As previously discussed here, on July 2, 2007, Judge Lewis Kaplan of the S.D.N.Y. requested, to assist in his decision on defendants' motions to dismiss, that the federal prosecutors in the KPMG tax shelter case estimate the reasonable costs of a defense for the KPMG partners. The U.S. Attorney's office recently responded. Unsolicited by the Court, counsel for eight of the separate defendants also provided their estimates of what a reasonable defense would cost: between $10 and $44 million per individual.
In response to Judge Kaplan's July 2 request, federal prosecutors stated that they were "not in the position to answer" such a question, explaining that "[t]he Government is not aware of any court decision or other authorities discussing how to determine, in advance of trial, what level of legal fees and expenditures would be 'reasonable' in a criminal case . . . . Accordingly, we respectfully believe it would be inappropriate for the Government to opine on the questions posed by the Court." Nonetheless, prosecutors pointed out a number of factors they consider relevant to the estimate and noted that former Enron CEO Jeffrey Skilling spent $70 million on his defense, while former HealthSouth CEO Richard Scrushy spent $21 million on his. A full copy of the federal prosecutor's letter is attached here.
According to the New York Law Journal, although the Court had not requested estimates of the costs of defense from defense counsel, a number did provide estimates anyway. Defense counsel's submissions, which are not yet publicly available at the time of this writing, apparently include fees incurred in other high profile cases and provide estimates for their clients. Among the other amounts in defense costs reportedly mentioned by defense counsel were those of former Enron Chairman Kenneth Lay ($25 million) and former Cendant Vice Chairman E. Kirk Shelton ($24 million). As to their own clients, defense counsel's estimates for a reasonable defense reportedly ranged from $10 million (Jeffrey Stein, represented by Spears & Imes) to $38-44 million (John Larson and Robert A. Pfaff, represented by Latham and Watkins and Overland Borenstein respectively). Among the factors defense counsel reportedly identified as contributing significantly to the high costs of these estimates were the volume of documents at issue in the case (estimated at 15-22 million pages), the likelihood of a lengthy trial ( currently estimated at 6 to 8 months), expert witnesses and consultants (including electronic evidence consultants and forensic accountants) and the risk of appeals and retrials.