Grant Thornton Ordered to Pay $100 Million

A circuit court judge in Kentucky has ordered Chicago-based Grant Thornton (FY12 gross revenues of $1.25 billion) to pay $100 million in damages related to sale of an offshore tax shelter that the IRS considered to be abusive.

The Wall Street Journal reported that the accounting firm must pay Bill Yung, president of a Kentucky-based hotel company, his wife and his family trust a total of more than $100 million, including $20.22 million in compensatory damages, and $80 million in punitive damages, ruled Kenton Circuit Court judge Patricia Summe on Nov. 15.

In a statement, Grant Thornton said it was “disappointed” in the ruling and believes it has “strong grounds for an appeal.”

According to court papers, in early 2000 Grant Thornton sold Yung a tax shelter to move offshore money into the U.S. with few tax consequences at a time when the IRS was cracking down on what it considered to be abusive tax shelters. The advice cost Yung and his family millions of dollars in taxes, penalties and interest, the lawsuit contends.

“We argued successfully that Grant Thornton had no business selling this product, knowing the previous position of the IRS when other accounting firms had previously tried and failed with this type of strategy,” said attorney Kevin Murphy in the Cincinnati Enquirer.

The case is one of many associated with offshore tax shelters sold not only by Grant Thornton, but KPMG, Ernst & Young and BDO. Some firms have already paid huge settlements. The judgment is believed to be the largest ever in the county and one of the largest in Kentucky.