It marked a stinging rebuke to federal prosecutors here and the Justice Department’s approach to corporate prosecutions as a whole.
In a narrow sense, the ruling means that more than a dozen former KPMG partners and employees under indictment can now have their legal costs paid upfront by the accounting firm.
But more broadly, the ruling strikes at the Justice Department’s policy for determining whether to bring charges against corporations. That policy, known as the Thompson Memorandum, was written after the indictment and collapse of the Arthur Andersen auditing firm. It sets out the conditions prosecutors should take under advisement when deciding whether to bring criminal charges against a corporation.
In order to avoid prosecution for suspected criminal wrongdoing, the memorandum states, a corporation has to show that it is cooperating fully with the Justice Department’s investigation. If the corporation is paying the legal fees of employees under investigation, prosecutors could view that as being less than fully cooperative.