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Corporate Employees Need Protection from Overzealous Prosecutors

By Robert S. Litt
November 27, 2007

The KPMG tax shelter case brought to light heavy-handed attempts by federal prosecutors to exert economic coercion on indicted former KMPG partners and deprive them of the counsel of their choice, of resources that would otherwise be available for their defense, and of their Fifth Amendment right against compelled self-incrimination. Judge Lewis A. Kaplan's landmark decisions on motions by various defendants held many of the government's actions unlawful. See United States v. Stein, 488 F Supp. 2d 350 (S.D.N.Y. 2007); 435 F. Supp. 2d 330 (S.D.N.Y. 2006). But what are counsel for corporate employees to do when prosecutors attack their clients' reputation and pocketbook, but there's no judge to complain to?

In cases my firm has handled in the past year, federal prosecutors, by direct demands or more subtle means, have caused two senior corporate executives to lose their jobs even though neither was charged with a crime. For regulated financial institutions, the practice by government agencies of obtaining agreements that bar non-party individuals from employment has become so prevalent that it has a name: 'backdoor prohibitions.' The Department of Justice (DOJ) seems to have adopted a similar practice of 'blacklisting,' even though Congress has never authorized it.

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