Federal prosecutors have identified a former partner in KPMG's Woodland Hills office as having participated in an alleged conspiracy to devise phony tax shelters used by prominent figures, including the founders of Guess Inc., former gubernatorial candidate Bill Simon Jr. and Global Crossing Ltd. founder Gary Winnick, documents show.
A federal grand jury's recent indictment of eight former KPMG executives in connection with illegal tax shelters listed seven unnamed individuals as unindicted co-conspirators. One of the unnamed individuals helped devise a scheme to keep tax shelters under the Internal Revenue Service's radar, according to the Aug. 29 indictment.
The indictment did not name the person, instead referring to him as unindicted co-conspirator No. 1. However, the filing said he was the author of two key memos -- dated May 26, 1998, and June 8, 1998 -- in connection with the shelters. Those memos were previously released by Senate investigators, who identified the author as Gregg W. Ritchie, a former tax partner in KPMG's Woodland Hills office.
Ritchie declined to comment.
Ritchie now works for Winnick, the Beverly Hills investor whose GKW Unified Holdings used KPMG-approved tax shelters, according to court papers filed in a related case. Winnick's staff declined to disclose Ritchie's title.
The Justice Department declined to say why certain alleged co-conspirators were not indicted. Joseph Bankman, a tax fraud specialist and law professor at Stanford University, said it was common to have unindicted co-conspirators at early stages of a tax fraud investigation.
"Maybe they are going to indict them later and they're still building up evidence, maybe they're cooperating, or maybe they're just small fries," Bankman said.
"Even if somebody is unindicted, their actions can be used during trial in the story of the conspiracy. At that point, they would be named, whether or not they were indicted."
In announcing the indictments in August, prosecutors said they planned to bring charges against as many as a dozen other people. A New York federal judge has asked prosecutors to file any additional indictments by Oct. 17.
The federal indictment alleges that KPMG executives devised illegal schemes to dodge taxes by falsely creating the appearance of enormous investment losses and then marketing these shelters to hundreds of wealthy individuals.
