Friday, January 20, 2006

Does the Push Against Organizations Paying Attorney's Fees for Employees Violate Their Constitutional Rights?

Among the flurry of motions filed by the defendants in the KPMG tax shelter prosecution is one seeking dismissal of the indictment because the government improperly pressured KPMG into terminating the payment of legal fees to its former partners charged in the case.  The Department of Justice's Thompson Memo (here) on prosecuting business organizations states that an organization's decision to pay the attorney's fees for individuals under investigation or being prosecuted could be viewed as an indication of a lack of cooperation and may result in charges being filed against the organization.  In the KPMG case, the firm agreed to stop paying the attorney's fees for its partners who did not cooperate in the investigation as part of its deferred prosecution agreement.  After the prosecution of Arthur Andersen, it was likely that criminal charges against KPMG would result in the firm's demise, and so throwing aside a few former partners was a small cost.

A brief (link available below) filed with the U.S. District Court for the Southern District of New York on behalf of twelve defendants argues that under Delaware law -- the state in which KPMG is organized as an LLP -- organizations are encouraged to provide support for employees and partners who are the subject of criminal and civil cases arising from their work on behalf of the business by advancing the costs of legal representation.  Their brief asserts:

[T]he prosecution unilaterally pre-empted the policy determination not only of the legislature but also of KPMG itself. By making clear that KPMG’s survival as an entity could depend, even in part, on abandoning its practice – grounded in state law and public policy – to advance legal fees to employees who had acted on its behalf, the Government has uncomfortably expanded its role. It has gone from an investigator/prosecutor to a bullying behemoth, who demands as tribute the sacrifice of individuals and uses any means at its disposal to stifle opposition to its awesome power to prosecute individuals. In so doing, the Government has violated law and policy. It has undermined the public policy and legal admonitions of the state of Delaware; it has improperly interfered with the contractual relationship between KPMG and its partners; and it has also unjustifiably and intentionally hampered the KPMG defendants’ ability to defend themselves in this case.

The brief goes on to note that if a private party had tried to force another party into not paying the fees, it could constitute tortious interference with a business opportunity.  The more difficult part of the argument is linking the government's conduct in having KPMG cut-off the attorney's fee spigot to a constitutional violation that could support dismissal of the indictment.  They argue that the government's conduct interferes with the right to counsel and to a fair trial, but the assertion is a bit of a stretch.  The brief relies heavily on the dissent in Caplin & Drysdale, a case involving the forfeiture of funds that would be used to pay attorney's fees.  In this case, the defendants have the right to counsel of choice, and the issue is one step removed concerning the source of the funds for payment for that counsel when the government is not directly seizing the money. 

Given the Supreme Court's aversion to enforcing the right to counsel of choice, I doubt a court will find a sufficient link between the government's conduct and the Sixth Amendment right of the defendants to permit dismissal of the indictment or ordering KPMG to resume paying the defendants' attorney's fees.  Even if there is no constitutional violation from the Department of Justice's conduct, the view that an organization which pays the attorney's fees of its employees is somehow not cooperative with the government is misguided.  I have beaten the drum before that the view of defense counsel as an obstacle or someone to be gotten rid of is flawed because the system is built around the availability of competent representation for both sides.  Undermining access to counsel is not a benefit to the criminal justice system. (ph)

Download kpmg_attorneys_fees_memo.pdf

http://lawprofessors.typepad.com/whitecollarcrime_blog/2006/01/doe_the_push_ag.html

Defense Counsel, Prosecutions | Permalink

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