Kroger Pays Tax Settlement in Fraud Probe

Kroger Co. here took millions of dollars in deductions through what was revealed to be a bogus tax shelter, federal authorities said.

CINCINNATI — Kroger Co. here took millions of dollars in deductions through what was revealed to be a bogus tax shelter, federal authorities said.

According to U.S. Department of Justice, Kroger claimed more than $178 million in loss deductions between 2002 and 2004 through a tax shelter known as the Sale Leaseback of Tenant Improvements Strategy (SLOTS), causing more than $64 million in tax losses to the Internal Revenue Service. Kroger was not aware of the scheme, according to federal authorities, who said the fraudulent tax shelter was implemented and marketed by TransCapital Corporation, an investment company in Northern Virginia, to corporate clients of the KPMG tax firm, including Kroger. The retailer, which was not available for comment Wednesday, reportedly paid a settlement to the IRS.

Michael Parker, who was chief operating officer of TransCapital, pleaded guilty to conspiracy charges Tuesday. Earlier this year, an alleged accomplice, Jon Flask, also of TransCapital, and Daryl Haynor, a tax partner of KPMG, were indicted on charges of defrauding the IRS and for obstructing and impeding the administration of IRS revenue laws.

According to Parker’s plea agreement, between 1998 and 2006 various companies claimed tax deductions worth more than $240 million through SLOTS. Authorities said the SLOTS tax shelter and related transactions were nothing more than devices to disguise and conceal other financing transactions.

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