US: U.S. Arrests Executive in Tax Case, Fearing He Will Flee

Publisher Name: 
The New York Times

Federal prosecutors said yesterday that one of the 19 executives charged in an investigation of tax shelters sold by the accounting firm KPMG might try to flee the country and should be detained pending trial.

The executive, David Greenberg, a former tax partner at KPMG, was arrested Monday afternoon in Los Angeles. At a hearing yesterday, prosecutors accused Mr. Greenberg of falsifying documents to hide his involvement in questionable tax shelters, coaching a co-conspirator to lie to investigators and misleading investigators about whether he had surrendered all his passports.

The accusations and the effort to detain Mr. Greenberg are unusual in a white-collar investigation involving tax fraud. In such cases, executives typically surrender voluntarily, without being publicly arrested.

"If your subject is aware of the investigation and hasn't taken off, there's no real reason that you need to arrest him," said Eric Havian, a former federal prosecutor who practices at Phillips & Cohen in San Francisco.

There was reason to believe that Mr. Greenberg might flee, said Sandra Brown, the federal prosecutor in Los Angeles who argued that he should be detained pending trial in federal court in Manhattan.

John N. Nassikas, a lawyer for Mr. Greenberg, declined to comment.

Mr. Greenberg is one of 19 executives charged with conspiring to defraud the Internal Revenue Service and other crimes in an indictment on Monday. So far, Mr. Greenberg is the only one who was arrested, and that, Ms. Brown said last night in an interview, was "indicative of how seriously we felt about Mr. Greenberg being a serious flight risk."

Ms. Brown said last night that at the hearing, she contended that Mr. Greenberg told a co-conspirator that if he were indicted, he would take $16 to $20 million that he had "in an account in my ex-wife's name that no one can touch," and would take off.

Ms. Brown contended that he misled investigators about where he lived, saying that he had a house in Florida; when investigators visited the house, a pool maintenance worker said Mr. Greenberg did not live there and that the house was for sale.

Mr. Greenberg also surrendered a new passport in August, saying that he had lost his passport on a flight from France, but Ms. Brown said that investigators found no record that he had visited France in the last five years.

In a court brief, Mr. Greenberg's lawyers argued that he was not a danger to the community - one of the reasons for detention cited by the government - and that if he had intended to flee, he would not have cooperated with investigators but would have fled long ago.

"Months before being indicted," the filing says, "Mr. Greenberg voluntarily met with the government on three separate days; voluntarily surrendered his passport; was photographed, fingerprinted and processed by the I.R.S; gave a handwriting exemplar" and provided detailed information on his assets.

The hearing to determine whether Mr. Greenberg should be detained will continue this afternoon.

AMP Section Name:Financial Services, Insurance and Banking