UPDATE 1-Ex-KPMG executives sentenced to steep prison terms

(Adds details, byline)

By Christine Kearney

NEW YORK, April 1 (Reuters) - A former KPMG [KPMG.UL] manager convicted of selling improper tax shelters was sentenced on Wednesday to more than 10 years in prison and a former tax partner at the firm received a sentence of more than eight years.

Former KPMG tax partner Robert Pfaff and former senior tax manager John Larson were convicted by a federal jury last December on several counts for evading taxes through a vehicle known as a BLIPS tax shelter.

Larson was sentenced to 121 months and ordered to pay a fine of $6 million by Judge Lewis Kaplan in U.S. District Court in Manhattan on Wednesday and Pfaff to 97 months and a fine of $3 million.

A third person convicted in the case, Raymond Ruble, a former partner at law firm Sidley Austin, was sentenced to six years and six months.

Upon handing down the sentence, Kaplan called the men's behavior "extremely offensive" and said their fraudulent tax shelter scheme, which targeted clients who earned more than $20 million a year, was "a brazen act."

"These defendants knew they were on the wrong side of the line," he said, adding later they had cooked up "this mass-produced scheme to cheat the government out of taxes for the purposes of enriching themselves." The losses due to the BLIPS scheme were estimated at more than $100 million.

Larson, 57, and Pfaff, 58, were immediately remanded into custody but may later be granted bail pending an appeal of their convictions. Ruble was granted bail pending his appeal.