Monday, July 31, 2006

More on the KPMG Attorneys Fees Issue

The controversy over KPMG and attorneys fees continues.

A little review: Accounting firm KPMG and some employees were being investigated for allegedly illegal tax shelters. KPMG cooperated with the investigation and, at the urging of the prosecutors (following the Dept of Justice's "Thompson Memorandum") capped its payment of attorneys fees for the employees under investigation. In the subsequent criminal prosecution of the employees, they said that Justice's pressuring KPMG to cut off their attorneys fees infringed their right to counsel. Judge Lewis Kaplan (S.D.N.Y.) agreed. He encouraged KPMG to pay and suggested the employees sue if KPMG did not pony up.

Now KPMG says Kaplan lacked jurisdiction. KPMG was not a party to the proceedings and didn't have an opportunity to cross-examine witnesses. In any event, the employees should be bound by their employment contracts, which specify that they must arbitrate all disputes with KPMG. On the other hand, Judge Kaplan says that arbitration might delay the start of their criminal trial. - KPMG Challenges Kaplan's Jurisdiction in Fee Dispute, N.Y.L.J., July 31, 2006.

Last week, "Kaplan, in United States v. Jeffrey Stein, S105 Crim. 0888, ruled that federal prosecutors coerced two ex-employees into giving statements at proffer sessions, and he refused to allow the government to use those statements at a trial scheduled for January." Federal Judge Finds KPMG Employees Coerced, Suppresses Statement, N.Y.L.J., July 28, 2006.

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