In what is seen as a major blow to the prosecution, U.S. District Judge Lewis Kaplan of the Southern District of New York has tossed from a tax shelter case statements made by two former partners at KPMG because they were found to have been forced into talking to prosecutors. Judge Kaplan wrote in his decision that the coercion took the form of threats to indict KPMG for pushing allegedly illegal tax shelters if it did not stop paying the legal fees of the 16 former employees charged in the case, as a way to get them to talk to prosecutors. The ruling knocks out statements only by Richard Smith and Mark Watson; the judge held that the other 14 former employees did not make a strong enough case for coercion, an act that the judge says violated Smith’s and Watson’s rights to remain silent under the Fifth Amendment. According to the ruling, the pair’s statements cannot be used as evidence. Both the U.S. Attorney’s Office and KPMG denied there was any coercion.
