Than the “Largest Tax Fraud Ever“?
News that the Judge on the case is considering throwing it out.
Defendants in the case have asked Southern District of New York Judge Lewis Kaplan to dismiss the charges in the case, alleging a violation of civil rights. In response, Judge Kaplan has advised that the defendants have until next Friday to file any related motions. The prosecution will then have a week to respond, and a hearing on the matter has been scheduled for July 2.
It’s sure to be a controversial decision. Last year, an Appeals Court dismissed Judge Kaplan’s efforts to take ancillary jurisdiction on a related matter. Judge Kaplan believed that the defendants’ Fifth and Sixth Amendment rights had been violated by prosecutors who had used the threat of civil prosecution to pressure KPMG to not pay legal fees for the defendants. This is a huge no-no. First-year law school criminal law, you learn that you can’t use threats of criminal prosecution in a civil case to bring about your desired result.
As a result, the judge invited the defendants to file a civil case against KPMG, promising to “entertain the claims pursuant to [my] ancillary jurisdiction over this case.” The appeals court ruled that this exercise of jurisdiction over a contract claim was inappropriate.
The judge has asked the defendants to argue what each believes the proper remedy in the case would be. Not surprisingly, each of their lawyers has indicated that they are prepared to argue for dismissal. It’s kind of like asking your child what he or she thinks should happen when they’re being disciplined. Rarely are they going to answer “send me to bed” or “ground me.” They most likely are going to answer “nothing”.
This whole case is a bit confusing on about a million levels. It’s not exactly clear who did or did not do anything wrong prior to the trial.
Any time a defendant’s civil rights are violated, it’s a serious matter. And if the government really did act outside of the scope of what they were able to do legally and ethically to prosecute this matter, that should be addressed. But does this rise to the level of dismissal? I’m no civil rights lawyer, but I don’t think it does. It seems like there might be other, less drastic remedies available – and the judge seemed to hint as much earlier.
And the bigger issue is whether or not this really happened at all. The defendants allege that the prosecution pressured KPMG to not pay their legal costs in the criminal actions. KPMG has insisted that it has nothing to do with the criminal case and the fee issue is a separate matter. The latter would make sense as it would not be uncommon for executives to have a contract calling for the company to pay their legal fees in connection with a matter related to the company unless the executives were acting outside of the scope of their jobs at the time of the alleged crimes. I’m guessing that since KPMG has distanced themselves from this action, they’re arguing that these activities were never blessed by the company (if they were, KPMG has bigger worries) and therefore, the fees should not be paid by the company. If so, the argument about fees would be a separate issue altogether and will likely take several years to resolve. The $456 million question is whether the government was involved in those fee talks…
Stay tuned. This has the makings of a TV movie all over it. Somewhere, Harry Hamlin’s agent is rubbing his hands together and making some calls…
