KPMG India plays down US legal wrangle impact

KPMG, which on Thursday admitted to 'unlawful conduct' before the US department of justice, was unlikely to go the way of its former rival Arthur Andersen, which collapsed after an indictment in 2002 by the department.

Even as talk of a possible collapse has increased in decibel, KPMG India and others from the accountancy fraternity feel the firm will survive because its case is very different from Andersen's, and it may not get indicted.

KPMG's India head Ian Gomes said the firm no longer has any of the senior people involved in the creation and sale of tax shelters that the US government contends cheated the treasury of billions of dollars in taxes.

"KPMG is a very different company now from what it was a few years ago. We completely withdrew from these services in 2002. We took active steps to disengage persons involved with that part of the business. When DoJ commenced investigations, we cooperated fully. We are confident of reaching a satisfactory settlement," he said.

Some say KPMG's admission of guilt can go a long way in avoiding an indictment. Also, KPMG was not accused, like Andersen, of destroying evidence.

But largely, KPMG will benefit from the lessons learnt from the collapse of Arthur Andersen, which will perhaps never recover despite the US supreme court overturning its conviction on grounds of obstructing justice in the Enron case.

"The whole world has understood that tremendous damaged has been caused to industry by reducing the Big Five (as the biggest accountancy firms were referred to) to Big Four (minus Arthur Andersen)," says a senior functionary of a top accountancy firm in India.

Says another: "Are you trying to create a monopoly? This is a punishment to the corporate world."

KPMG has been under investigation by a federal grand jury in Manhattan for more than a year over its work on a number of abusive shelters from 1996 through 2002.

The admission of guilt marks a turnaround by KPMG, which had initially resisted investigations by the Justice Department, the Internal Revenue Service and a Congressional committee.

At a Senate committee hearing in 2003, a top KPMG executive at the time insisted that all the shelters in question "were consistent with the laws."