Court denies arbitration of fee dispute in KPMG criminal tax case

In the massive criminal tax case against seventeen former partners and employees of KPMG, KPMG declined, under severe pressure from the government, to pay the attorneys' fees of the defendants. The District Court permitted the defendants to add KPMG as a defendant, and assert a claim against it for fees. The Court recently denied KPMG's motion for summary judgment, and set the claims seeking the advancement of fees for trial on an expedited basis. United States v. Stein, Case No. 05-crim-0888 and 06-civ-5007 (USDC S.D. N.Y. Sept. 6, 2006). The Court rejected KPMG’s contention that the fee issue was subject to arbitration under the partnership agreement, in part because not all of the defendants had been partners, but also on public policy grounds, due to the severe disruption that such a course would necessarily have had on the pending criminal case. This opinion may become of interest to reinsurers to the extent that there are criminal charges filed relating to finite reinsurance matters.


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