NEW YORK (Reuters) - A U.S. appeals court has upheld the dismissal of criminal charges against 13 former executives at KPMG, saying prosecutors violated the defendants' rights by pressuring the accounting firm not to pay their legal bills.
The ruling on Thursday came the same day the U.S. Justice Department announced new guidelines to rein in prosecutors' tactics in corporate crime cases that had been criticized by some politicians and business groups.
Critics have accused the government of going too far to press companies to cooperate in criminal probes or else risk indictment, such as demanding that businesses waive attorney-client privilege or stop paying attorney fees for employees under investigation.
The decision, by the U.S. Court of Appeals for the Second Circuit, also deals a blow to what had been touted at one time as the largest-ever criminal tax prosecution. Several other defendants in the tax fraud case who were not part of the appeal are still set to go on trial, but the case is now much smaller than it was when first announced in 2005.
In the ruling, a three-judge panel of the appeals court found that federal prosecutors inappropriately pressured KPMG to refrain from paying the legal fees of 13 former partners.
The decision upholds the principle that prosecutors "can't play dirty," said Stanley Arkin, a defense lawyer for one of the defendants, Jeffrey Eischeid.
The court "did the exact right thing," Arkin said. "It's a lesson to prosecutors all through this country that they have to be fair before they become ferocious."
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