Paul L. Caron

Thursday, July 20, 2006

Judge Delays KPMG Tax Shelter Trial

The Associated Press and Wall Street Journal report that the federal district judge overseeing the KPMG tax shelter trial has postponed the trial date to Jan. 15 (from Sept. 11), citing the Government's delays in turning over information to defense lawyers and a dispute over the firm’s decision to cut off payment of the KPMG partners’ legal fees.

Update #1:  Here is a copy of the court's order in United States v. Stein, No. SI 05 Crim 0888 (7/19/06).  Some excerpts:

Among the factors supporting relief are these:

First, despite the fact that the government was obliged to complete discovery by October 5, 2005, it has produced a vast quantity of documents to the defense since that date... Moreover, there frequently have been extensive delays between the government's receipt of documents that it eventually concluded that it was obliged to turn over and the production of those documents to the defense. Quite apart from the question whether some of the government's failures are culpable and deserving of sanctions, defendants justifiably argue that the extent of the belated production has been so large that they simply need more time to make sense out of it.

Second, there have been problems with the government's production above and beyond its tardiness....

Third, sixteen of the remaining defendants are former partners and employees of KPMG. As the Court held in an opinion dated June 26, 2006, the government improperly caused KPMG to depart from its uniform prior practice by cutting of its payment of these defendants' legal fees, thus subjecting the defense to a resource constraint in violation of their constitutional rights. Rather than dismiss the indictment as against these defendants out of hand, the Court has sought to afford these defendants the possibility of a remedy short of dismissal by entertaining under its ancillary jurisdiction claims against KPMG to require it to pay the fees. If they succeed in that regard, dismissal or other sanctions against the government may be less appropriate than otherwise may be the case. But it will take some time to resolve that matter, one way or the other. In addition, if these defendants prevail against KPMG, it will take them some time to make effective use of the resources thus made available.

Update #2:  Peter Lattman of the WSJ's Law Blog has more here.

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