Four current and former partners of accounting firm Ernst & Young were today charged with tax fraud conspiracy and other crimes relating to tax shelters for wealthy clients.

The charges are the latest in a long-running criminal investigation by the Inland Revenue Service and the US Department of Justice which has already seen rival big four firm KPMG having to settle for $456 million and one of its former partners charged with fraud.

Two of the men charged today are still senior partners at Ernst & Young but have been placed on "administrative leave". They are Martin Nissenbaum, national director of Ernst & Young's personal income tax and retirement planning practice and tax partner Richard Shapiro.

The other two are former E&Y partners Robert Coplan, a lawyer from Texas who previously served in the IRS’ Legislation and Regulations Division and Brian Vaughn, an accountant from Louisiana.

All four worked in a group set up by the company in 1998 to develop tax shelters, according to an indictment filed in US District Court in Manhattan.

They allegedly defrauded the Internal Revenue Service from 1998 through 2004 by designing, marketing and selling fraudulent tax vehicles.

US Attorney Michael Garcia said in a statement that the criminal indictment targets “tax professionals whose deceit costs this country untold millions in tax revenues.”

The charges follow other a long running probe by the Inland Revenue Service and a criminal probe by the Department of Justice into potentially illegal tax shelters which has already led to KPMG's former deputy chairman, Jeffrey Stein, being charged among nine others for allegedly designing illegal tax shelters to help clients of KPMG to avoid paying more than $1 billion (£560 million) of tax.

According to today's indictment, the defendants created documents containing false and fraudulent descriptions of the clients’ motivations for entering into the transactions to hide the tax fraud from the IRS.

The partners enticed clients to participate in the shelters by getting law firms to provide letters claiming that the tax shelter losses or deductions would “more likely than not” survive IRS challenge, the court papers said.

They were charged with conspiracy to defraud the IRS, tax evasion, making false statements and impeding and impairing the lawful functioning of the IRS.

The IRS has spent a year trying to force more than 90 accountancy firms, law firms, insurance companies, banks and brokerages to disclose the names of customers and their tax arrangements. It has filed lawsuits against several accountancy firms, including KPMG, for refusing to hand over the details.

PricewaterhouseCoopers paid an undisclosed sum to settle tax shelter abuses dating back to the mid-1990s. Ernst & Young recently agreed to a $15 million fine and said that it would provide the IRS with full information about clients.

KPMG's Jeffrey Stein, retired at the end of last November.

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