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August 04, 2004


Want leniency for your business? Knife your workers

From the WSJ: "Jeffrey Eischeid, a onetime star at accounting giant KPMG LLP, is bracing for possible criminal charges that could land him in federal prison for more than two decades. His offense? Marketing tax shelters that KPMG said were legal....

"Until recently, the accounting firm staunchly supported both its tax shelters and Mr. Eischeid, whom it sent to Congress to defend the shelters. But this year the firm, which like Mr. Eischeid is at risk of a fraud or conspiracy indictment over the tax shelters, switched strategies. It placed Mr. Eischeid, a 46-year-old partner, on leave, then asked him to resign. And it refused to pay his legal costs unless he agreed to cooperate with the prosecutors, where anything he said could be used against him."

Why did it pull the rug out from under him? New federal sentencing guidelines menace companies with huge penalties unless they cooperate with prosecutors in a variety of ways. Critics, including attorneys who represent employees under investigation, say recent changes in the sentencing rules "encourage companies to break faith with their own employees, making it harder for them to avoid self-incrimination. The critics say that companies, to avoid facing charges themselves, now sometimes feel obliged to fire people, snitch on them, refuse to pay their legal fees, and withhold documents they need." ("Prosecutors switch tactics, turning firms against workers", Wall Street Journal/Toledo Blade, Jun. 13).

Posted by Walter Olson at 12:02 AM | TrackBack (0)



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