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KPMG Fee Ruling Spurs Dismissal Motion

Posted Jun 1, 2007 10:48 AM CDT
By Debra Cassens Weiss

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Ex-employees of KPMG who battled to force the accounting company to pay their legal fees will ask a judge to dismiss the criminal case against them.

Judge Lewis Kaplan of the Southern District of New York has scheduled a July 2 hearing on the matter, according to the New York Law Journal.

The latest round in the legal fee battle comes after a May 23 decision by the 2nd U.S. Circuit Court of Appeals that suggested dismissal as a remedy for any inappropriate government conduct.

Kaplan is overseeing the pending criminal case against the 16 employees who are accused of creating illegal tax shelters. Last year Kaplan ruled that federal prosecutors violated the workers’ Fifth and Sixth Amendment rights by pressuring KPMG to cease paying their legal fees.

Kaplan said then that the government could use its leverage to persuade KPMG to advance defense costs. He also indicated he would hear any civil claims regarding fees filed by the workers as part of his ancillary jurisdiction.

But the 2nd Circuit, based in New York City, said ancillary jurisdiction was improper and dismissal is a possible remedy.

"Dismissal of an indictment for Fifth and Sixth Amendment violations is always an available remedy," the court said. The remedies available to the district court in the circumstances presented "did not include its novel exercise of ancillary jurisdiction."

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