Wednesday, April 5, 2006

The KPMG Tax Shelter Mega-Trial

U.S. District Judge Lewis Kaplan rejected the flood of motions filed by the 18 defendants charged with conspiracy arising from the sale of tax shelter products by KPMG, including requests for separate trials.  The judge found that the same core of evidence would be applicable to all defendants, 16 of whom are former KPMG partners, so that separate trials would not be efficient.  The judge also rejected a request to dismiss the indictment because KPMG's deferred prosecution agreement would require all employees of the firm to testify in support of the firm's admission of wrongdoing and not provide testimony favorable to the defendants.

The Department of Justice has estimated that the trial will take three months, according to an AP story (here) about Judge Kaplan's rulings.  Unless a slug of defendants are going to enter guilty pleas, that strikes me as pretty low estimate of the time it will take the government to put on its case.  The transactions involved are fairly complex, and even if the government avoids the nitty-gritty details of the tax shelters -- a likely strategy -- it will still have to explain how they worked and the false statements allegedly made to the IRS about the propriety of the underlying transactions.  The cross-examination of the government witnesses by over a dozen defense lawyers alone could take weeks -- "just a few questions, your honor" from each -- and that's before the defense case even begins.  This trial could be a sure cure for insomnia if it is allowed to drag on, which could be in the defendants' favor. (ph)

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Tracked on Jun 13, 2006 6:40:31 AM


How about the editorial in today's Wall Street Journal that dicusses Judge Kaplan's critcal comments with respect to the Thompsen Memo? At least according to the editorial, it seems the judge left open the possibility of questioning the constitutionality of that document.

Posted by: CRL | Apr 6, 2006 4:14:39 PM

How about the Wall Street Journal editorial today on Judge Kaplan's comments with respect to the Thompson Memo? At least according to the editorial, the judge seems to have been highly critical of the Memo and left open the possibility of challenging the constitutionality of its requirements, given that it essentially forces companies to cut off legal aid to executives charged with wrongdoing.

Posted by: CLane | Apr 6, 2006 4:19:03 PM

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