[JURIST] A federal judge on Friday approved a $153 million settlement between tax firm KPMG [corporate website] and 200 of its former clients in a class action lawsuit based on illegal tax shelters sold by the firm from 1996 to 2002 which were categorized as abusive by the IRS [press release]. The settlement, preliminarily approved by US District Court Judge Dennis M. Cavanaugh on October 31, covers the transaction costs paid by clients to KPMG, but not the fines and penalties the clients have since paid to the IRS.

In August 2005 KPMG agreed to pay the IRS a $456 million fine [JURIST report] to avoid criminal prosecution for the tax shelters, and agreed to be supervised for three years by a former SEC chairman. KPMG has admitted the tax shelters were illegal, and took full responsibility for the unlawful conduct by former KPMG partners [KPMG press release, PDF; JURIST report] Criminal prosecutions against 19 former KPMG executives [JURIST report] are currently underway. The IRS estimates the tax shelters resulted in $2.5 billion in lost tax revenue for the US government. AP has more.