Simon v KPMG LLP
Proposed Settlement in Tax Shelter Lawsuit
KPMG and Sidley, Austin, Brown & Wood have reached a $225 million settlement with plaintiffs in a class action suit that charges the firms with having sold bogus tax shelters.
The settlement hearing in Simon v. KPMG LLP, is subject to approval by U.S. District Judge Dennis Cavanaugh in Newark, N.J., is scheduled for October 7, 2005.
It would end litigation lodged by KPMG clients who, in the late 1990s, bought tax shelters that R.J. Ruble, a partner for Sidley Austin's predecessor firm, Brown & Wood, helped develop. Ruble wrote more than 600 letters to clients declaring the shelters would withstand Internal Revenue Service scrutiny. But even while the shelters were being sold, KPMG officials wrote memos expressing doubts about their validity, the plaintiffs claim. Sale of the shelters was discontinued after the IRS disallowed them.
The parties reached the agreement after a year of mediation with former U.S. District Judges Nicholas Politan of New Jersey and Daniel Weinstein of California.
Plaintiffs counsel asked Judge Cavanaugh to give preliminary approval to the settlement Sept. 27. Weiss said in a declaration that the pact, which provides $195 million for the class and $30 million in plaintiffs counsel fees and costs, would give claimants more than the payouts in settlements of individual suits filed against the two firms.
