A deferred criminal charge against KPMG related to the sales of tax shelters has been dismissed by a federal judge. In August 2005, a deferred prosecution agreement was agreed to by the parties in the case against KPMG, which accused the audit firm of creating and selling the tax shelters to help people avoid paying U.S. income taxes.

Under the deferred prosecution agreement, KPMG paid a $456 million fine, submitted to outside monitoring, and gave up some of its tax businesses. The agreement called for the government to dismiss the deferred charges if KPMG was in compliance through December 31, 2006.

Had KPMG been indicted for those charges, it might have led to the firm’s demise. In the agreement, KPMG admitted being involved in a conspiracy to defraud the U.S. government and the Internal Revenue Service.

While the firm is off the hook, 17 former KPMG executives were criminally charged with fraud and tax evasion related to the tax shelters. One has pleaded guilty and the others are expected to be on trial in September. Jeffrey Stein, the former deputy chairman of KPMG, opposed the dismissal of the charges against KPMG.