U.S. v. Stein

In the recent decision of U.S. v. Stein, the US Court of Appeals for the Second Circuit upheld the dismissal of all charges against thirteen former partners and employees of KPMG, holding that the government had violated defendants’ Sixth Amendment rights by pressuring KPMG to cut off payment of their legal fees. The court affirmed the central findings that US District Court Judge Lewis A. Kaplan reached two years ago: absent the Thompson Memo (the Principles of Federal Prosecution of Business Organizations then-in-effect) and the actions of the US Attorney’s Office, KPMG would have paid the legal fees of all of its partners and employees without regard to cost. KPMG’s decision not to advance legal fees “followed as a direct consequence of the government’s overwhelming influence, and that KPMG’s conduct therefore amounted to state action.” The Court held that “the government thus unjustifiably interfered with defendants’ relationship with counsel and their ability to mount a defense, in violation of the Sixth Amendment, and that the government did not cure the violation.” The case perhaps represents a decisive victory to the defendants in this high-profile matter.

My colleague David B. Anders and I have written a memo, available here, on the decision as well as the DOJ’s policies regarding its evaluation of corporations in the course of criminal investigations. The Court’s opinion may be accessed here.