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Former BDO partner pleads guilty

A former BDO Seidman partner faces up to 10 years in jail after pleading guilty to conspiracy to defraud the US tax system and helping investors avoid paying $200 million in tax through a tax shelter scheme.

Michael Kerekes pleaded guilty to one count of conspiracy to defraud the US Inland Revenue Service (IRS) and one count of tax evasion at the Southern District of New York in Manhattan, according to the US Department of Justice.

Between 1998 and 2008, Kerekes was an attorney and a principal at BDO Seidman and from 1998 until 2003 he was a member of the firm’s tax solutions group (TSG). The group designed and implemented high-fee tax strategies, including shelters, for wealthy clients.

Kerekes and his co-workers caused the clients to file false and fraudulent tax returns reporting the tax benefits flowing from the shelter transactions, the US Department of Justice said.

In total, the fraudulent tax shelter transactions implemented by Kerekes, his accounting firm, a law firm Jenkens & Gilchrist, and the financial institution that assisted them, caused clients to report more than $1 billion in false and fraudulent tax losses. This resulted in the evasion of more than $200 million of taxes due to the IRS.

BDO Seidman said in a statement the TSG was dissolved by the firm several years ago.

“BDO Seidman has co-operated fully with the government’s investigation and will continue to do so. The firm does not intend to comment further,” the statement said.

Kerekes faces five years prison for conspiracy and five years prison for tax evasion. He is due to be sentenced on 4 March 2010.

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