(by Ameli Berksman)

Long-Term Capital Management LP, whose bankruptcy forced a bailout by Wall Street’s biggest investment banks, was charged to pay $56 million in tax and penalties as the hedge fund claimed an improper deduction at $106 million.

Long-Term Capital has already paid some of its tax bill. They definitely could reach $56 million in case of applying the highest amount of penalties of $16 million.

“This is a big step for the IRS. This decision should push people to participate in settlements,” said Charles Hurley, a lawyer with Mayer, Brown, Rowe & Maw in Washington. Over the past two years IRS gathered a lot of fines from accounting firms. For instance, PricewaterhouseCoopers LLP was fined in 2002 and Ernst & Young in 2003.

July 2003 four-week trial against Long- Term Capital comprised testimony of 21 witnesses, such as experts on tax shelters and equipment leasing, hedge fund partners Meriwether and Scholes and so on.