The federal judge in the KMPG accounting fraud case in New York ruled that federal prosecutors cannot pressure companies to stop paying legal fees for indicted employees. In doing so, the government would get an unfair advantage and violate due process for the indicted employees.
Companies such as KPMG, Enterasys, and HealthSouth have not paid legal fees for certain indicted executives after prosecutors told the companies that their payment of legal fees on behalf of those employees would signal non-cooperation.
A key document in this issue is a 2003 memo from former Deputy Attorney General Larry D. Thompson that advises U.S. attorneys to “scrutinize the authenticity of a corporation’s cooperation” when deciding whether or not to issue criminal charges against a corporation.
Defense lawyers have said that withholding legal fees is really pressure by the government to get defendants to plead guilty. A guilty plea would save the employee huge legal bills. Prosecutors deny trying to get employers to stop paying the legal bills, and the government is expected to appeal this ruling.