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Feds probe Ernst & Young over tax shelters

Accounting firm Ernst & Young LLP Monday said federal prosecutors are conducting a criminal probe of its promotion of tax shelters for clients.
/ Source: Reuters

Accounting firm Ernst & Young LLP Monday said federal prosecutors are conducting a criminal probe of its promotion of tax shelters for clients.

A spokesman for the firm said E&Y was cooperating with the probe, but he declined to give further details. He confirmed a report which appeared in Monday's Wall Street Journal.

The investigation was launched last week by the U.S. Attorney's office for the Southern District of New York, which is also conducting a similar probe on KPMG. A spokeswoman at the U.S. Attorney's office declined to comment on the probe.

The Department of Justice probe on E&Y comes around 10 months after it reached a settlement with the Internal Revenue Service. E&Y was fined $15 million for its failure to comply with registration requirements on tax shelters.

The IRS has been probing the big accounting firms for using potentially illegal ways to help U.S. corporations save billions of dollars in taxes.

PriceWaterhouseCoopers earlier had also reached a settlement with the IRS. The probe on KPMG is still ongoing in parallel with the DOJ probe on it.

The audit firms have scrapped offering the tax shelter programs that came under fire, and both KPMG and E&Y have restructured their tax practices since then.