A federal judge yesterday dismissed charges against 13 former executives of KPMG in the US.

The executives had been accused of orchestrating a tax-shelter scheme that defrauded the US Government of more than $2 billion (£980 million).

However, the cases against Robert Pfaff, John Larson and David Greenberg, three former KPMG tax executives, as well as two defendants who never worked for the firm, will proceed.

Judge Lewis Kaplan’s ruling was tied to his decision last year that prosecutors had violated the defendants’ constitutional rights to counsel and a fair trial by threatening to indict KPMG if it refused to cut off their legal fees.

KPMG avoided the indictment after it agreed to pay a $456 million fine in April 2005.

‘[The Justice Department] foreclosed these defendants from presenting the defences 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,’ the judge said in a 64-page opinion.

‘The court has reached this conclusion only after pursuing every alternative short of dismissal and only with the greatest reluctance,’ he continued, before adding that the responsibility for the move ‘lies with the Government’.