Case Delayed As Defense Lawyer Is Disqualified
By Chad Bray and Amir Efrati
The Wall Street Journal
Friday, October 19, 2007
NEW YORK -- A federal judge in Manhattan delayed the trial of
three former KPMG LLP executives and a onetime Sidley Austin LLP
lawyer yesterday after disqualifying a lead defense attorney in
the tax-shelter case.
U.S. District Judge Lewis A. Kaplan disqualified Steven Bauer,
counsel for ex-KPMG senior tax manager John Larson, after
several closed hearings on potential conflicts of interest.
Opening statements were scheduled to begin next week.
The judge didn't rule on whether Mr. Bauer's law firm, Latham &
Watkins LLP, also should be disqualified "unless and until Mr.
Larson seeks to be represented at trial by someone else at that
Mr. Bauer didn't return a phone call seeking comment.
Last month, prosecutors asked the judge to explore potential
conflicts of interest by Mr. Bauer and David C. Scheper, a
lawyer for former KPMG tax partner Robert Pfaff, as a result of
a joint defense agreement they may have reached with David Amir
Makov, who is a cooperating witness in the government's case and
is expected to testify in the trial.
Prosecutors then asked the judge to preclude Mr. Bauer from
cross-examining Mr. Makov based on evidence that he had acted as
counsel to Mr. Makov early in the government's investigation.
"A lawyer cannot attack his former client through
cross-examination or argument to the jury" because of his "duty
of continuing loyalty" to that former client, prosecutors said.
The government also raised the possibility that Mr. Bauer "may
be viewed as having participated in the preparation of, or at a
minimum having been aware of," false statements and testimony
Mr. Makov made to prosecutors in 2004 and 2005. In court
filings, Messrs. Larson, Pfaff and Bauer denied the government's
Mr. Larson, Mr. Pfaff, former KPMG tax partner David Greenberg
and ex-Sidley Austin lawyer Raymond J. Ruble are accused of
participating in a scheme that allowed people to avoid paying
billions of dollars in taxes to the Internal Revenue Service
through the use of tax shelters. The men, who have been charged
with conspiracy and multiple counts of tax evasion, have denied
Write to Chad Bray at
firstname.lastname@example.org and Amir Efrati at