U.S. Tactic on KPMG Questioned - New York Times

Yesterday Judge Lewis A. Kaplan (S.D.N.Y.) ruled that KPMG was improperly pressured by the Justice Department not to pay or to cap the legal fees of its employees who were under investigation. U.S. Tactic on KPMG Questioned - New York Times.

Many federal prosecutors tell corporations that they must take certain actions in order to show that they are cooperating with an investigation. These actions -- outlined in a 2003 document referred to as the Thompson memorandum (after then deputy AG Larry D. Thompson) -- include limiting the company's payment of employees' legal fees and sometimes firing employees (before they are convicted). Many groups -- including such rare bedfellows at the U.S. Chamber of Commerce and the ACLU -- have criticized the guidelines.

The judge says that the prosecutor held "the proverbial gun" to KPMG's head, forcing it to cut the attorney's fees. What's the remedy? The judge did not dismiss the indictments (a remedy the defendants probably would have welcomed). And he can't force KPMG to pay the fees. Instead he gave the individuals 14 days to file a civil suit against KPMG for the fees.

Here's a Reuters story that describes a little of the underlying case -- a huge tax fraud case: Judge Faults US for Pressuring KPMG Over Fees, June 27, 2006.

Filed in: cases, news, KPMG, attorney's-fees, white-collar, KPMG, U.S.-Chamber-of-Commerce, ACLU, Thompson-memorandum, Justice-Department,