updated 1/12/2004 6:21:14 PM ET 2004-01-12T23:21:14

Accounting firm KPMG LLP Monday announced a shake-up in the leadership of its tax division, which has been the target of IRS and congressional inquiries into the promotion of potentially abusive tax shelters.

KPMG Chairman and Chief Executive Eugene D. O'Kelly said Deputy Chairman Jeff Stein, formerly vice chairman of tax practices, will retire at the end of January. The firm expects to elect a successor in February.

Jeff Eischeid, partner-in-charge of the tax practice's personal financial planning services, has been placed on administrative leave. Richard Smith, vice chairman of tax services, will take a different job within the tax practice.

"KPMG is committed to fill our role as a responsible corporate steward," O'Kelly said. "These changes are consistent with our ongoing consideration of the firm's tax practices and procedures and reaffirm KPMG's commitment to the highest standards of professional practice and responsibility."

KPMG and other accounting firms have come under scrutiny in a broad IRS investigation into potentially abusive tax shelters. The tax code requires promoters of tax shelters to register each with the IRS before offering it for sale and to maintain a list of investors. Tax shelters, some of which are legal, are ways people and businesses can shield income from taxation or take advantage of greater tax deductions.

The Justice Department in December accused KPMG of improperly withholding documents from IRS investigators in "a concerted pattern of obstruction and noncompliance." KPMG has maintained that it has not promoted abusive tax shelters.

"Assuring that accountants and attorneys adhere to professional standards and follow the law is a cornerstone of our ongoing efforts to curb the use of abusive tax shelters by corporations and high-income individuals," said IRS Commissioner Mark Everson.

The firm's critics said they hope the management changes signal a new era of cooperation.

"A change in culture at KPMG is absolutely critical," said Sen. Carl Levin, D-Mich., who held a two-day hearing into firm's tax practices. "Our investigation revealed a culture of deception inside KPMG's tax practice. If the changes announced by KPMG today represent a real reform of that culture, they are welcome."

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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