Saipan man pleads guilty to lying to investigators

NEW YORK Jan 11 (Reuters) - A man who lives in a U.S. commonwealth near Guam pleaded guilty on Thursday in Manhattan federal court to lying to investigators in a lawsuit linked to the KPMG [KPMG.UL] tax shelter suits.

Michael Grandinetti, a resident of Saipan, worked for a company that used tax shelters in 1996 and 1997. He received a portion of the fees generated by those transactions.

When investigators from the U.S. Internal Revenue Service and the U.S. Attorney's office in Manhattan asked Grandinetti about those transactions in 2006, he admitted to receiving a portion of the fees, but said he had disclosed them to the company's board of directors, even though he had not.

"The statement I made was not true, and I knew it was not true," Grandinetti told Judge Thomas Griesa in the U.S. Court for the Southern District of New York.

He faces up to five years in prison, a $250,000 fine and and additional three years of supervised release when he is sentenced on Jan. 8, 2008.

Grandinetti was and is a senior executive officer of the United Micronesia Development Association, which has invested in companies in the tourism, telecommunications, and airline industries.

A source familiar with the matter said Grandinetti is involved in the KPMG tax shelters case, but the precise linkage is unclear. A corporation based in Saipan was involved in tax shelter transactions that Chandler Moisen, a former partner at KPMG, said were fraudulent in his guilty plea in March.

Grandinetti's lawyer, Larry Krantz, declined to comment.

Moisen was one of 19 people indicted for their roles in the KPMG tax shelters in November 2005.

The defendants in the KPMG suit were accused of helping to create bogus hedge funds that could generate paper losses for clients to offset their income and reduce their tax bills.

Three of the 19 defendants, including one KPMG partner and two non-KPMG people, have pleaded guilty. A fourth defendant, not originally named in the broad indictment, pleaded guilty on Wednesday.