In 2003, when he was chief of the Justice Department’s criminal division, Larry Thompson wrote that a factor in whether a company, as opposed to individuals, would be charged with a crime would be the extent of its cooperation, one measure of which “is whether the corporation appears to be protecting its culpable employees and agents,” among other things, “through the advancing of attorneys fees.” Mr. Thompson might well have added lavish severance packages and other forms of hush money to the list.

Image Glenn Mulcaire, an investigator entangled in the phone hacking scandal involving the British tabloid, The News of the World. Credit... Peter Macdiarmid/Getty Images

In 2005, the accounting firm KPMG admitted to creating fraudulent tax shelters that enabled wealthy clients to evade $2.5 billion in federal taxes, and six former partners, including the firm’s former deputy chairman, were indicted. KPMG, as it had in the past, paid their legal bills. All pleaded not guilty and declined to cooperate with the government.

As an accounting firm dependent on public trust, KPMG recognized that its survival depended on the firm’s escaping criminal charges. At a meeting with prosecutors, the firm’s lawyer, Robert Bennett, emphasized that KPMG “had decided to change course and cooperate fully.” The prosecutors zeroed in on the issue of legal fees, with one saying that “misconduct should not be rewarded” and another warning that with respect to legal fees, “we’ll look at that under a microscope,” according to notes taken at the meeting.

KPMG subsequently said it would pay legal fees up to $400,000 as long as employees cooperated and did not invoke the Fifth Amendment but would cease altogether for anyone indicted, including the six former partners already indicted.

Two years later, United States District Judge Lewis A. Kaplan took the drastic step of dismissing the indictments and harshly criticized both the Thompson memo and the prosecutors’ use of it to cow KPMG into terminating the fees to its former partners.

He suggested that this violated the Sixth Amendment right to counsel and ruled that the Justice Department “deliberately or callously prevented many of these defendants from obtaining funds for their defense that they lawfully would have had absent the government’s interference. They thereby foreclosed these defendants from presenting defenses they wished to present and, in some cases, even deprived them of counsel of their choice. This is intolerable in a society that holds itself out to the world as a paragon of justice.”