Thursday, February 2, 2006

Deferred Prosecution Agreements and Admissions of Guilt

The National Law Journal has an interesting story (here) about the challenge by the KPMG individual defendants to the partnership's deferred prosecution agreement related to the sale of tax shelters.  One provision of the agreement requires that employees of the firm conform their statements to KPMG's admissions regarding the wrongfulness of the tax shelters and that incomplete or inaccurate information was provided by the firm to the IRS and clients.  In effect, any witness called by the government must be consistent with that position or the firm risks breaching the agreement and triggering the reinstatement of the criminal charges, a virtual kiss of death for an accounting firm. 

Does such a provision violate the rights of the defendants by preventing them from obtaining evidence from current employees that would support their defense?  The government likely will argue that the agreement is binding on the firm alone, and the admission of wrongdoing is the "truth" regarding the tax shelters so there is no obstruction of the defendants' access to evidence.  The agreement does not prevent the defendants from obtaining evidence because what they will get is in fact consistent with the firm's admissions in the deferred prosecution agreement.  Such an argument is a bit circular -- if that's not the same as being kinda pregnant -- because the assumption is that KPMG's admissions are both accurate and complete, and there are no shades of gray.  Of course, in tax, we know differently.

The recent deferred prosecution agreement by Roger Williams Medical Center contains a provision in which the hospital "admits" that its executives, who were also indicted, committed the charged offenses (see earlier post here).  Does this provision have any meaning?  To the extent that the Medical Center is bound to assist the government, it would have to support that admission.  While the statement has no direct effect on the determination of the guilt of the individual defendants, it could affect the jury pool by getting into the media the assertion of the defendants' guilt.  As deferred prosecution agreements evolve, I wonder whether the Department of Justice will craft internal guidelines for what is and is not permissible in such an agreement.  At the moment, it's still the Wild West. (ph) 

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