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Accountant Pleads Guilty in KPMG Shelter Case
By Lynnley Browning
New York Times
Thursday, January 11, 2007

A California accountant pleaded guilty yesterday to charges of conspiracy, tax fraud and obstructing a federal investigation, and pledged to help prosecutors as they conduct a widening criminal investigation of questionable tax shelters.

The accountant, Steven Michael Acosta, entered his plea in Federal District Court in Manhattan, becoming the fourth person to do so in the inquiry.

Mr. Acosta, 49, of Pasadena, Calif., is a relatively minor figure in the investigation, which has led to the indictment of 16 former employees of the accounting firm KPMG.  The inquiry has also ensnared Deutsche Bank, Germany’s largest bank, and other banks, accounting, law and investment firms.

But his plea may have significant consequences for one of the 16 KPMG defendants, who are scheduled to stand trial in September.  That defendant is David Greenberg, a former partner in KPMG’s Los Angeles office.

In his plea before Judge Denny Chin, Mr. Acosta read a statement that provided explicit details about Mr. Greenberg’s role in questionable tax shelters and his close work with Mr. Greenberg.

Calls late yesterday to the lawyer for Mr. Greenberg were not immediately returned for comment.

Mr. Acosta’s statement also made references to his and Mr. Greenberg’s work with a bank in New York.  That bank is Deutsche Bank, according to a person briefed on the inquiry.  The criminal investigation of Deutsche Bank over its work with questionable tax shelters grew out of the indictment of the former KPMG employees, which itself grew out of a criminal inquiry into KPMG itself.

A Deutsche Bank spokesman did not return calls late yesterday.

Kevin Downing, a special assistant United States attorney in Manhattan who is helping to oversee the investigation, told Judge Chin yesterday that Mr. Acosta’s actions were “part of a much larger conspiracy,” including one involving the KPMG defendants.

Mr. Acosta pleaded guilty to four charges of conspiracy to defraud the United States, tax evasion and obstruction of the Internal Revenue Service and aiding in the filing of false tax returns and acting corruptly on behalf of himself and others from 1999 to 2004.  He faces as much as 16 years in prison and substantial fines.  He will be sentenced next year.

In his statement. Mr. Acosta described how Mr. Greenberg paid him $600,000 to pose, at different times, as an independent hedge fund manager and as an independent investment adviser before clients to whom Mr. Greenberg sold a bogus tax shelter known as SOS, or short options strategy.  Mr. Acosta also signed questionable trade documents and other papers on behalf of a bank that were used as part of the shelters.

He said that Mr. Greenberg designed SOS, and on several occasions signed Mr. Acosta’s name to various documents used to carry out the shelter transactions.  Some of the documents were signed after the transactions were carried out.  Mr. Acosta, who said that he knew the shelters were invalid in the eyes of the IRS, also admitted to using SOS to cheat on his personal income tax returns in 2000 and 2001.  Mr. Acosta also said that at Mr. Greenberg’s request, he lied to an IRS agent about his and Mr. Greenberg’s roles with the shelters.

Mr. Acosta worked for KPMG as a tax manager in Los Angeles until 1991, then became an insurance agent.

“I have no experience in investments,” he said yesterday in his statement.

http://www.nytimes.com/2007/01/11/business/11shelter.html?_r=1&ref=business&oref=slogin