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Paralleling the U.S. Department of Justice, New York state Attorney General Eliot Spitzer has also pressured companies to stop paying the legal fees of employees who face criminal charges. Spitzer appears to be the only state AG who has raised fee payment as an issue. The AG’s tactics came as a surprise to several white-collar crime experts and leaders of the bar, including officials at the Association of Corporate Counsel and the American Bar Association. Most of Spitzer’s targets are financial institutions swept up in his probe of mutual funds. According to a review of 17 agreements that Spitzer’s office struck with companies accused of market timing, nine settlements included “no indemnification” clauses. These provisions prohibit a business from paying the legal fees of indicted employees unless its bylaws require it. In one instance, Bank of America Corp. agreed to a no-indemnification clause even though its bylaws require it to pay fees. Moreover, the bank had already begun advancing expenses in at least one case. Spitzer’s office declined to comment on the no-indemnification clauses. Spitzer is running for governor of New York, and is far ahead in the polls.

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