Judge Lewis Kaplan’s eloquent and eminently correct decision striking down the Justice Department’s policy embodied in the “Thompson Memo” that pressures corporations, by threat of indictment, to cut off legal fees to “culpable” employees, was widely publicized and acclaimed. But it may ultimately produce little change in the real world of white-collar criminal defense.
In the specific case — the KPMG tax fraud prosecution, United States v. Stein, 435 F. Supp. 2d 330, 362 (S.D.N.Y. 2006) — Kaplan thus far has been unwilling to dismiss the criminal charges because of the government’s conduct or order the government to pay the lost fees. Instead, the court attempted to jawbone KPMG into resuming payments. When this failed, the court opened an ancillary civil proceeding that permitted the criminal defendants to sue KPMG for legal fees on the ground that its past practices show an implied agreement to advance legal fees. Every indication is that KPMG will vigorously fight the claim at trial and will appeal if it loses.
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