Wednesday, June 28, 2006

Judge: Tactic Unconstitutional

From The New York Times:
A federal judge ruled yesterday that a tactic used by prosecutors to crack down on corporate misconduct violated the constitutional rights of employees, a decision that may change the way the government pursues white-collar cases.

The ruling, by Judge Lewis A. Kaplan of United States District Court in Manhattan, who is overseeing the trial of former employees of the accounting firm KPMG, is the first major criticism from the bench of tactics that federal prosecutors have adopted since a wave of corporate scandals erupted after the collapse of Enron.

The issue addressed by Judge Kaplan concerns the advancing of legal fees to employees caught up in criminal investigations. Companies have traditionally paid such costs, and some states' laws and a number of companies' bylaws require it. But an influential 2003 Justice Department document known as the Thompson memorandum has been interpreted by many lawyers to mean that companies under investigation can gain favor with prosecutors if they cut off legal fees.

No comments: