Just Pay a Fine and Promise, Really Promise Not to Do It Again
If one subscribes to the philosophy that justice is defined in part as equal treatment under the law, then the
United States has not been a just country for a long time. For example, here is what
happens when a large international accounting firm gets caught aiding and
abetting tax evasion.
E&Y entered into a non-prosecution agreement (the “NPA”) with the
United States, in
which the company agreed to pay $123 million to the and acknowledged a
detailed Statement of Facts in which it admitted the wrongful conduct of
certain partners and employees. United States
Gosh, what did they do?
Ernst & Young LLP (“E&Y”) has admitted wrongful conduct by certain E&Y partners and employees in connection with the firm’s participation, from 1999 to 2004, in four tax shelters that were used by approximately 200 E&Y clients in an effort to defer, reduce, or eliminate tax liabilities of more than $2 billion.
Yes, they helped clients cheat the Federal government out of more than $2 billion, collected enormous fees for that service and now pay a fine of about 6% of the amount of tax cheating. And unlike regular criminals, they get to enter into a non-prosecution agreement, where they won’t be taken to court for their crimes or convicted in a plea bargain.
But there is also this.
E&Y also agreed to certain permanent restrictions and controls on its tax practice, including a prohibition against planning, promoting or recommending any “listed transaction.” A "listed transaction" is a transaction that is the same as, or substantially similar to, one that the IRS has determined to be a tax avoidance transaction.
Yes, everyone is reading that correctly. E & Y agreed, under duress no doubt not to help clients cheat on their taxes in the future using transaction structures the IRS has determined to be tax evasion. In other words, the government agreed not to prosecute so long as E & Y obeyed the law going forward, which is something we thought everyone was supposed to do anyway.
Think about what justice means the next time you read how Justice Scalia and the Conservatives on the Supreme Court rule a person must be given the death penalty even though his incompetent court appointed attorney fell asleep at the trial. And if anyone is ever charged with a serious crime like helping defraud the government of billions, just ask for a Non Prosecution Agreement. They have them all printed up and ready to go, assuming you are of course a large wealthy organization or individual.
Thanks to Paul Caron's wonderful Tax Prof Blog.