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KPMG Hearing: To Dismiss or Not To Dismiss?

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There were so many defense attorneys in the KPMG hearing yesterday (at least thirty by my count) that a separate observation room had to be set up so they could all sit down in courtroom 12D. It was a germane, if not ironic setting for what became a discussion of defense costs in a federal litigation.
In the way of background, sixteen KPMG employees, an outside lawyer and an investment adviser face charges of creating questionable tax shelters for major clients amounting to billions in breaks. Things got complicated when the government, betting on guilty pleas, pressured KPMG to stop paying the defendants’ legal fees, a pretty blatant Fifth Amendment violation. The trial pushed on however, and last year Judge Lewis Kaplan said he would probably dismiss the charges because of the government’s violations. In a surprising move last week, federal prosecutors agreed that the case should be dismissed, hoping to start new with an appeal.
Yesterday, Kaplan backed off last year's decision, posing what he called the “Bill Gates Question:” If, by way of constitutional violation, a defendant’s legal fees are cut off, but that defendant(say, Bill Gates) can afford the same council out-of-pocket, is the appropriate remedy dismissal? On this question, the judge was undecided.
To understand this case, one must first enter the bizarro-world where the prosecution is arguing for dismissal with the motivation of appealing Kaplan’s earlier decision that the constitution was indeed violated. It is desperate move, but maybe the only thing the government can do. Kaplan’s hesitance to dismiss is a countermove to preserve the earlier ruling.
For much of the hearing, the defense attorneys argued that they themselves were replacements for more expensive attorneys that their clients could no longer afford. Many sentences began with phrases like, “Now I’m not saying I’m less capable then my client’s previous attorneys, but…”
In the end, Kaplan did not dismiss the case despite arguments from both sides, but ordered financial statements from the defendants, leaving the dismissal door open.