Free Motion to Stay - District Court of Federal Claims - federal

Case 1:05-cv-00999-MMS

Document 10-10

Filed 01/13/2006

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UNED STATES DISTRCT CO T
FOR THE NORTHRN DISTRICT OF EXS
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JOHN DOE 1,
PlaÎDöfs,
v.

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No.

KPMG, LLP,
Defendant.

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I, Keith A. Tucker, d=ARTlON OF KEITH A. TUCKS E ALE 0
1. My curnt legal reidence is 3831 Ture Crek Boulevar; Unit 6H;

Dallas, TX 75219.
2. I am curntly employed by Waddell & Reed Financial, Inc. as Chaan

and CEO. I have held that position since 1998.
3. I have personal knowledge as to the facts herein.

4. - KPMG ha ben my peona ta adviser since at leat 1984 and I have
reguarly sought ta plang advice from KPMG.
Schorr, a ta
5. In the Sprig of 2000, I ha discussions with Mr. Eugene

parer at KPMG who ha since retired, about potential strtegies for minzig my
Federa income ta liabilty for the yea 2000 in accordace with the Federa income ta
laws.
6. A short tie afer ths intial converstion with Mr. Schorr, a ta parer at

KPMG who has since retied Mr. Schorr conferrd with other KPMG ta plang
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EXHIBIT

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~XHIBIT AJ
Docket No. 12307-04

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Case 1:05-cv-00999-MMS

Document 10-10

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parers, includig Mr. Timothy Speiss, who was a parer KPMG's "Inovative
Strtegies" grup. Mr. Speiss, a KPMG ta parer, then met with me to discuss my ta

situon and to preseIit varous alterntives for potenti implementaon in the year

200.
7. Bas on these discusions, I agr with KPMG (Mr. Speiss, a KPMG
ta parer) th an approh th KPMG propose known as "short options" would be
appropriate for my paricular ta situon.

8. In July of 2000, Mr. Speiss, a KPMG ta parer, agee to provide me

with an engagement letter indicatig tht KPMG would provide ta advice to me for the

year 2000 concerng the implementaon of the "short option" proposa. I received th
engagement letter in the fit week of Augu 2000.
9. Durng the seond of week of Augut 2000, KPMG withdrw the

engagement letter they ha issued to me. KPMG explaied tht it took ths action
becae the "short options" proposal ha been listed as a ta shelter by the Intern

ths,
Revenue Servce ("IR") purt to Notice 2000-4,2000-2 C.B. 255. Becaus of

KPMG stated tht they could no longer reommend that proposa.

10. After KPMG's withdrwal of its engagement letter regarding the "short
options" stregy, Mr. Speiss, a KPMG ta parer, and I discussed whether there were

any other strtegies tht would be appropriate for my year 2000 ta planng. KPMG, in
the persn of Mr. Speis and other KPMG ta paers, attempted to identify and plan

alterntive tractions.
11. KPMG propose another sttegy in the Fall of 2000, but tht strtegy
failed due to a lack of appropriate ficing.

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12. In Dembe of 2000, Mr. Speiss, a KPMG ta paer, advise me th
- KPMG could anyz and develop a cusmi solution to my 2000 ta plang nee.

13. KPMG ultimaely proposed th I consider implementig an investent
strctue that was designed to meet my pacular needs, includig cert beneficial ta

results.

14. KPMG represente th ths proposa wa not a short options sttegy and
would not be subject to Notice 2000-4, and thus could be reommended to me by
KPMG. Accordingly, KPMG issue an engagement lettr to me tht indicated KPMG
would provide ta advice concerng the proposa.

15. KPMG develope an investment strtegy for me tht was compri of a
long-term customized investent stctu tht ba the potential to yield favorale
year. To ths daYt I am stll engaged
economic and ta-related benefits over a senes of

in that investment strctu.

16. In addition to the ta advice tht KPMG provided to me, KPMG

recommended that I engage Brown & Wood to provide a legal opinion that would give

me additional comfort in the fa,ce of an IRS challenge to the strtu. Brown & Woo
provided such a legal opiion to me.
both KPMG and Brown & Wood, I
17. Bas upon the ta and legal advice of

engaged KPMG to implement and execute the investment strtu for me in Decmbe

of 2000.
18. As par of

the ta advice I received frm KPMG, KPMG provided to me a

memoradum in which KPMG advise among other thngs, that the investment strtu

was not similar to the trons descbe in Notice 2000-4.

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19. KPMG explicitly assurd me tht no penaties would be levied in
connecon with any audit of the investment stctue.

20. Puuat to my ageeent with KPMG. I paid KPMG $500,000 for ta
advice regardig implementig the invesent strctue.

21. Bas on my prior deaings with KPMG and its representaons to me, I
keep confidential all of the detals of their ta
believed and expeted that KPMG would

advice concernng the investent stregy and al related documents.

22. KPMG did not inform me and 1 wa not awar tht KPMG ha any

obligation to identify and disclose to the IRS cert trtions organd by KPMG.
Based on representaions made by KPMG, I believed that KPMG did not have an
obligation to disclose to any person the fact th I engaged in the investment strctue, or

any related information. Furer, based on the representaons made by KPMG, I
believed th the investment stitue wa not an "abusive" ta trction th was

subject to any speial rules.
23. On varous ocasions prior to Augu 27,2003, KPMG (includig Mess_

Schorr, Speiss, and other KPMG ta parers) consistently advise me tht the
investment stctu tht KPMG developed for me was not abusive, and tht there was no

obligation on me or KPMG to disclose to the IR or any person that I engaged in the
investment strctu.
24. On or about April

9, 2002, I was contacted by KPMG to discuss whether I

wished to disclose the detals of the investent strctu to the IR purt to its

Amouncement 2002-2, 2002-1 C.B. 304, which disclosur would have provided

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29. KPMG did not at any tie advise me in wrtig th it intended to disclose
my nae and documents to the IR.
30. I have not disclose to anyone other th my counl the detals of my

parcipaton in the investment st or any douments or the detals of my
communcations with KPMG. To the be of my knowledge, KPMG ha not disclose to

anyone any such detals or communcaons.

I declar under penalty of perjur tht to the best of my knowledge, the foregoing

is tre

and correct. Executed ths

6

day of September, 2003.

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Keith A. Tucker

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