Ernst & Young In $15M Settlement
Accounting firm enters agreement with the IRS over recommendation of tax sheltersJul 2, 2003 | CNN/Money The Internal Revenue Service said Wednesday that accounting firm Ernst & Young agreed to settle a probe into tax shelters with a payment of $15 million.
"The settlement underscores our commitment to having a good working relationship with the IRS and complements the initiatives we have put in place to ensure the quality and integrity of our tax practice," the firm said in a statement.
Ernst & Young's recommendation of tax shelters came into focus after Sprint Corp.'s former chairman, William Esrey, resigned from the telecom company amid an IRS investigation.
Esrey said in an electronic message sent in February that an IRS ruling against his use of the shelters could wipe out his personal fortune.
Although Ernst & Young has said it stands by the tax advice and counsel it provided in the Sprint case, former clients are suing the firm and rival KPMG, claiming they advised them to enter into illegal tax shelters.
In addition to the $15 million fine, the IRS said Ernst & Young will set up a standards program and the agency can review additional documents as part of the program.
"This agreement constitutes a significant development in our continuing efforts to identify potentially abusive tax transactions," IRS Commissioner Mark W. Everson said in a statement announcing the conclusion of the investigation.
The examination is one of more than 90 investigations the IRS has opened on professional service firms.