BDO Agrees To Pay $50 Million In Tax Shelter Case

Chicago-based BDO USA (FY11 net revenue of $572 million) has agreed to pay $50 million to settle a years-long investigation into abusive tax shelters that generated $6.5 billion in phony losses.

The deferred prosecution agreement, announced in mid-June, includes the filing of a tax fraud conspiracy charge against the firm, but the U.S. Attorney for the Southern District of New York will move to dismiss the charge in December as long as BDO cooperates with the investigations and meets other conditions, Forbes reported. The tax fraud conspiracy charge involves BDO’s false contention that its tax shelters were legitimate investments, false tax returns filed on behalf of wealthy clients and false information filed with the Internal Revenue Service.

Court documents say the firm admitted to receiving $200 million in fees from 1997 to 2003 for developing, marketing and implementing the improper tax shelters. BDO says it has since made “extensive changes in its governance and compliance procedures” to “prevent such conduct from occurring in the future,” Forbes reported.

BDO will pay $34.4 million of the $50 million to the IRS as a civil penalty to settle the tax agency’s investigation. BDO will forfeit the other $15.6 million to the government. BDO’s payments must be completed by April 1, 2018. IRS Commissioner Doug Shulman says the BDO settlement “is another reminder that taxpayers can’t hide behind complicated schemes or corporate tax shelters.”

BDO, formerly BDO Seidman, is recovering from the actions of its former executive Denis Field. Field led a group selling the shelters that was known internally as the “wolf pack,” for its aggressive marketing techniques, the Chicago Tribune reported. Field was found guilty of participating in the fraud last year, but his conviction was overturned last week and a new trial was ordered.

The BDO settlement is part of a larger government crackdown on bankers, lawyers and accountants who helped rich clients evade taxes. KPMG and Deutsche Bank have already agreed to pay large penalties to avoid charges.