Posted Jul 19, 2007 08:08 pm CDT
The Justice Department may have lost big in the massive $2.5 billion tax shelter fraud case brought against former KPMG accounting firm employees, if a federal judge’s dismissal of 13 defendants on ethics grounds this week holds up on appeal.
But it has won 1,236 other corporate fraud cases over the past five years, collecting hundreds of millions for victims, says Deputy Attorney General Paul McNulty. He says at least one-third of the convictions were against senior company officials such as CEOs and legal counsel, reports the Associated Press.
As discussed in an earlier ABAJournal.com post, U.S. District Judge Lewis A. Kaplan dismissed charges against 13 of 16 KPMG defendants Monday because of misconduct. Prosecutors excessively pressured KPMG not to pay its former employees’ legal fees, violating the employees’ constitutional rights, the judge determined. Prosecutors had earlier described the case as the biggest criminal tax case ever brought.
McNulty, who is leaving the department’s No. 2 post later this summer, had already issued a “McNulty Memo” softening its hardball position on tactics that can be used to persuade corporations to “cooperate” with federal criminal investigations. But some critics say more restrictions are needed.
Last week, Rep. Bobby Scott (D-Va.), introducted a bill in Congress that would further limit prosecutors, AP reports. Similar to one proposed last year by Sen. Arlen Specter (R-Pa.), it would ban prosecutors from pressuring corporations not to pay defense fees or demanding confidential information protected by attorney-client privilege.