[JURIST] A federal judge in Manhattan ruled [opinion, PDF] Tuesday that the US government violated the constitutional rights of 16 former employees of KPMG [corporate website] by pressuring the professional services firm to stop paying the employees' defense costs in an ongoing criminal tax shelters case [JURIST report]. US District Judge Lewis A. Kaplan [official profile] found that the tactic violated the defendants' rights to a fair trial and the effective assistance of counsel under the Fifth and Sixth amendments [text], and he criticized prosecutors for trying to gain an "unfair advantage" in the case. He wrote:

Justice is not done when the government uses the threat of indictment – a matter of life and death to many companies and therefore a matter that threatens the jobs and security of blameless employees – to coerce companies into depriving their present and even former employees of the means of defending themselves against criminal charges in a court of law. If those whom the government suspects are culpable in fact are guilty, they should pay the price. But the determination of guilt or innocence must be made fairly – not in a proceeding in which the government has obtained an unfair advantage long before the trial even has begun.

How Kaplan will remedy the prosecutors' conduct is unclear, although he declined to dismiss the charges against the former employees. They are accused of setting up tax shelters, costing the US government an estimated $2.5 billion in revenue. KPMG has admitted the tax shelters were illegal and has taken full responsibility for the unlawful conduct [JURIST report]. In August 2005 KPMG itself agreed to pay the IRS a $456 million fine [JURIST report] to avoid criminal prosecution for the tax shelters, and agreed to be supervised for three years by a former SEC chairman. AP has more.