The argument by Assistant U.S. Attorney Karl Metzner - and an assurance that the government was ready to give the defendants as long as necessary to prepare for trial - were met with resistance and a chuckle from Judge Dennis Jacobs of the 2nd U.S. Circuit Court of Appeals.

"What you're describing - to take all the time needed - is something that would leave these defendants not knowing what their status is for a year or more. One reason why they would need more time is because they didn't have the lawyer of their choice," Jacobs said.

Last year, U.S. District Judge Lewis A. Kaplan threw out conspiracy and tax evasion charges against 13 former employees of the global tax firm in a landmark tax shelter case. Charges remain against four other people.

Kaplan ruled that the government coerced KPMG to limit and then cut off its payment of the employees' legal fees.

Kaplan also found that the Justice Department threatened the company with indictment and destruction if it did not fully cooperate. KPMG LLP has signed a deal admitting its role in the tax shelter scheme, but avoided criminal prosecution by cooperating and paying a $456 million fine.

Lawyer John S. Martin Jr., a former federal judge, urged the appeals court to uphold Kaplan's findings, saying the government "used KPMG to strip these defendants of their constitutional rights."

Metzner, however, argued that the government did not force KPMG to change a decades-old practice of paying for employees' legal representation.

Stanley Arkin, who represented one of the defendants whose case was dismissed, said cutting off the millions of dollars in legal fees KPMG would have paid for each defendant had made it impossible for the men to get fair trials.

"My defense has been crippled," he said, saying he was unable to hire experts and investigate the charges himself because his middle-class client did not have the money to mount a proper defense.

Metzner asked the three-judge panel to reinstate the case, saying there was still plenty of time for the defendants to properly mount a defense and for KPMG, if it wished, to pay for it.

But Jacobs said KPMG may now be less inclined to pay the legal fees if it thinks doing so might improve the chance the cases will be allowed to proceed to trial.

"Time has moved forward," Jacobs said.