“They are learning their trusted advisors and accountants and
lawyers sold them a bill of goods,” he said. “They weren’t told a
lot of information they should have been told.”
Peevey and Liu paid Andersen $225,000 for their tax plan.
In many cases, tax officials say, the firms created shelters they
knew were abusive but sought to paper them over with various
complicated accounting maneuvers.
“It was clear these firms were banking on us not finding these
schemes,” said Rossotti, the former IRS chief. “The logic was, the
IRS will never find out about it, and if they do find out it will
take years to litigate, and you will only have to pay part of the
The accounting firms say the tax code is extremely complex and much
of it is open to interpretation. The firms note that clients were
told upfront that these strategies were merely an interpretation of
the tax code, one that the IRS and state tax officials could
Signs of trouble for Peevey didn’t come until two years after the
energy executive moved his money into the shelter in 1999. By then,
federal regulators were investigating Anderson as part of the Enron
scandal, and they came across the tax plan sold to Peevey and about
a dozen other clients.
By spring of 2002, the plan Peevey had locked himself into began to
fall apart. The IRS informed Peevey he was being audited.
The news came to him as he was diagnosed with lung cancer and he was
undergoing a tough confirmation process for his appointment to the
utilities commission. Consumer groups charged that his background as
former president of Southern California Edison made him too cozy