NEW YORK (Bloomberg) — Four current and former partners of Ernst & Young LLP, the second-largest US accounting firm, were charged with tax fraud in an expansion of the US government's crackdown on illegal shelters.The four were indicted for marketing tax shelters to people with taxable incomes greater than $10 million based on "false and fraudulent factual scenarios," US Attorney Michael Garcia in New York said in a statement yesterday.

"This prosecution further demonstrates our commitment to hold accountable tax professionals whose deceit costs this country untold millions in tax revenues," Garcia said in the statement.

Sixteen former executives of accounting firm KPMG LLP are to be tried in September on charges of cheating the US Treasury out of at least $2 billion by promoting improper tax shelters. The US has also secured millions of dollars in fines from law firms in tax-shelter cases.

The Ernst & Young defendants are Robert Coplan, 54, of Plano, Texas; Martin Nissenbaum, 51, of Brooklyn, New York; Richard Shapiro, 58, of Rye Brook, New York; and Brian Vaughn, 39, of Calhoun, Louisiana, according to Garcia. Shapiro and Nissenbaum are on administrative leave from Ernst & Young; Coplan and Vaughn are no longer with the firm.

The four are charged with eight counts, including conspiracy to defraud the IRS, tax evasion, making false statements to the IRS and impeding the lawful functioning of the IRS. They are due to appear in federal court in New York at 2.30 p.m.

If convicted, Coplan faces 18 years in prison, Nissenbaum 13 years and Shapiro and Vaughn 10 years each, Garcia spokeswoman Yusill Scribner said.

The four worked in a group set up by Ernst & Young in 1998 to develop tax shelters, Garcia said. It was first named Viper, or Value Ideas Produce Extraordinary Results, and later called SISG, or Strategic Individual Solutions Group.

"We are very disappointed that the government has brought these changes, as we have provided them over the past year with evidence that Mr. Nissenbaum did not engage in any unlawful activity," Nissenbaum lawyers Charles Clayman and Brian Linder of New York said in an e-mailed statement.

Nissenbaum was national director of the firm's Personal Income Tax and Retirement Planning practice, according to Garcia.

"Richard Shapiro is extremely disappointed that the Department of Justice and the United States Attorney's Office have decided to go forward with the prosecution of an innocent man," his lawyer John J. Tigue Jr. in New York said in an e- mailed statement.

Shapiro cooperated with tax-shelter probes for about five years, including testifying at an IRS proceeding, Tigue said.

Coplan lawyer Paula Junghans of Washington and Vaughn lawyer Peter H. Barrett of Gulfport, Mississippi, didn't immediately return calls for comment.

The accused "were part of a small group within the firm, disbanded years ago, that was responsible for developing the transactions in question," Ernst & Young spokesman Charlie Perkins said in an e-mailed statement. "None of the individuals was part of the firm's management."

Ernst & Young cooperated with the government's investigation and has voluntarily changed and enhanced its tax practice, Perkins said. It made other changes to its tax practice pursuant to a 2003 agreement with the IRS, he said.

KPMG, after earning about $115 million from sales of improper tax shelters, agreed to pay $456 million in 2005. The firm promised to cooperate with prosecutors, and charges against it were dismissed in January.

Sidley Austin, a Chicago-based law firm, paid the U.S. Internal Revenue Service a $39.4 million fine on May 23 to settle charges of promoting fraudulent tax shelters. Garcia said the same day the firm wouldn't be criminally prosecuted.

Former Sidley partner Raymond Ruble, who is accused of writing legal opinions vouching for the validity of the tax shelters, is scheduled to be tried with the former KPMG executives.

Another law firm, Jenkens & Gilchrist in Dallas, in March admitted that it developed and marketed fraudulent tax shelters and faces a $76 million fine from the IRS in return for an agreement not to be prosecuted. The firm, which once had 600 lawyers, shut down as of March 31, according to its web- site.