[JURIST] US District Judge Lewis Kaplan [official profile] indicated Monday that he may reconsider a 2006 ruling in which he threatened to dismiss all charges in an ongoing criminal tax shelters case [JURIST report] against former employees of the accounting firm KPMG [corporate] because federal prosecutors violated constitutional rights of the defendants [JURIST report] by pressuring KPMG to not pay for their legal fees. Prosecutors, who had threatened to indict the firm if it continued to provide legal costs for the defendants, last week proposed dismissing charges against 12 of the 18 defendants so that the prosecution could continue. The proposal prompted Kaplan to say that he might not remedy the prosecutors' conduct by dismissing the case, although he remains undecided on the matter.

Last July, Kaplan suppressed statements made by two partners [order, PDF; JURIST report] because prosecutors had improperly coerced the defendants with excessive financial pressure and also forced KPMG to threaten to fire employees that did not cooperate with the investigation. The defendants are accused of setting up tax shelters, costing the US government an estimated $2.5 billion in revenue. KPMG has admitted the illegality of the tax shelters and has taken full responsibility [JURIST report], agreeing to pay the International Revenue Service a $456 million fine [JURIST report] to avoid criminal prosecution. KPMG also agreed to be supervised by a former SEC chairman for a period of three years. The International Herald Tribune has more.