Interesting article in today’s National Law Journal:  Deferred Prosecution Deal Raises Objections; Attorneys for Indicted KPMG Employees Say Deal Limits Ability to Build Defense, by Leonard Post:

A flurry of motions filed by 19 indicted tax and estate professionals — most formerly with auditing giant KPMG — accuses the government of stacking the deck against them in the deferred prosecution agreement it made with the company.

Last August, KPMG, an audit, tax and advisory firm, became the latest company to defer a prosecution, a relatively new avenue of avoiding corporate prosecution. The option avoided a likely indictment for crimes such as promoting fraudulent tax shelters. Attorneys defending the indicted former employees or partners of these companies complain that the ever more onerous terms contained in deferred prosecutions prevent them from effectively representing their clients. …

In a provision apparently unique to the KPMG agreement, the Justice Department requires that KPMG employees’ statements conform to the statement of facts that the company agreed to when it cut the deal. In the agreement, the company admits that "through the conduct of certain tax leaders, partners and employees," KPMG "promoted and implemented … fraudulent tax shelters" and prepared fraudulent tax returns. That provision also says that an employee who contradicts the statement of facts puts the company in breach of the agreement and at risk of being prosecuted. The definition of "contradictory statement" is determined solely by the prosecution, and the company’s admissions are admissible at trial if it is indicted. To avoid prosecution in such a situation, the company is required by other provisions to repudiate immediately an employee’s contradictory statement and take additional "personnel action for wrongdoing." That means firing anyone who makes a truthful but contradictory statement, alleged Patrick Hall of San Diego’s Seltzer Caplan McMahon Vitek, the attorney for defendant David Rivkin….

No court has ever determined the legality of the tax shelters that are included in the deferred prosecution agreement with KPMG and the indictments. That is a major reason defendants have asked the court to dismiss their cases. Until KPMG entered into the deferred prosecution agreement, they had insisted that their strategies were lawful. Under the agreement’s terms, KPMG must also pay the government $456 million, restrict its tax work to certain areas, implement an "effective" compliance and ethics program, and accept oversight by a monitor appointed by the U.S. Attorney’s Office in New York.