Sunday, February 25, 2007

Guest Blogger - KPMG - Part II

Professor J. Kelly Strader - Guest Blogging - KPMG - Part II

KPMG has already produced several extraordinary decision, with more likely ahead. In something of a nuclear explosion for the government, last June, Judge Kaplan, who is presiding over the case, found that KPMG had threatened to withhold payment of attorneys’ fees if its employees failed to cooperate in the investigation. The court also found that KPMG acted under government pressure, in accordance with Department of Justice policies set forth in the Thompson Memorandum. ("Stein I," discussed here, here, here, here and here.   (For a discussion of the Thompson Memorandum policies and the subsequent McNulty Memorandum, see here, here, here, here, and here). The court held that KPMG, as a government agent, had violated the defendant employees’ Sixth Amendment right to counsel and right to substantive due process. The court urged the defendants to pursue a civil action against KPMG for the fees, and exercised ancillary jurisdiction over that action. Because this decision did not directly affect the government’s interests, it was not appealable by the prosecution.

Certainly, the Thompson and McNulty memos raise serious issues of fairness. As to Stein I’s Sixth Amendment holding, though, it is difficult to reconcile with the Supreme Court’s decisions in Caplin & Drysdale and Monsanto that a criminal defendant has a Sixth Amendment right to a court-appointed attorney only, not the right to an attorney of choice. (In those cases, the government had sought forfeiture of funds needed to pay attorneys’ fees.) Those cases were decide by bare majorities, and may be based upon questionable logic, but they are still good law. Judge Kaplan’s decision in reality invokes Justice Blackmun’s comment in dissent that "it is unseemly and unjust for the government to beggar those it prosecutes in order to disable their defense at trial."

KPMG has appealed the district court’s exercise of ancillary jurisdiction over the fee dispute, arguing that the district court did not have subject matter jurisdiction and that the claims should be arbitrated. In just one example of the strangeness of this case, Judge Kaplan filed an "amicus brief" (brief here) with the Second Circuit in support of his original decision. The appeal is pending. (Next time: coerced Fifth Amendment waivers.)


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