & Young has cooperated with the government from the beginning of its investigation, and we will continue to do so."

In July 2003, Ernst & Young agreed to pay $15 million to the IRS to end an investigation of tax shelter marketing.