By Larry Neumeister
Associated Press
Wednesday, March 26, 2008; D03
NEW YORK, March 25 -- The U.S. government promised Tuesday to play fair if a federal appeals panel resurrects its criminal case against more than a dozen former KPMG tax firm employees.
The argument by Assistant U.S. Attorney Karl Metzner, and an assurance that the government was ready to give the defendants as long as necessary to prepare for trial, were met with resistance and a chuckle from Judge Dennis Jacobs of the U.S. Court of Appeals for the 2nd Circuit.
"What you're describing -- to take all the time needed -- is something that would leave these defendants not knowing what their status is for a year or more. One reason why they would need more time is because they didn't have the lawyer of their choice," Jacobs said.
Last year, U.S. District Judge Lewis A. Kaplan threw out conspiracy and tax evasion charges against 13 former employees of the global tax firm in a landmark tax shelter case. Charges remain against four other people.
Kaplan ruled that the government coerced KPMG to limit and then cut off its payment of legal fees to the employees. He also found that the Justice Department threatened the company with indictment and destruction if it did not fully cooperate. KPMG has signed a deal admitting its role in the tax shelter scheme but avoided criminal prosecution by cooperating and paying a $456 million fine.
Attorney John S. Martin Jr., a former federal judge, urged the appeals court to uphold Kaplan's findings, saying the government "used KPMG to strip these defendants of their constitutional rights."
Metzner, however, argued that the government did not force KPMG to change a decades-old practice of paying for employees' legal representation.
He asked the three-judge panel to reinstate the case, saying there was still plenty of time for the defendants to properly mount a defense and for KPMG, if it wished, to pay for it.
But Jacobs said KPMG may now be less inclined to pay the legal fees if it thinks doing so might improve the chance that the cases will be allowed to proceed to trial.
"Time has moved forward," Jacobs said.
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