Coyote Blog

I am way, way late in posting this, but there was good news several weeks ago when a judged slapped down federal prosecutors in the KPMG case for essentially following the Thompson Memo and dismissed all charges in the case.  Here was the initial confrontation the judge had with prosecutors over a year ago, which explains key provisions of the Thompson memo:

Those steps were extraordinary in their attempt to
pressure corporate executives: They include waiving attorney-client
privilege to give investigators access to internal documents and
cutting off accused employees from legal and other forms of support. In
short, the Thompson memo said that companies under investigation are
expected to surrender any right against self-incrimination and cut
their accused employees adrift.

In one sense, the memo's guidelines are just that --
internal guidelines for prosecutors. But as a practical matter, only a
rare CEO will risk the death sentence that a corporate indictment
represents. So "cooperation" as defined by Justice is hardly optional.
It was on this point that Judge Kaplan took Assistant U.S. Attorney
Justin Weddle to task last week. When Judge Kaplan questioned the
fairness of pressuring companies to throw their employees overboard,
Mr. Weddle replied that companies are "free to say, 'We're not going to
cooperate.'"

"That's lame," the judge retorted. He then asked Mr.
Weddle "what legitimate purpose" was served by insisting that companies
cut their former employees off from legal support. Companies under
investigation, Judge Kaplan noted, ought to be free to decide whether
to support their employees or former employees without Justice's "thumb
on the scale."

Mr. Weddle replied that paying the legal fees of
former employees charged with crimes amounted to protecting
"wrongdoers." This prompted the judge to remind the young prosecutor
that the accused are still innocent until proven guilty. He also
reminded Mr. Weddle that the Constitution's Sixth Amendment guarantees
the right to counsel. And for good measure, if the government is
confident in its case, it shouldn't be afraid to allow "wrongdoers"
access to an adequate defense.

And this is from his decision to drop all charges:

Just as prosecutors used KPMG to coerce interviews with KPMG personnel
that the government could not coerce directly, they used KPMG to strip
any of its employees who were indicted of means of defending themselves
that KPMG otherwise would have provided to them. Their actions were not
justified by any legitimate governmental interest. Their deliberate
interference with the defendants' rights was outrageous and shocking in
the constitutional sense
because it was fundamentally at odds with two of our most basic
constitutional values "“ the right to counsel and the right to fair
criminal proceedings. But the Court does not rest on this finding
alone. It would reach the same conclusion even if the conduct reflected
only deliberate indifference to the defendants' constitutional rights
as opposed to an unjustified intention to injure them.

Tom Kirkendall has more analysis

I know that no one seems to really give a crap about due process for accountants nowadays, perhaps an over-swing of the pendulum from the days when no one really cared much about prosecuting white collar crime, but some of the Justice Departments prosecutorial abuses are finally coming back to haunt them.

The Justice Department's case against 16 former KPMG partners for tax
evasion continues to unravel, with prosecutors themselves conceding
late last week that federal Judge Lewis Kaplan has little choice but to
dismiss the charges against most of the defendants.

Judge Kaplan ruled
last year that Justice had violated the defendants' Constitutional
rights by pressuring KPMG not to pay their legal fees. He is now
considering a defense motion to dismiss. Prosecutors continue to
protest the judge's ruling but on Friday they admitted in a court
filing that dismissal is the only remedy for the rights violations. The
more honorable route would have been for prosecutors to acknowledge
their mistakes and dismiss the charges themselves.

The truth is that
this tax shelter case should never have been brought. Both KPMG and its
partners believed the shelters they marketed were legal, and no tax
court had ruled against the shelters before Justice brought its
criminal charges. Then prosecutors used the threat of criminal
indictment against all of KPMG to extort an admission of guilt from the
firm and force it to stop paying the legal bills of individual partners.

I have written several times on prosecutorial abuse, most recently in this post on the Justice Department's current practice of forcing companies to waive attorney-client privilege and punishing companies that help their employees seek legal council.

The WSJ($) editorializes about a recent division by Judge Lewis Kaplan in the KPMG trial.

Those steps were extraordinary in their attempt to
pressure corporate executives: They include waiving attorney-client
privilege to give investigators access to internal documents and
cutting off accused employees from legal and other forms of support. In
short, the Thompson memo said that companies under investigation are
expected to surrender any right against self-incrimination and cut
their accused employees adrift.

In one sense, the memo's guidelines are just that --
internal guidelines for prosecutors. But as a practical matter, only a
rare CEO will risk the death sentence that a corporate indictment
represents. So "cooperation" as defined by Justice is hardly optional.
It was on this point that Judge Kaplan took Assistant U.S. Attorney
Justin Weddle to task last week. When Judge Kaplan questioned the
fairness of pressuring companies to throw their employees overboard,
Mr. Weddle replied that companies are "free to say, 'We're not going to
cooperate.'"

"That's lame," the judge retorted. He then asked Mr.
Weddle "what legitimate purpose" was served by insisting that companies
cut their former employees off from legal support. Companies under
investigation, Judge Kaplan noted, ought to be free to decide whether
to support their employees or former employees without Justice's "thumb
on the scale."

Mr. Weddle replied that paying the legal fees of
former employees charged with crimes amounted to protecting
"wrongdoers." This prompted the judge to remind the young prosecutor
that the accused are still innocent until proven guilty. He also
reminded Mr. Weddle that the Constitution's Sixth Amendment guarantees
the right to counsel. And for good measure, if the government is
confident in its case, it shouldn't be afraid to allow "wrongdoers"
access to an adequate defense.

Its good to see these practices starting to get some judicial scrutiny.  There is unfortunately no real political constituency in this country to get worked up about this kind of stuff.  Left-leaning groups tend to be the first to challenge police and prosecutorial abuses of power, but have little interest in doing so when the target (ie corporations) is someone they have no ideological sympathy for.  And right-leaning groups tend to be strong law-and-order types that feel the need to go out of their way to be tough on recent corporate transgressors to avoid the accusation that they are in bed politically with white collar criminals.