KPMG Trial Delayed Over Lawyer Ruling

A federal judge has disqualified a defense lawyer and delayed the trial of four defendants accused of helping KPMG promote illegal tax shelters.

Judge Lewis Kaplan of New York disqualified Steven Bauer of Latham & Watkins following accusations of a secret defense pact, the Wall Street Journal reports (sub. req.). His order said Bauer had a conflict of interest and his client, former KPMG senior tax manager John Larson, had refused to waive the conflict.

Prosecutors had said the secret pact may have existed between Bauer and other lawyers representing defendants accused of promoting KPMG tax shelters for a consulting firm called Presidio Advisory Services. One of the Presidio defendants, David Amir Makov, pleaded guilty to conspiracy and is cooperating with prosecutors. Kaplan held closed door hearings on the accusations before issuing his order.

Prosecutors suffered a big setback in the case when Kaplan dismissed charges against 13 of 18 defendants in July because the government had pressured KPMG to cut off their legal fees.