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Charges Dropped Against 13 Ex-KPMG Officials
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The judge ruled yesterday that bullying by the government was so "outrageous and shocking" that it ran afoul of the Constitution. The facts of the case, he wrote, "demonstrate a willingness by the prosecutors to use their life and death power over KPMG to induce KPMG to coerce its personnel to bend to the government's wishes."
KPMG eventually averted criminal prosecution by agreeing to pay $456 million and discontinue parts of its tax business.
In his statement yesterday, Garcia, the U.S. attorney, signaled that he might contest the judge's finding that the government's conduct was so troubling that it violated the defendants' constitutional rights. Such a ruling is extremely rare and is likely to trigger intense scrutiny from an appeals court, said lawyers not involved in the case.
"The fact of the matter is the government overreached in just about every way," argued Cristina Arguedas, a lawyer for a former executive involved in yesterday's ruling.
"This is really an overwhelming victory, not only for the defendants but for the system of justice in this country," said Washington lawyer Michael J. Madigan, who represents John Lanning, a former KPMG partner. "These kinds of tactics shouldn't be used against anybody."
The head of a trade group for corporate lawyers yesterday called the ruling a "wake-up call." Lawyers who defend corporations and executives across the country said Kaplan's criticisms over the past year already have had a significant impact. Companies including AOL in Dulles have resumed paying defense costs for employees under government scrutiny.
Top Justice Department officials last year overhauled guidelines that help determine when companies are charged with breaking the law. A coalition including the American Civil Liberties Union, the National Association of Criminal Defense Lawyers and the U.S. Chamber of Commerce said prosecutors did not go far enough.
Congress is taking note of the heated debate. The judge's ruling came a few days after Rep. Robert C. Scott (D-Va.) introduced legislation with bipartisan support that would protect executives' communications with their lawyers and would bar prosecutors from using legal fees as a weapon against executives who assert their right against self-incrimination. Sen. Arlen Specter (R-Pa.) advanced a similar bill in the Senate.
"Enough is enough," said Stephanie A. Martz, director of the white-collar-crime project of the National Association of Criminal Defense Lawyers.
