The accounting firm KPMG asked a federal appeals panel yesterday to rule that a district judge could not compel the firm to pay the legal fees of former executives facing criminal charges in a tax-shelter fraud investigation.
Appearing before a three-judge panel of the United States Court of Appeals for the Second Circuit, a lawyer for KPMG, Sheila L. Birnbaum, argued that the district judge, Lewis A. Kaplan, did not have the authority to conduct a proceeding on legal defense costs. The matter should instead be decided by an arbitration panel, as set out in the firm’s partnership agreement, Ms. Birnbaum said.
In June, Judge Kaplan found that prosecutors violated the constitutional rights of 16 former KPMG executives by putting undue pressure on the firm not to pay their legal fees. The former partners have since pursued a civil action before Judge Kaplan, seeking advance payment toward those costs.
Last week, the judge indefinitely delayed the criminal trial, saying the fee dispute would probably not be decided before the trial was scheduled to start in January.
But David Spears, a lawyer for a former vice chairman of KPMG, Jeffrey Stein, argued yesterday that the circuit judges did not have jurisdiction to hear KPMG’s appeal and that a trial on the fee dispute before Judge Kaplan was the proper way to proceed.