In the Courts

The four remaining defendants in the KPMG tax shelter prosecution moved unsuccessfully to have the indictment against them dismissed because of alleged IRS violations of 26 U.S.C. ' 6103, which requires the IRS to keep tax return information confidential. (See analysis on page 1.) United States v. Stein, No. 05-CR-00888 (S.D.N.Y. Sept. 10, 2008) (Memorandum & Order). Section 6103 provides that returns and “return information shall be confidential” and shall not be disclosed except as authorized by federal law. Disclosures may be made only “if the Secretary [of the Treasury, or his designees] has referred the case to the Department of Justice.” The defendants claimed that KPMG's return information was disclosed in 2003 to government authorities, who at the time were conducting a civil investigation, without the necessary referral under the law from the Secretary of the Treasury.

Judge Lewis Kaplan denied the motion for three reasons. First, the court found that even if the defendants were able to state a claim under ' 6103 ' which the court assumed arguendo ' dismissal of the indictment was not the proper remedy. “Congress has provided civil and criminal remedies for violations of Section 6103.” Second, ' 6103 does not protect the defendants in this case, because the information that was disclosed was KPMG information, not the defendants' information. Finally, Judge Kaplan found that the government's actions did not constitute “outrageous conduct” in violation of the Fifth Amendment's Due Process Clause.