Judge dismisses 13 former KPMG partners and employees based on US Government’s coercive tactics
What are the consequences in a white collar criminal case when government prosecutors coerce a corporation into leaving corporate employees without a paid legal defense team? From yesterday’s opinion in the high profile KPMG case:
The government threatened to indict, and thus to destroy, the giant accounting firm, KPMG LLP (“KPMG”). It coerced KPMG to limit and then cut off its payment of the legal fees of KPMG employees. KPMG avoided indictment by yielding to government pressure. Many of its personnel did not. They now await trial, four of them deprived of counsel of their choice and most of the others unable to afford the defenses that they would have presented absent the government’s interference. This Court previously held that the government’s interference with KPMG’s payment of the legal fees of its employees and former employees violated the employees’ constitutional rights. The government now concedes that thirteen of the sixteen individuals formerly employed by KPMG (the “KPMG Defendants”) are entitled to dismissal, assuming that this Court’s previous ruling correct. But the government does not concede the correctness of that ruling. Accordingly, the Court has reconsidered Stein I carefully in light of the government’s arguments. It remains convinced that the ruling was correct. Indeed, additional evidence not previously considered strongly supports the Court’s decision. The government, however, now has focused for the first time on the specific circumstances of certain of these defendants. The Court concludes that three of the defendants have not established that KPMG would have paid their defense costs even if the government had left KPMG to its own devices. The indictment therefore will be dismissed as to thirteen of the sixteen KPMG Defendants. The case will proceed to trial on the charges against the other three as well as two additional defendants who never were employed by KPMG and whose rights therefore were not violated.
TalkLeft also has a lengthy post on the dismissal:
There was big news today in the white collar tax fraud case of 16 former partners and employees of the accounting powerhouse, KPMG. The Judge dismissed the charges against 13 of the defendants, harshly rebuking the Government for interfering with the defendants’ 5th and 6th Amendment rights to due process, to effectively prepare and present a defense and to be represented by counsel of choice.
The opinion is here (pdf). For a wrap-up of news reports on the ruling, check out White Collar Crime Blog.
In a nutshell, and I’m coming late to the case, the Government made a cooperation deal with the company and offered it a deferred prosecution for its alleged misdeeds. In exchange, the Government for all intents and purposes demanded KPMG stop its long-time policy of paying legal fees for indicted employees.
The Judge previously had ruled these actions by the Government violated the indicted employees’ 5th and 6th Amendment rights. But, he refused to dismiss the Indictment because attempts were being made in other court actions and on other fronts to get KPMG to pay the legal fees.