White-Collar Crime

Prosecutors Feel Pressure in Wake of KPMG Ruling

Federal prosecutors are facing increased pressure to preserve legal protections for corporations and employees accused of misconduct.

The most recent impetus is a judge’s decision to dismiss charges against 13 KPMG employees because the government pressured the company to cut off their legal fees. ABAJournal.com wrote about the decision on Monday.

Criminal defense lawyer Robert Morvillo told the Wall Street Journal (sub. req.) that he knows of one company that resumed paying its employees’ legal fees, apparently as a result of the case, and prosecutors did not object.

Miami lawyer Stephen Bronis said prosecutors are more cautious when asking about internal corporate investigations as a result of new Justice Department guidelines. Previously, prosecutors frequently demanded that corporations seeking sentencing leniency waive the attorney-client privilege that had protected results of the probes. The new guidelines require federal prosecutors to get permission from their superiors before demanding probe reports.

A bill recently introduced in the House goes further, barring prosecutors from pressuring companies to waive attorney-client privilege and cut off employees’ legal fees. The ABA supports the legislation. (See this ABAJournal.com post for details.)

Meanwhile, the government announced yesterday it plans to appeal the KPMG ruling that dismissed charges against employees accused of setting up fraudulent tax shelters.

Deputy Attorney General Paul McNulty insists the KPMG decision won’t change the way the government prosecutes most white-collar crimes. “It’s a unique case,” he told the newspaper. “It’s easily distinguishable from the body of success that we’ve had over the past five years.”

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