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Judge Delays Ruling on KPMG Exec's Bail

The former partner at the accounting firm is accused of tax fraud and deemed a flight risk by prosecutors.

November 08, 2005|Thomas S. Mulligan | Times Staff Writer

NEW YORK — A former KPMG executive indicted last month on charges of tax fraud remained in custody after a federal judge Monday postponed a decision on whether to override prosecutors' objections and grant him bail.

Lawyers for David B. Greenberg said they expected U.S. District Judge Lewis A. Kaplan to review new legal filings in the case and rule on the bail application within days.

Greenberg, 46, a former Los Angeles-based tax partner at Big Four accounting firm KPMG, is one of 19 people accused of designing and marketing tax shelters that generated $11 billion in allegedly phony tax losses for wealthy individuals. Greenberg, who has pleaded not guilty, is the only defendant being held without bail.

During a two-hour hearing Monday, defense lawyer John Nassikas said the government had failed to adequately back up its contention that Greenberg was a flight risk or a danger to the community. He said that Greenberg, his ex-wife, his father and three siblings together had pledged real estate and other assets valued at $17 million to guarantee Greenberg's return for trial in September.

Greenberg's father, his 22-year-old daughter and two of his sisters attended Monday's hearing in a courtroom in lower Manhattan, as they had done during a federal court hearing in Los Angeles last month. His fiancee, Jane Holtel, who had attended the Los Angeles hearing, was absent Monday because she was due to deliver their first child within days.

Nassikas said Greenberg had provided detailed financial statements for all bank accounts, real estate and other property held by him and his ex-wife, Laura Greenberg. The documents -- showing a combined net worth of $24 million -- refute prosecutors' contention that Greenberg has access to "a secret $20-million bank account," the lawyer said.

Assistant U.S. Atty. Kevin Downing, speaking for the prosecution team, said Greenberg had compiled "a pale and dismal record" of compliance with the government's efforts to learn about his assets or even where he lives. Of the $24 million of holdings itemized in his court filings, only $20,000 is in his name, Downing said.

In 2004, when he knew he was a likely target of the criminal tax-shelter probe, Greenberg shifted millions of dollars of assets into an entity called Laura Adams LLC (using his ex-wife's maiden name) that he created without her knowledge, Downing said.

Downing also alluded to statements by a cooperating witness, whom he identified as accountant Steve Acosta, who told authorities that he had heard Greenberg boast that if indicted he would "take $15 [million] to $20 million that I have in an account in my ex-wife's name" and would flee prosecution. Acosta's account was first made public during the Los Angeles hearing.

Defense lawyer Joseph R. Price said in an interview after the hearing that Acosta was a convicted money launderer whose testimony could not be trusted.

KPMG agreed to pay a $456-million fine to avoid criminal charges that probably would have put the country's fourth-largest accounting firm out of business.

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