KPMG suffers adverse legal ruling

KPMG LLP endured another blow in its tax shelter case this week, when a federal judge in Texas ruled that tax shelters based on fake bank loans are not legitimate tax write-offs, according to the New York Times. The shelters, known as Blips, are at the center of a criminal inquiry of Deutsche Bank concerning questionable tax shelters and in a criminal trial in federal court in Manhattan of 16 former employees at New York-based accounting firm and two outsiders. The Jan. 31 decision by Judge T. John Ward of Federal District Court for the Eastern District of Texas will probably add to prosecutors' arguments that Deutsche Bank acted improperly by providing fake bank loans for Blips and similar shelters. The decision is the first civil ruling on the legitimacy of Blips, or bond-linked issue premium structure. The decision also enhances the prosecutors' case against John Larson, Robert Pfaff and David Amir Makov, all former employees of a defunct investment firm called Presidio Advisory Services. According to previously disclosed internal Deutsche Bank documents, Blips was created and sold primarily by Deutsche Bank, KPMG and Presidio.