updated 3/1/2013 3:30:23 PM ET 2013-03-01T20:30:23

NEW YORK (Reuters) - Ernst & Young agreed Friday to pay $123 million to resolve a federal investigation into its role developing and marketing tax shelters that helped its clients avoid more than $2 billion in tax liabilities, the U.S. government said.

As part of the settlement, announced by the Manhattan U.S. Attorney's Office, the accounting firm also entered into a non-prosecution agreement and admitted to the wrongful conduct of certain partners and employees.

The settlement amount reflects the gross fees Ernst & Young earned developing and marketing four tax shelter products from 1999 to 2004, according to the non-prosecution agreement.

(Reporting By Nate Raymond in New York; Editing by Gary Hill)

(c) Copyright Thomson Reuters 2013. Check for restrictions at: http://about.reuters.com/fulllegal.asp

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