KPMG partners are breathing a sigh of relief with prosecutors officially dropping a criminal conspiracy charge against the accounting firm in an abusive tax-shelter case under a deferred prosecution agreement hatched last year with the US government.

The deal was done despite the firm peddling a scheme that allowed the ultra-rich to avoid paying billions of dollars in taxes to the Internal Revenue Service, effectively cheating other US taxpayers.

Details of KPMG's Get Out of Jail Free card are contained in the order of nolle prosequi.

As reported in BusinessWeek, US Attorney Michael J. Garcia said that the accounting giant is now on probation.

Garcia said: "The charges against KPMG may be reinstituted if it is determined that KPMG has violated any provision of the DPA. The monitorship, which has been comprehensive and effective, will continue until September 2008, and may be extended if KPMG violates the DPA during the period of the monitorship."

Of course, this allows KPMG to escape the fate of Andersen which went in 2002 following its conviction (later overturned) for obstruction of justice in relation to Enron's shonky accounts.

The deferred prosecution deal tells us how much power the big auditing firms now wield.

As The Economist told us last year, republished here via CFO.com, the concentration of auditing in the hands of just four firms leaves corporations with nowhere to turn if one firm collapsed. The Big Four becoming the Big Three would mean one firm fewer in an industry already highly concentrated and that would be a real problem where potential conflicts of interest require a company to hire more than one accountant. All that leaves regulators in a real bind. As The Economist noted:

"The darker version of this theme is that the four will use their power to hold sway with litigators, regulators and standards setters. On the one hand, they dominate the profession's official bodies; on the other, they cannot be too severely sanctioned for fear that four might become an even more dominant three."

This is exactly what happened with KPMG.

And of course, 16 former KPMG executives and two others are still to stand trial, expected in September. The alleged violations stemmed not from the tax shelters themselves, but rather what the indicted partners allegedly did: preparing false tax returns, hiding information from the Internal Revenue Service etcetera etcetera.

Expect the defendants to paint a very different picture, and maybe even recast themselves as fall guys.