The KPMG 16: The Case That Won't Die

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It’s a tale that’s now becoming all two familiar. Aggressive prosecutors zealously pursue a case that probably should never have been brought, using every dirty trick in the government’s book (and a few that turn out to not be in the book at all), and refuse to let go even after the case has become a public embarrassment.
We’re not talking about the Duke phony-rape case here. In North Carolina at least they have the decency to disbar and fire their prosecutor-gone-wild.
But things are different if you work for the Justice Department. Being a federale means never having to say you are sorry. And far from apologizing to the 16 former KPMG partners who face trumped-up charges for tax evasion, the prosecutors in the case are mounting a daring legal gambit in an attempt to save their case from the dustbin of history.
This requires a bit of explanation. At first glance, it looks as if the prosecutors are admitting defeat. Yesterday the Wall Street Journal reported that the prosecutors asked the judge to dismiss the case against the defendants on the grounds that the government had violated their rights to defense of counsel. But, in fact, this is part of a strategy to revive the case against the former KPMG partners.
When the case was brought against the partners, the government intimidated KPMG into refusing to pay for their legal fees. The deal was that if KPMG refused to pay the fees for their employees, the firm would be treated as a cooperating witness in the case. If they paid the legal fees, the firm faced might more serious charges itself. It was an offer they couldn’t refuse.
Prosecutors hoped that the defendants would plead guilty rather than face near certain bankruptcy from the costs of defending themselves. Surprisingly, most of the defendants refused. It’s a rare defendant who is willing to take on the unlimited resources of the federal government and risk financial ruin as the cost of acquittal. But the KPMG partners were made of sterner stuff, and apparently were convinced of their own innocence.
Judge Lewis Kaplan ruled last year that the governments tactics had violated the defendants’ constitutional rights. The government has since dropped the tactic from its approved methods for bringing cases against white collar criminal defendants. But prosecutors refused to drop the case, and all attempts to cure the constitutional violations through procedural fixes have failed.
Now the prosecutors have asked the judge to dismiss the case. But they've already announced that they plan is to appeal the judge’s dismissal, as well as his earlier finding of constitutional violations, once it is dismissed. Why move to dismiss and then appeal? Apparently, the case cannot be appealed by the prosecutors until it is dismissed by the judge.
So the extraordinary and twisted case that began with accounting scandals in the late nineties—and somehow morphed from deceiving private shareholders to avoiding government taxes—marches on. Like some kind of horror movie killer that just...won't...die.
Update: The New York Times headline in this story is truly noxious. "Prosecutors Invite a Dismissal in KPMG Tax-Shelter Case, Burdened by Technicalities" some editor of the Times wrote. When was the last time the New York Times editors dismissed constitutional violations as technicalities? This was the language used by law-and-order types a couple of three decades ago when the courts starting throwing out criminal convictions for minor mistakes in Miranda warnings ("You have the right to remain silent..." etc.) Here the government set out to effectively deprive the accused the financial means to defend themselves, and they call it a technicality.
Further Update: As is often the case, the business blog of the Times does a better job than the old gray lady herself on the case. They convey quickly and immediately the strategy of the prosecutors. "Federal prosecutors trying to bolster their faltering tax-shelter investigation have essentially dared a federal judge to dismiss charges against former employees of the accounting firm KPMG so that they can appeal the ruling and get the case moving again," DealBook writes. "But there is a catch: Prosecutors also said in the filing that they did not believe any of the defendants’ rights had been violated — and that they would appeal any such dismissal. A hearing has been scheduled for Monday."
Prosecutors Urge Dismissal Of KPMG Indictments [Wall Street Journal]
Prosecutors Invite a Dismissal in KPMG Tax-Shelter Case, Burdened by Technicalities [The New York Times]

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