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On July 16, when federal district court Judge Lewis Kaplan dismissed criminal charges against 13 former KPMG partners indicted in the government’s massive tax shelter fraud case, he beamed a bright light on a subject that is usually very private: the cost of defending a complex corporate fraud case.

As part of his own fact-finding, Kaplan had asked defense lawyers for their actual and projected costs. His decision to dismiss was rooted in what he found: a growing gap between what defendants were able to pay and what they needed for a full defense. By prodding KPMG to end its longtime practice of advancing employees’ legal fees, he concluded, the government had irreversibly damaged the defendants’ ability to defend themselves. Eighteen submissions were filed by individual defendants and their counsel; even though most were filed under seal, the judge cited or referred to all of them to varying degrees in that ruling. Twenty-one months into the case, through early July, all the defense firms had spent at least $500,000, and one tab was up to $3.6 million, Kaplan wrote. The defendants, he found, couldn’t afford their defense.

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