Telecom Mogul's Attempt To Pass Tax Shelter Blame To Advisers Denied

by Glen Shapiro, LawAndTax-News.com, New York

19 September 2003

Ruling in the West Palm Beach District Court last week, Judge Kenneth L. Ryskamp dismissed a claim by telecommunications entrepreneur, Peter Loftin that his tax advisers, including accounting firm KPMG, were guilty of racketeering, fraud and negligence.

Following the commencement of an IRS investigation into his tax affairs with regard to his use of tax sheltering arrangements, Mr Loftin claimed against KPMG, First Union (now Wachovia), QA Investments LLC, Quellos Group LLC, Presidio Growth LLC and New York based law firm, Brown & Wood under the federal Racketeer Influenced and Corruption Organizations Act (RICO).

According to a report from the Miami Daily Business Review, in the lawsuit filed last year (which is one of several similar claims for 'bad tax advice'), Mr Loftin sought $3.9 million in fees, and treble damages.

In his decision, Judge Ryskamp announced that the 1995 federal Private Securities Litigation Reform Act, which prohibits plaintiffs from using securities fraud allegations as a basis for RICO complaints, meant that the telecom mogul's racketeering allegations were not valid.

With regard to his fraud, malpractice, and breach of fiduciary duty complaints, Judge Ryskamp argued that the claim was not 'ripe', because as the IRS investigation into his affairs is ongoing, he is as yet unable to prove that he has been damaged by the advice given.

'Indeed, if Loftin's settlement payout amounts to nothing more than payment for back taxes and interest, he will not have suffered any injury,' the judge concluded.

Speaking to the Miami business daily, KPMG spokesman, Greg Dvorken announced that: 'We believed the allegations were without merit and are pleased with the court's ruling.'

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