KPMG 'on the brink' of $450m settlement to avoid tax shelters prosecution

Speculation was intensifying yesterday that KPMG was on the brink of reaching a settlement with the US Department of Justice in its investigation into illegal tax shelters. The accountancy firm is thought to have agreed to pay $450m (£250m) and accepted the need for more regulatory oversight in order to avoid a criminal indictment which could destroy the firm.

Eight former KPMG partners are, however, expected to face charges of fraud and conspiracy in connection with the firm's past sales of tax shelters to hundreds of wealthy individuals. US authorities believe these shelters were an abuse of the tax system.

Federal prosecutors negotiating the possible settlement with KPMG have approached the former chairman of the Securities and Exchange Commission, Richard Breeden, to serve as an outside monitor, the Wall Street Journal reported yesterday.

Mr Breeden has stepped in to investigate or monitor various other companies when they have hit difficulties with regulators, including Hollinger International, for which he prepared a hard-hitting report last year accusing its former chairman, Lord Black of Crossharbour, of "corporate kleptocracy".

He also acted as a court-appointed monitor in the SEC's civil fraud lawsuit against WorldCom following its Chapter 11 bankruptcy-court filing.