Election Section

WASHINGTON — Bill Simon, the Republican nominee for governor, is among dozens of investors identified by the Internal Revenue Service as participants in tax shelters now under federal investigation. 

Simon’s late father, former Treasury Secretary William E. Simon; Gary Winnick, chairman of the bankrupt telecommunications giant Global Crossing Ltd; Robert Shaye, chairman of New Line Cinema; and the late race car drive Dale Earnhardt were among scores of names made public by the IRS as part of a court fight with KPMG LLP over documents that detail the tax shelters. 

The Justice Department, acting on behalf of the IRS, sued KPMG and BDO Seidman LLP on Tuesday for information about the tax shelters they have promoted. The firms said the documents at issue are protected by client confidentiality privileges. 

IRS spokesman Frank Keith said the unusual disclosure was “designed to substantiate for the judge the basis of the allegation being made in the filing.” The names came from KPMG, not from individual taxpayer filings, Keith said. 

For Simon, the suits present a political problem, because they focus new attention on his refusal to release his federal and state income returns, as his opponent, Democratic Gov. Gray Davis, has done. 

Peter Simon, the candidate’s brother and chairman of the family investing firm William E. Simon and Sons, said the Simons relied on professional tax advice from KPMG and others. 

“The matter at hand is between the IRS and KPMG,” Peter Simon said in a statement issued by his brother’s campaign. “Like many Californians, because of the technical complexity of IRS regulations, we have utilized the advice and guidance of tax professionals, including KPMG, other accountants and tax attorneys.” 

Davis said the disclosure “raises serious and troubling questions about whether Mr. Simon has been improperly using shelters to avoid paying taxes. It is now more incumbent than ever that Mr. Simon make public his tax returns immediately. 

“There’s only question,” Davis said. “Did Mr. Simon use offshore tax shelters to reduce his taxes or not. I think the answer to that is probably yes. I think we all suspect it’s yes. If Mr. Simon did not have anything to hide, he’d be releasing his taxes for all of us to see.” 

Simon said Friday he has “paid over a million dollars a year in state and federal taxes” and that he has already filed a statement on his finances with the state’s Fair Political Practices Commission. “That document complies not just with the letter, but the spirit of the law.” 

At a campaign appearance in Los Angeles, Simon was asked whether he was aware of or participated in the decision to put his money in a tax shelter, but did not answer the question. 

The IRS suits are part of an attempt to rein in shelters that officials estimate cost the government tens of billions of dollars in lost revenue every year. Companies can be sanctioned for promoting shelters that only serve to avoid paying taxes. 

Also, the suits come amid a growing number of corporate accounting scandals and increasing political pressure to make corporate officials more responsible. 

The investors disclosed by the IRS were participants in two shelters marketed by KPMG — the Foreign Leveraged Investment Program and the Offshore Portfolio Investment Strategy. According to an IRS agent who examined the shelters, both used foreign investments and tax rules to create large artificial losses to balance real gains. 

KPMG has turned over some information, including a list of names, but the government wants more. KPMG maintained that it has done nothing wrong, either through the options it presented investors or its decision to withhold documents. 

“It’s disappointing that the IRS has deemed it appropriate to disclose the identity and embarrass individual taxpayers without having expressed any deficiencies in their transactions to the listed parties,” KPMG said in a statement. “Individual taxpayers have a right to expect privacy in the tax system, which has been violated as part of the IRS’ public filing.” 

BDO Seidman refused to provide even lists of its clients that use tax shelters. The company said the IRS demand for documents was too broad and vague. 

Stephen Moore, a senior fellow at the libertarian think tank Cato Institute, said the unusual disclosure violated investors’ privacy rights. “It’s a return to the classic bullying tactic that the IRS used to use in the past,” Moore said. “Not only haven’t these people been convicted, they haven’t even been charged with a crime.” 

The law requires tax shelter promoters to register each shelter with the IRS before it is marketed and to keep a list of investors that must be made available to the IRS within 10 days of its request. 

The lawsuits ask a federal judge to order KPMG and BDO Seidman to comply with 29 summonses between them seeking tax shelter documents. In KPMG’s case, the documents go back to arrangements marketed since 1998; the lawsuit against BDO Seidman seeks documents dating to 1995. 

The IRS has issued 148 summonses to 11 firms seeking similar documents. Officials said more are likely. 

Last month, the IRS announced a settlement with the PricewaterhouseCoopers LLP accounting firm in a similar dispute that resulted in the company paying an undisclosed amount. 

The Treasury Department has asked Congress for greater powers and tougher penalties in its bid to rein in shelters. 

Winnick has so far declined to comment, according to the New York-based public relations firm that represents him. 

A spokeswoman for Shaye and New Line Cinema failed to return phone calls on Friday.