Ending a century-old tradition, an American Bar Association panel is set to recommend overhauling rules that prevent lawyers and accountants from sharing profits, a shift that will reshape the delivery of legal services in the United States.
The recommendations, which are expected to be adopted by state bar groups across the country, would rewrite ethical regulations that have long barred lawyers from sharing fees with non-lawyers. Consumers can anticipate "one-stop shopping" firms where both legal and accounting advice are offered under one roof.
The report comes after years of sometimes bitter wrangling within the legal profession about how to cope with the gradual incursion of accounting firms. The Big Five accounting companies have been hiring hundreds of lawyers in the past decade, but ethical rules have prohibited these attorneys from offering anything more than consultations and tax tips.
With the market changing rapidly, the ABA has reconsidered its stand against accountants. A panel convened last year by the country's largest legal group has concluded that breaking down barriers that keep non-lawyers and lawyers at a professional arm's length is a good idea for consumers.
"Our view is you can preserve essential values and adjust to conform to changing needs of the profession and society," said one panel member who did not want to be identified.
ABA officials wold not comment yesterday. A news conference unveiling the panel's report is scheduled for Tuesday in Washington.
Lawyers have argued that a fire wall between them and other professions is necessary to insulate them from competition, which they maintain would inevitably lead to ethical corner-cutting that would hurt clients. Rules in all states, though not in the District, prevent lawyers from partnering with non-lawyers.
But critics have complained that the ABA has simply been maintaining a monopoly on the legal services market, a $100 billion-a-year business that accounting firms have been eyeing. Accounting firms, such as Ernst & Young, are today among the largest employers of lawyers in the country.
Panel members were swayed by the example of Europe, where accounting firms and lawyers have been sharing profits for a few years. Others were moved by the testimony of lawyers at small firms -- those with fewer than five lawyers -- who practice in small towns and say clients want the ease and simplicity of one-stop shopping.
"We heard representatives from both consumer and professional groups who gave a strong case about why they should be able to combine with accountants, or financial planners, or with family psychologist or family planner if they do family law," said the panel member.
Critics say the ABA is belatedly ratifying a decision that has already been made by the marketplace. With business increasingly conducted globally, it's become difficult for U.S. law and accounting firms to compete with European rivals who can share profits. Meanwhile, the influx of lawyers to the Big Five accounting operations is fraying consensus at the ABA.
Moreover, state bar groups that discipline lawyers have consistently demonstrated that they have little stomach for punishing attorneys accused of violating the rules against lawyer-accountant commingling. Last summer, a bar group in Texas dismissed charges against lawyers at Arthur Andersen & Co. who had been accused of practicing law without a license.
The ABA panel, called the Commission on Multidisciplinary Practice, heard more than a week's worth of testimony by academics and professionals in three cities over the course of months. According to sources, the panel will recommend that accountants who practice with lawyers abide by the higher confidentiality standards now found in law firms.
Many firms have been gearing up for months to compete with accounting firms, sharpening their marketing pitches and getting ready to mount counteroffensives by hiring accountants.
But other lawyers are decrying the imminent change, contending that clients will be ill served and that thousands of lawyers will soon find themselves answering to corporate bosses and bean counters, a fate similar to that of doctors when managed care caught on. Some worry about a decline of ethical standards.
"I don't think that accountants should be permitted to control legal practices because they're not subject to the disciplinary system of the courts," said Terry Cone, counsel at New York's Cleary, Gottlieb, Steen & Hamilton. "For me, the basic issue is that the legal practice has to be controlled by lawyers."