February:
Prosecutors meet with KPMG in connection with an investigation into the company’s alleged devising and marketing of fraudulent tax shelters.
August: KPMG enters a deferred prosecution agreement, agreeing to pay $456 million and to cooperate in the prosecution of individuals.
October: The government indicts 19 people in connection with the probe, including 17 ex-employees of KPMG.
January: The defendants file a motion accusing prosecutors of improperly infringing on “their constitutional rights to counsel and a fair trial” by pressuring KPMG to stop paying their legal fees.
March: Ex-KPMG employee David Rivkin pleads guilty to conspiracy and tax evasion.
June 26: Southern District Judge Lewis Kaplan rules that the U.S. Attorney’s Office coerced KPMG into refusing to advance legal fees for its ex-employees. He declines to dismiss the indictment, but says the ex-employees can pursue a civil lawsuit against the accounting firm for payment of their legal bills. United States v. Stein, 435 F. Supp. 2d 330.
July 2006: The 16 ex-employees file a civil lawsuit against KPMG to recoup legal fees.
January: The case against KPMG is dismissed.
May: The 2nd U.S. Circuit Court of Appeals rules that Judge Kaplan cannot exercise ancillary jurisdiction over the civil case, although it suggests he could dismiss the indictment if he believes the defendants’ rights had been violated, Stein v. KPMP, 486 F.3d 753.
June: The 16 ex-employees file a motion to dismiss the indictment in light of Judge Kaplan’s June 2006 decision. Prosecutors later in the month ask the judge to dismiss charges against 12 of the 16 KPMG defendants, saying it is his only option due to his earlier ruling.
July 16: Judge Kaplan dismisses indictments against 13 ex-KPMG employees. The case proceeds against the other three, as well as against the two non-employees, one of whom is R.J. Ruble, a former Sidley Austin tax lawyer, United States v. Stein, 495 F. Supp. 2d 390.
September: A second defendant, former investment advisor David Makov, pleads guilty.
Thursday: The 2nd Circuit upholds the dismissals.
