The Accountants Are Coming!
In the late 1990s, our profession was presented with yet another challenge to its well-being (and that of the public it serves) in the form of a threatened…
June 28, 2019 at 11:57 AM
4 minute read
In the late 1990s, our profession was presented with yet another challenge to its well-being (and that of the public it serves) in the form of a threatened invasion by what was then the “Big Five” public accounting firms. In countries that permitted lawyers to practice with non-lawyers, those firms had begun to incorporate legal services into the portfolio of accounting, auditing and consulting services they already offered. They touted the “one-stop shopping” they could then offer to their corporate clients through their new “multi-disciplinary practices,” and apparently business consumers of legal services found that attractive.
By 2011, KPMG and PwC were the eighth and ninth largest “law firms” in the world, and they, and their sister firms, were preparing to take their new concept to the United States with an aggressive campaign to change the rules prohibiting such practices here. But then came the Enron scandal, which lead to the demise of Arthur Andersen, the largest of the Big Five; remedial legislation to tame the accounting profession; and a pull-back from their plan to bring the multi-disciplinary practice concept to this county.
But none of that deterred what became the “Big Four” from growing the legal services they offered in the countries where they had already planted that flag. And grow they did. Ernst and Young now has 2,100 attorneys practicing employment law and doing mergers and acquisitions in 80 countries. Deloitte first entered into an “alliance” with a large immigration law firm in London and then bought the firm. Big Four legal departments are now among the top ten largest law firms in France, Italy, Russia and Spain.
But that growth has not satisfied them. They have now refocused their attention on the $275 billion legal services market in the states, with the intention of revisiting their earlier invasion plans. Last year, PriceWaterhouseCoopers established a beachhead by opening its own law firm in Washington, D.C., which only shortly before then had amended its Rules of Professional Conduct to permit non-lawyers to own law practices.
But deeper advances into the traditional legal market in this country by the Big Four currently encounter at least two obstacles. The Sarbanes-Oxley Act, adopted in the wake of the Enron debacle, precludes public accounting firms from offering legal services to their audit clients (although that restriction would not apply to non-audit clients). But the real bulwark holding back the Big Four and other accounting firms from adding the practice of law to their list of professional services offered is the ABA Model Rules, which still prohibit multi-disciplinary practices in most states.
That bastion is, however, now under siege. Some members of the ABA House of Delegates have proposed revisiting the rule changes drafted but not adopted during the last assault by the public accounting firms. Those proposed amendments would have permitted multi-disciplinary practices—but under strict regulations. Those who advocate the resurrection and adoption of those rule changes point to the thousands of lawyers now employed by the Big Four—allegedly not “practicing law” but performing the same services lawyers in private practice provide. They should be made subject to all the ethical regulations applicable to lawyers, the proponents of the rule change maintain.
But that argument completely misses the real issue. There is a reason for the rule prohibiting lawyers from practicing law with non-lawyers, and we addressed that issue previously when we warned against the so-called “alternative business structure” concept, which permits non-lawyers to own law practices and which was adopted by the legal profession in the United Kingdom and Australia several years ago. Simply stated, the absolute loyalty a lawyer owes his client cannot be compromised by the profit motives driving the decision making of the non-lawyer controlling that attorney. Yet that is precisely what happens with all those thousands of lawyers already working for the Big Four, where they indisputably practice law notwithstanding protestations to the contrary. Non-lawyers control their practice, and that—as we have previously editorialized—is wrong.
The solution then is not to modify the Model Rules to condone and sanction what is now being done in violation of the existing regulations. The answer is to stop the Big Four from practicing law in flagrant violation of the rules. And to be ever vigilant in guarding against the Big Four infiltrating the legal profession in our country with their “full service” business model.
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