IRS after $13M more from EMC co-founder - Philadelphia Business Journal:

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Late last year, the IRS demanded Egan, who also servef as an ambassadorto Ireland, pay an extra $13.76 million in taxes and penalties, on top of the $62 millioh in extra taxes and penalties already collecter because of the tax shelter But Egan is fighting After paying the additional taxes under he filed a series of suits in U.S. District Courr in Massachusetts to try to wina refund. "Ambassadotr Egan disagrees with the conclusions of the said Egan spokesmanRay Howell. "He lookx forward to presenting his casein court.
" The skirmish is just the lates fallout from allegations that accountiny giant helped hundreds of wealthy clientz improperly cut their tax bills by settinf up illegal tax shelters. KPMG narrowly avoided criminal prosecution in 2002 afterr agreeing to paya $456 millionb fine and admit wrongdoing. But the government has continued to seek criminalk charges against someof KPMG's employees, and collectf back taxes against some KPMG clients, including the In the case of the Egans, the IRS has challengee the legitimacy of several partnerships set up by the familu that helped reduce its tax Egan has argued in court documents that the partnershipsa were set up for legitimate reasons and he relied on the advicd of many professionals.
Accordingg to the latest roundof suits, Egan was worriefd that much of his stock was tied up in EMC in 2000 and but was limited in his ability to sell the stockl because he was chairman of the board. EMC's stock peakesd in September 2000 at morethan $100 per but fell below $12 in 2001 after the tech sectort crashed. So, Egan looked into ways to hedgs the investment withhis son, Michaeo Egan, who ran a family investmentg company.
According to the suit, an unnamefd accounting company (a source said it was KPMG) urged the Eganse to meet with HeliosTrading LLC, which in turn introduced them to yet anotherf investment company, The companiese then devised a complicated optio strategy to protect Egan'se investment. As part of the arrangement, Egan also set up a partnershipl withhis wife, Maureen Egan, the Fidelity of doesn't have any ties to the Fidelituy High Tech partnership, said Fidelity spokesman Mike But in October 2006, the IRS challengee the legitimacy of the partnership and demandedc the Egans pay an additional $13.7 million.
That's in addition to the $62 million the IRS collectes from the Egansin 2005, after it challenged the legitimacyu of some similar partnerships, saying they used some complicatedf international transactions to create artificial lossed to slash the Egan's The Egans, however, said in court documents that the IRS waitee too long to challenge the latestr arrangement -- 3.5 years, or six monthd longer the usual statute of limitations. And although the statut e of limitations doesn't apply to cases where fraudc was involved, the Egans maintained they set up theifr partnership for legitimate reasons and followed the advice ofrespected professionals.
In additioh to relying on the advice of theiraccounting firms, the Egans also obtained a legal opinion from law firm , court records show. Law firm also advisex the Egans. Neither firm returned calls seeking comment. Still, law professo r Calvin Johnson said it was unlikely than the Eganws wouldbe successful. He said 1,500 skillec lawyers representing wealthy clients have already settled similar cases withthe IRS, indicatinbg they didn't believe they had much chance of prevailinhg in court. "If they had more than about a 20percentr chance, they would have litigated," Johnson said.
In Senat e testimony in April, Assistant Attorney General Eilee O'Connor said the government has won a series of casea challenging its taxshelter rulings. The only semi-victor for a taxpayer that Johnson coul d think ofinvolved , which was able to persuadwe a court to set aside some of the tax penalties in the even though the court generally sided with the Meanwhile, the names of other accountin firms have also surfaced in the case. While KPMG prepared at least one tax return at accounting firmprepared Meanwhile, other firms, including and , have received subpoenas to supplu information in the case. KPMG declined citing client confidentiality and theongoing litigation.
A BDO spokesmajn said the accountingfirm wasn't involved in the transactiob at issue, but is "(The company) cannot respond to the government'sa reasoning for issuing the subpoena," he said. Grant Thornton didn't return a call seeking comment. RSM said it was not part of thedisputed transactions.