аЯрЁБс>ўџ +-ўџџџ*џџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџџьЅС` №ПЭbjbjц‡ц‡ .„э„эЭџџџџџџЄ<<<<<<<Ф\ \ \ \ h T Ж€ € € € € € € € ŠŒŒŒŒŒŒ$Сh) А<ь€ € ььА<<€ € ХFFFьF<€ <€ ŠFьŠFF<<F€ t 0зьСVЦ\ 2 FŠл0 FЩ<ЩFFЩ<Z0€ >О ,Fъ $о€ € € АА< € € € ььььTTT„и „TTTи P$tŒ<<<<<<џџџџ KPMG judge criticizes prosecutors Thu Mar 30, 2006 4:34 PM ET By Jonathan Stempel NEW YORK (Reuters) - A federal judge on Thursday accused prosecutors of overreaching in their attempt to show that former KPMG LLP executives sold questionable tax shelters to wealthy clients. Lawyers involved in the case expect U.S. District Judge Lewis Kaplan to reject defendants' calls to dismiss the case. The Manhattan judge, however, faulted what he called the government's "shameful" activity that led the accounting firm not to pay defendants' legal bills, contrary to past practice. He also suggested that prosecutors drop some lesser counts. It is unknown when Kaplan will rule on how the case should proceed. A trial, set to begin in September, is expected to last at least four months. The government is accusing 18 defendants, including 16 former KPMG executives, of scheming to defraud the Internal Revenue Service by setting up bogus tax shelters. The shelters created at least $11.2 billion of fake tax losses for hundreds of wealthy clients, deprived the federal government of $2.5 billion in taxes, and won KPMG at least $115 million of fees, prosecutors said. Thursday's three-hour hearing, in a courtroom with dozens of lawyers and observers filling the aisles and the jury box, came three days after a 19th defendant, former KPMG partner David Rivkin, pleaded guilty to conspiracy and tax evasion. He faces up to 10 years in prison, but may get less depending on how well he cooperates with prosecutors. KPMG agreed last August to pay $456 million, accept an outside monitor and admit to wrongdoing in resolving a federal probe into the shelters. An indictment could have put the smallest of the Big Four accounting firms out of business. Another big accounting firm, Arthur Andersen, dissolved after being indicted over its role in the 2001 collapse of its client Enron Corp. The U.S. Supreme Court last year overturned Andersen's conviction in that case. Among the 16 remaining KPMG defendants are former deputy chairman Jeffrey Stein, former tax vice chairman Richard Smith, and former tax services vice chairman John Lanning. Defendants also include an outside lawyer and an investment adviser. 'FINGER ON THE SCALE' Stanley Arkin, a lawyer for former partner Jeffrey Eischeid, accused prosecutors of using KPMG's deferred prosecution agreement as a sword to stop defendants from arguing that they believed in good faith that the shelters were "more likely than not" lawful. "It corrupts the pursuit of the truth," he said. While Kaplan questioned some of Arkin's arguments, he reserved stronger criticism for lead prosecutor Justin Weddle. Some defendants argued in court papers that prosecutors "pressured (KPMG) not to pay legal fees for any partners indicted on criminal charges, even if they had 'cooperated' with the government." Weddle argued that KPMG's admission of wrongdoing warranted charges against individual defendants. But Kaplan said the government, through its communications, was "depriving people ... potentially ... of counsel." He also expressed confusion about whether prosecutors were arguing that the case turned on allegations of fraud in the shelters' implementation, but not necessarily their design. Weddle declined to comment after the hearing. Michael Kim, a lawyer for former KPMG partner Mark Watson, after the hearing said, "One overriding theme is (Kaplan) thought the government had its 'finger on the scale' when it spoke with KPMG about the fees, and then KPMG decided not to support its former partners though it did so historically." Weddle rejected some defendants' calls to split up the trial, saying "we need to present a full picture to the jury" of a global fraud that lasted several years. Many in the courtroom stirred when he told Kaplan it would take three months to present the government's case, leaving perhaps one month for the 18 defendants to make their cases. 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