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Manager Alleges KPMG Employment Retaliation

June 25, 2003|From Bloomberg News

An L.A.-based senior manager of KPMG is suing the world's third-largest accounting firm, saying that it put him on administrative leave after he refused to sign off on allegedly illegal tax shelters sold to an audit client.

Michael Hamersley said he was ordered to stop working on client accounts after he refused to endorse two "aggressive" tax shelter transactions that involved millions in firm fees, according to a suit filed in Los Angeles County Superior Court on Monday.

After Hamersley's refusal, New York-based KPMG waged a campaign of "defamation and retaliation" against him "after he refused to endorse their illegal actions and began cooperating with federal investigators," he alleged in the suit.

KPMG and other accounting firms have faced mounting lawsuits from wealthy individuals who face large tax bills because shelters that were designed and sold in the 1990s have since been disallowed by the Internal Revenue Service.

Tim Connolly, a spokesman for KPMG, said: "We don't comment on litigation matters."

Hamersley, a senior manager in KPMG's Los Angeles tax practice, was asked for an opinion on two transactions that would have generated federal tax losses of more than $1 billion, the suit alleges. Hamersley objected, saying the transactions would not pass IRS scrutiny. KPMG signed off on both, according to the suit.

Hamersley faced intense pressure to endorse the transactions, with superiors saying that he would not be named a partner unless he agreed to do so, according to the suit. KPMG partners defamed Hamersley to discredit his cooperation with the investigation, the suit alleges.

The suit seeks damages for defamation and employment retaliation.

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