A judge's decision this month to throw out criminal charges against 13 former employees of the accounting firm KPMG illustrates what has gone wrong with the government's pursuit of corporate cases.
U.S. District Judge Lewis A. Kaplan of New York dismissed the charges because he found that the Justice Department had so egregiously violated the constitutional rights of the defendants that allowing the cases to go forward would be wrong. What prompted Judge Kaplan's action was evidence that federal prosecutors had demanded that KPMG stop paying legal fees for the individual defendants, even though companies commonly pay such fees. The Justice Department, according to Kaplan, strongly suggested that cutting off the legal fees would put the company in the government's good graces and possibly help it avert indictment.
The tactic on attorneys fees is contained in the so-called McNulty Memorandum, a Justice Department guide for how prosecutors should proceed with corporate cases. The memo also contains provisions allowing prosecutors to ask companies to waive their attorney-client and work-product privileges, two long-ensconced legal principles. These tactics so tilt the scales toward prosecutors and are so potentially damaging to due process that a legislative remedy is needed.