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A federal judge lacks the power to hear claims by indicted former KPMG executives that the accounting giant must pay for their defense in a massive criminal tax shelter prosecution, the 2nd U.S. Circuit Court of Appeals ruled Wednesday.

Southern District of New York Judge Lewis A. Kaplan, who is handling the criminal case, last year blasted the government for pressuring KPMG to withhold or stop paying legal fees of indicted former employees. He claimed ancillary jurisdiction over the fees issue, encouraging KPMG defendants to file civil claims in his court to remedy what he regarded as constitutional violations.

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