CORPORATE CRIME REPORTER
Comey
Put Kibosh on KPMG Criminal Case – Report
19 Corporate Crime Reporter
44(11), November 10, 2005
Earlier this year, federal prosecutors in Manhattan wanted to stick a criminal
charge to KPMG for obstructing a criminal investigation into abusive tax shelters.
But they were overruled by officials at the Justice Department in Washington,
D.C.
That’s according to a report in the current issue of Corporate Counsel
magazine.
The magazine reports that former U.S. Attorney David Kelley “had convened
a grand jury and appeared determined to indict the company as much for its cover-up
tactics as for its tax shelters.”
But KPMG went over Kelley’s head to then Deputy Attorney General James
Comey – Kelley’s predecessor as U.S. Attorney in Manhattan.
Citing unnamed sources, the magazine reports that Comey “ordered”
Kelley to enter into a deferred prosecution agreement with KPMG, a decision
that saved KPMG from a criminal conviction and a possible Andersen-like corporate
death sentence.
In an interview with Corporate Crime Reporter, Kelley refused to discuss
the KPMG negotiations.
When asked about the report in Corporate Counsel magazine, Kelley said
this:
“You are talking details from one side of the table, without the contribution
of people sitting on my side of the table,” Kelley said. “It would
be completely inappropriate for people to either confirm or discuss anything
concerning internal discussions we had either in my office or with the Justice
Department on KPMG. What I will say is what I have said before – KPMG
was a difficult case. At the end of the day, the Justice Department –
Washington and New York – came forward with a just resolution of that
case, with regard to the entity.”
But Kelley, who is now a partner at Cahill Gordon in New York, defended the
Justice Department’s move toward deferred prosecution agreements.
“A deferred prosecution isn’t necessarily painless,” he told
Corporate Crime Reporter. “While it may permit a corporation
to survive, it is very painful. You suffer damage to your reputation, you suffer
likely changes to your corporate structure, you’ll have the burden of
the government on your back for some time in terms of close scrutiny and monitors
and the like.”
But at the same time, Kelley warned defense attorneys about the dangers of believing
that a deferred prosecution is a sure outcome of a major corporate criminal
investigation.
“I don’t know that I would look at it as a trend, as a flavor of
the month,” Kelley said. “If you look at it as a trend, you will
be lulled into a sense of complacency, thinking that – if my corporate
entity gets into trouble, it won’t be that big of a deal, because I’ll
get a deferred prosecution.”
(For a complete transcript of the question/answer format interview with Kelley, see Interview with David Kelley, Partner, Cahill Gordon, New York, New York, 19 Corporate Crime Reporter 44(10-16), November 14, 2005, print edition only.)
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