Tuesday, September 19, 2006
KPMG signed a deferred prosecution agreement with the government that called for cooperation. In the Stein case (as discussed here, here, here and here) the court held that the Thompson Memo discouraged corporations from adhering to their practice of paying employee attorney fees. Since that decision, KPMG has joined sides with the government in saying it will appeal the court's decision and even filed seeking compensation against some of the defendants in that case. (See NYTimes here).
It is not surprising to see KPMG fighting alongside the government. For one, they benefited enormously from the deferred prosecution agreement as a prosecution could have been devastating to the company. One need only look at the Arthur Andersen situation to see the ramifications of an indictment. Even though the Andersen conviction was overturned by the Supreme Court, the indictment caused the company to fall.
In the KPMG case there is even a greater reason for the company to side with the government. Paragraph 21 of the deferred prosecution agreement states:
"KPMG has been involved in an engagement to audit the Department of Justice's financial statements. The Department of Justice's debarring official has determined that KPMG is currently a responsible contractor. The debarring official has determined that suspension or debarment of KPMG is not warranted because KPMG has agreed to the terms of this Deferred Prosecution Agreement, in which, among other things, KPMG has admitted its involvement in unlawful conduct and has agreed to take steps to ensure that KPMG, it leadership, partners, personnel, and clients will adhere to the highest standards of ethics and compliance with the United States tax laws." (emphasis added)