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The KPMG Tax Shelter Case and the Right Against Self-Incrimination

By Laurence A. Urgenson and Jason P. Hernandez
September 24, 2008

In a much anticipated opinion, the Second Circuit has affirmed the dismissal of an indictment against 13 former partners and employees of the accounting firm KPMG, who were charged with creating fraudulent tax shelters. United States v. Stein, — F.3d –, 2008 WL 3982104 (2d Cir. Aug. 28, 2008). The appeals court agreed with District Judge Lewis Kaplan that prosecutors' coercive tactics designed to induce KPMG's refusal to pay for the defendants' legal fees constituted a violation of their Sixth Amendment right to counsel. In addition, Judge Kaplan had found that some of the defendants' Fifth Amendment rights against self-incrimination were violated when KPMG employees were told that if they did not answer the government's questions, their employment would be terminated and/or that the firm would cease advancing legal fees to them.

The Second Circuit did not reach the Fifth Amendment question, but we do here. We conclude that Stein strengthens the argument of employees that their Fifth Amendment rights have been violated when they are coerced by their employers ' acting as agents of the government ' to cooperate with government investigations.

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