Saturday, July 15, 2006

KPMG Draws a Line in the Sand

Well-known white collar defense attorney Bob Bennett, lead counsel for KPMG, asserted in response to a request by sixteen of the defendants in the U.S. v. Stein prosecution who are former partners and employees of the firm that his client will not pay their attorney's fees, resisting the "suggestion" of U.S. District Judge Lewis Kaplan that the firm make the payments.  The defendants filed a civil claim (see earlier post here) pursuant to Judge Kaplan's opinion finding that the government improperly pressured KPMG to not make the payments and authorizing the defendants to file their claim directly with the court as "ancillary" to the criminal case.  At a hearing on July 13, Bennett stated, ""KPMG has no legal obligation to pay these fees . . . KPMG has no intention to pay these fees." (see AP story here).  Bennett also indicated that the firm would seek to have the claims arbitrated rather than heard in the federal court, an issue that is likely to spark an immediate appeal if Judge Kaplan finds that any arbitration clause in employment or partnership agreements does not apply.

On another front, the judge also raised questions about government pressure on KPMG to force its partners to cooperate with the government's investigation by agreeing to interviews with prosecutors.  Judge Kaplan will consider a motion to suppress statements made by three defendants that they assert were coerced by the firm, and indirectly the government, because of the Thompson Memo.  A New York Times article (here) notes that Judge Kaplan referred again to the pressure created by the Thompson Memo on firms to cooperate, although unlike the attorney's fee issue, the DoJ document does not break much if any new ground related to cooperation in having employees speak with the government.  It has long been a feature of the corporate landscape that, if an employee does not cooperate in an investigation, the person is liable to be fired, and at least for private firms they are largely free to decide whether to threaten an employee with termination for a lack of cooperation.  The Thompson Memo makes explicit a common practice, and I suspect it will require quite a leap to find that government pressure on KPMG meets the standard for a coerced statement under the Due Process Clause. 

Not that the judge can't reach that conclusion, and given his predilections about the Thompson Memo there is a reasonable chance he will suppress the statements.  If he does exclude the statements on the ground that the Thompson Memo is unconstitutional or impermissibly pressured KPMG, then I think the government will quickly appeal. Who would have thought a tax prosecution could be this interesting -- not that these are tax issues, thankfully (and with apologies to Blog Emperor Caron!). (ph)

Defense Counsel, Prosecutions, Tax | Permalink

TrackBack URL for this entry:

Listed below are links to weblogs that reference KPMG Draws a Line in the Sand:


Post a comment