In the past three years, federal prosecutors in New York, Alabama and, now, Concord, N.H., have pursued a strategy that puts companies at risk of being branded as uncooperative if they don't cut off such payments. Lawyers say that could be tantamount to convicting defendants before they have even had a trial, since they can't properly defend themselves.

"If companies don't cooperate with the government, they can face a death penalty by being indicted," says Ellen Podgor, a professor at Stetson University College of Law. She adds that companies fear becoming the next Arthur Andersen LLP, which imploded shortly after its indictment in 2002 for allegedly obstructing the government's investigation of fraud at Enron Corp. (The accounting firm was later convicted of obstruction, but the Supreme Court overturned the verdict last year.) "Prosecutors can now force individuals to pay their own attorneys' fees," Prof. Podgor says, "and corporations have to go along."

Justice Department spokesman Brian Roehrkasse counters that "the government does not force corporations to do anything." If a company declines to advance fees, he adds, "that is a business decision made after weighing all of the costs and benefits of cooperation."

The cost of a trial is out of the financial reach of many white-collar defendants. "It is hard to defend a white-collar case for less than $100,000, and most cost much, much more than that," says John Hasnas, a professor at Georgetown University's McDonough School of Business.

In the New Hampshire case, five former executives of technology company Enterasys Networks Inc. charged with accounting fraud were set to stand trial in Concord this month but got a three-month reprieve after federal prosecutors were accused of misconduct. Government lawyers pressured the company to cut off legal fees to the defendants to weaken the employees' ability to fight the charges, defense lawyers allege in court filings.

New Hampshire U.S. Attorney William Morse, the lead prosecutor in the case and one of three accused of misconduct, denies wrongdoing. In pretrial testimony, when asked why he inquired about the company's payment of legal fees, he said, he simply wanted to inform Enterasys that the "payment of attorneys' fees for defendants was something that the Department of Justice had instructed its line prosecutors to consider" when assessing a company's cooperation with prosecutors. In an interview, he says, "Enterasys's decision to stop paying legal fees had nothing to do with government pressure." He says that he last spoke to Enterasys about the reimbursement of fees in the summer of 2004, and that the company didn't cut off funding until a year later.

Mr. Morse says he notified the Justice Department in 2004 that he had asked Enterasys about its payment of legal fees. He says he made the inquiry to determine whether the company was living up to its cooperation agreement. The Justice Department approved his actions, he says. A Justice Department spokeswoman declines to comment.

At a March 7 hearing, U.S. District Judge Paul Barbadoro, who is presiding over the trial, voiced concern that prosecutors had wrongly pressured Enterasys to cut off funding to the defendants. Nevertheless, he didn't sanction the prosecutors, and Enterasys reluctantly agreed to pay past-due legal bills and cover future costs.

The fee-payment issue has gained prominence in recent years, following a 2003 U.S. Justice Department memo that advised prosecutors to credit companies that cooperate with the government in an effort to avoid indictment. The memo, written by former Deputy Attorney General Larry Thompson, advises that a company's willingness to advance legal fees to "culpable employees" may signal a lack of cooperation. A spokesman for PepsiCo Inc., where Mr. Thompson is now the general counsel, says he wouldn't discuss the memo.

Until now, the nonpayment of legal fees has been most heavily debated in the government's ongoing tax-shelter case against former executives of KPMG LLP, which is scheduled for trial in New York in September. Yielding to government pressure, the accounting firm hasn't reimbursed these executives since 2004 in what Stanley Arkin, an attorney for one of the defendants, calls "a way of unfairly breaking down the defendants' ability to resist the government." KPMG declines to comment.

In their investigation of accounting fraud at HealthSouth Corp., federal prosecutors informed the company that the payment of fees to indicted executives would be viewed as a sign of noncooperation, according to lawyers in the case. The company later withheld fees to former chief executive Richard Scrushy, the only indicted executive who pleaded not guilty to federal charges. A jury in Birmingham, Ala., acquitted him of fraud in 2005.

Federal prosecutors also encouraged Symbol Technologies Inc. to withhold fees from executives charged in an alleged accounting fraud at the New York maker of bar-code scanners, according to company counsel Andrew Levander. Last month, in Central Islip, N.Y., U.S. District Judge Leonard Wexler ended the trial of three former Symbol executives after jurors said they were deadlocked.

Symbol was able to pay the executives' fees after it convinced prosecutors that company bylaws required it to do so, Mr. Levander says. "The government is not sensitive to the fact that a failure to indemnify can harm a company's ability to attract talented officers and directors in the future," the lawyer says.

Enterasys, based in Andover, Mass., makes wireless products and computer hardware. It was spun off by Cabletron Systems in 2000 and co-founded by New Hampshire Gov. Craig Benson before he went into politics. Gov. Benson hasn't been charged with wrongdoing. The executives, whose trial is set for June, are accused of artificially inflating revenue in 2001. Four other top executives, including the company's chief executive, have pleaded guilty to charges relating to accounting fraud.

Enterasys has agreed to cooperate with the government's fraud investigation, according to company lawyer Harvey Wolkoff. In 2004, prosecutors encouraged Enterasys not to pay the defendants' legal bills, in order to comply with its cooperation agreement, according to Mr. Wolkoff.

The law in Delaware, where the company is incorporated, authorizes Enterasys to advance legal fees to the defendants. Still, prosecutors asked Enterasys to contest the law. It was an appropriate request, says Mr. Wolkoff: "If [the defendants] did something criminal, why should" their legal fees be reimbursed?

The Enterasys defendants asserted in court filings that they have been hampered from proving their innocence by a lack of funding. In a February filing, the defendants claimed Enterasys stopped paying their legal fees in the summer of 2005, hurting their ability to investigate the backgrounds of witnesses and to review "voluminous" documents. Prosecutors have pressured Enterasys to cut off fees in order to "gain a substantial advantage at trial," defendants asserted in the filing.