Wednesday, November 22, 2006

Arguing KPMG in the Second Circuit

The Second Circuit heard oral arguments on November 21 in the appeal of U.S. District Judge Lewis Kaplan's decision providing sixteen former KPMG partners and employees with a civil claim to seek attorney's fees in the government pending prosecution of them on conspiracy and tax fraud charges.  A Wall Street Journal article (here) states that senior Circuit Judge Ralph Winter said he was "dubious" of the district court's authority to permit a civil cause of action, and noted Judge Winter questioned whether Judge Kaplan "created a proceeding without any expressed authority."  U.S. District Judge John Gleason, sitting on the panel by designation, raised the interesting issue of the proper remedy for a constitutional violation, stating that it could be dismissal of the indictment.  As a trial court judge, I suspect Judge Gleason will be more sympathetic to Judge Kaplan's position than the appellate judges might be because he may well face the same issues in his courtroom in Brooklyn one day.

As discussed in an earlier post (here), Judge Kaplan's recent order postponing the trial indefinitely hinted that he might revisit the issue of remedy, and the defendants have asked for dismissal due to prosecutorial misconduct and a violation of their constitutional rights from the government's pressure on KPMG to deny them attorney's fees.  Dismissal is the ultimate penalty, and one the Supreme Court has been loath to permit absent a clear violation of a constitutional or statutory protection.  The Second Circuit's skepticism about Judge Kaplan's decision to drag KPMG into the case in a collateral proceeding may result in a remand to address directly the question of the proper remedy for a constitutional violation, assuming there is one. (ph)

Prosecutions, Tax | Permalink

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