Court backs decision to toss KPMG indictment
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NEW YORK - A US appeals court upheld a judge's decision to throw out the indictment of 13 former KPMG LLP executives for tax-fraud after finding federal prosecutors violated their constitutional right to legal counsel.
The government "unjustifiably interfered with defendants' relationship with counsel and their ability to mount a defense, in violation of the Sixth Amendment," US Circuit Judge Dennis Jacobs wrote yesterday on behalf of a unanimous three-judge panel of the US Court of Appeals in New York. By threatening to indict KPMG if it paid the legal fees of the former partners and employees, the prosecutors infringed their right to have a lawyer.
The ruling came the same day Deputy Attorney General Mark Filip unveiled guidelines barring prosecutors from demanding firms not pay employee legal fees in federal criminal cases.
The policy switch, disclosed last month in a letter to the Senate Judiciary Committee, is a victory for groups including the US Chamber of Commerce and the American Bar Association that have spent more than three years lobbying for the modifications.
Rebekah Carmichael, a spokeswoman for US Attorney Michael Garcia in New York, said the office is reviewing the ruling. The government could seek a rehearing, or permission to appeal to the US Supreme Court.
The panel's ruling upheld a July 2007 decision by US District Judge Lewis Kaplan that gutted the largest US criminal tax-shelter prosecution. Kaplan said it was "intolerable" that prosecutors threatened to indict New York-based KPMG, which likely would have destroyed the firm, unless it stopped paying legal bills for former executives.
The case began in 2005 when prosecutors accused 17 former KPMG executives and two other defendants of selling illegal tax shelters from 1996 to 2005, allegedly costing the Treasury at least $2 billion. One executive pleaded guilty.
Four of the original 19 defendants are scheduled to go on trial this year. Charges against KPMG, the fourth-largest US accounting firm, were dismissed last year after it paid a $456 million fine.
