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AOL will begin paying the legal fees for two former executives charged with corporate fraud in federal court in Alexandria, Va., according to two sources with knowledge of the case. The move came just days before a landmark ruling last month by Judge Lewis Kaplan in a separate case involving New York accounting firm KPMG. Kaplan’s decision found that the Justice Department’s much-criticized practice of forcing companies to cut off legal fees to former executives under investigation, outlined in the 2003 “Thompson memo,” violated the executives’ constitutional rights. Lawyers for former AOL executives John Tuli and Kent Wakeford had advanced similar arguments in their case in Alexandria. Tuli and Wakeford were indicted shortly after AOL entered into a deferred-prosecution agreement with DOJ in December 2004. That agreement helped the company avoid charges of aiding and abetting securities fraud over transactions between AOL and Internet startup Purchasepro.com that were alleged to have artificially inflated earnings at both companies. “You have to wonder whether the decision by AOL wasn’t to prevent the sort of litigation [over legal fees] KPMG is involved in in New York right now,” says Schertler & Onorato’s David Schertler, who represents a PurchasePro executive in the case. U.S. Attorney for the Eastern District of Virginia Charles Rosenberg declined to comment. Wakeford is represented by LeBoeuf, Lamb, Greene & MacRae’s Kerri Ruttenberg and Henry Asbill. Tuli is represented by Steptoe & Johnson’s Mark Hulkower and Bruce Bishop.
Jason McLure can be contacted at [email protected]lm.com.

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