KPMG tax shelter convictions upheld

* Convictions upheld of two ex-KPMG officials, one lawyer

* Larson's $6 million fine found twice as much as allowed

NEW YORK Aug 27 (Reuters) - A federal appeals court upheld the convictions of two former KPMG LLP [KPMG.UL] officials and a lawyer in connection with the use of illegal tax shelters, but threw out a $6 million fine against one of the defendants.

The U.S. Second Circuit Court of Appeals in New York on Friday affirmed the convictions of former KPMG tax partner Robert Pfaff, former KPMG senior tax manager John Larson, and former Sidley Austin LLP partner Raymond Ruble.

It ruled, however, that a lower court erred in fining Larson $6 million, given a lack of jury findings to support a fine greater than $3 million. The Second Circuit sent that part of the case back to the lower court for further proceedings.

"We're deeply disappointed with the court's decision affirming the conviction and are considering our options for further review," said J. Scott Ballenger, a lawyer representing Larson. "Of course, we're gratified by the court's recognition that the fine imposed was unconstitutional."

Lawyers for the other defendants did not immediately return calls seeking comment.

The case is U.S. v. Pfaff et al, U.S. Second Circuit Court of Appeals, Nos. 09-1702, 09-1707 and 09-1790. (Reporting by Jonathan Stempel; editing by John Wallace)