Enron and multidisciplinary practice: No thanks
By Thomas Van Flein
In the last few years there has been discussion and perhaps even some controversy regarding limitations on the practice of law relative to partnerships with other professions, such as accounting.
The ABA stated that the 'most important issue to face the legal profession this century' is the proposed 'expansion of professional service entities, principally accounting firms, into the practice of law.' The Washington State Bar Association noted that '(i)n many foreign countries, accounting firms are permitted to offer legal services to the firm's clients. There are a number of large international accounting firms (e.g., PriceWaterhouseCoopers, Ernst and Young, Arthur Andersen) openly expressing their desire to become legal service providers around the world. Their goal is to provide legal services along with the traditional accounting services accounting firms currently provide.'
With the Enron debacle still coming to light, the whole story remains to be told. What is clear so far is that accounting firms such as Arthur Anderson, in their zeal to provide all services to a client (business consulting and supposedly independent auditing, and now legal services), face insurmountable conflicts of interest. No lawyer or law firm could retain true independence in providing legal advice if the other 'partners' who are providing business and marketing advice also have a say. What is sound legal advice is often not good business marketing. When the lawyer speaks up with advice that the 'business consultants' don't want to hear, whose advice will the client follow? And when things go sour and allegations of negligence and fraud are made, the lawyer and law firm, now partnered up with consultants and accountants, will be listed as a defendant along with the others, irrespective of the advice the lawyer wanted to give.
The first Alaska Bar ethics opinion ever issued stated that it would not be unethical for a law firm to have a branch office 'in the same suite as an insurance business so long as care is taken to prevent the insurance business from becoming a means of directing legal business to the law firm.' Ethics Op. 68-1.
So, 34 years ago the issue was whether a law firm could even share the same building or office with a non-law firm; today the question is whether they should just go into business together. The Alaska Bar at that time stated that an 'association between a lawyer and a public accountant is unethical only when it is or could be used as a ëfeeder' of legal business to the lawyer, as an indirect method of advertising the lawyer's services, or as a method of sharing fees or responsibility for legal business between the lawyer and a layman.' Ethics Op. 68-1. That, of course, is exactly what multidisciplinary practice advocates seek.
Those in favor of multidisciplinary partnerships focus on the potential for improving client service and providing a choice for legal consumers. They contend that improved client service, along with access to a wider range of resources and technology, plus the inclusion of diverse individuals with different areas of expertise should work well together.
Those opposed to multidisciplinary partnerships stress the role of the lawyer as requiring independent judgment. The New York State Bar Association Commission's report on multidisciplinary practice stated that a law firm may be disqualified from representing a client under our standards for conflicts of interest, but under accounting standards (AICPA rules) an accountant may not be required to be disqualified. The Alaska Bar Association has repeatedly stressed the need for lawyers to retain their independent judgment, reasoning that '[i]n all cases, the lawyer . . . must maintain his or her professional independence, and exercise professional judgment for the sole benefit of the client.' Ethics Op. 99-3.
Whatever the potential benefits a multidisciplinary practice could theoretically provide, the potential harm is far greater, particularly to our profession. Somebody has to remain independent. Somebody has to be willing to say, 'No, this is not a good idea, perhaps we should not shred the evidence; perhaps we should not hide our losses and artificially inflate our profits.' Lawyers have traditionally served their clients well in this regard, and economic expediency is not a good reason to trash hundreds of years of independent thought and deliberative analysis.
As for lawyers joining a multidisciplinary practice, 'just say no.'