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Thompson Memorandum on Fees Found Unconstitutional
Strong words: KPMG refused to pay its employees' legal fees because prosecutors held a 'gun to its head,' and the government thus 'violated the Constitution it is sworn to defend.'
This statement from U.S District Judge Lewis A. Kaplan in the KPMG tax shelter case has shaken the foundations of corporate prosecutorial policy. United States v. Stein et al., 2006 WL 1735260, (S.D.N.Y. June 26, 2006).
Since Jan. 20, 2003, when the Department of Justice (DOJ) released the so-called Thompson Memorandum, federal prosecutors have attempted to coerce companies and other entities under investigation to refuse to advance legal fees and expenses to employees deemed 'culpable' for the government. The KPMG case itself is a poignant example, as the firm, to save itself from indictment, cut off legal fees to its former partners and employees, including my client Jeffrey Stein. KMPG did this despite its at least 35-year prior practice of paying the legal fees of its employees in investigations. The challenge brought by counsel for the KPMG defendants, including this author and Stein's co-counsel David Spears, led to Judge Kaplan's watershed ruling that the Thompson Memo's fee provisions violate both the Fifth Amendment right to due process and the Sixth Amendment right to assistance of counsel.
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