Summary of the Testimony of Thomas O. Verhoeven
Before the Multidisciplinary Practice Commission
The next presenter was Thomas O. Verhoeven, a Rechtsanwalt (lawyer) member, resident in New York City, of the German multidisciplinary partnership of Oppenhoff & Radler. The firm consists of 280 fee-earners, including accountants, tax advisors and lawyers, most of whom are in Germany. All those in New York are lawyers. With its affiliation with the Linklaters group in 1998 it will be one of the largest firms in Europe. Germany had almost always accepted that a lawyer could function at the same time as a CPA, tax advisor or patent lawyer. Thus there were never restrictions against a lawyer with a CPA holding herself out as a lawyer/CPA. In 1961 an accounting firm partner, who also was trained as a lawyer but not admitted to the Bar, applied to the Bar and was denied admittance because he was linked to the accountants. He took the issue to the German Supreme Court, which stated that if someone can himself be a lawyer and accountant, there is no reason why he should be banned from being a lawyer on one hand and an accountant in partnership with other accountants on the other? Initially, however, he could not share fees with his accounting firm partners and they had to bill separately. The German Federal Attorney-at-Law statute, as amended in 1994, allows Rechtsanwalts (attorneys) to partner with Patenanwalts (patent lawyers), Wirtschaftprüfer (auditors/CPAs), Steuerberaters (tax advisors) and similar professionals. The amendment also allows German lawyers to partner with foreign lawyers to create international partnerships. These international partnerships also can include CPAs from other jurisdictions. The German statute now allows full fee sharing within the partnership.
Anwaltnotars (civil law notaries) are trained lawyers, commissioned by the state. One of their main official functions is to be independent (not to advise only one party). In some parts of Germany lawyers can only be notaries. In other parts, especially in the Prussian part of Germany, you can be a lawyer and notary at the same time. Mr. Verhoeven’s firm recently won an appeal by its civil law notaries/lawyers in the German Constitutional Court. The Constitutional Court found that if Parliament prohibited lawyer-accountant partnership it must do so with equal treatment, but as the law permitted partnership between lawyers and tax advisors, the Court found the prohibition against partnership with accountants to be unequal treatment. There is now a law that allows lawyers to partner with accountants and tax advisors. Mr. Verhoeven said that if a lawyer determines that there is a conflict of interest or a confidentiality constraint, that determination applies to all other partners in the firm, such as a CPA or a tax advisor. If there are inconsistencies on these issues among the rules of the professions of the members of an MDP, the most stringent ethical rule is applied. The German legal profession doesn’t discern a lot of conflicts.
Questions were directed to Mr. Verhoeven. What standard is applied if professional rules are in direct conflict as, for instance here in the U.S., the confidentiality standards in New Jersey (pro disclosure) and California (pro confidentiality) upon discovering fraud? In Germany confidentiality is not part of the ethics rules, it is part of the penal code and the same standard is applied to lawyers, doctors, accountants and others. To the MDP control question the Rechtsanwalt responded that his firm does not allow accountants to give a legal public certificate to a company for which the firm has rendered legal advice. This is part of the Oppenhoff partnership agreement, however, and is not necessarily a standard in Germany. There is no prophylactic rule against doing legal work in connection with an audit engagement. He said there should be - the government should step in to assure that a firm that gives a certificate that protects the public should be prohibited from doing anything else for that client. Upon further questioning, however, he admitted to what he presented as a comparable situation - his firm second chairing the legal defense of a contract it drafted. He sees the business interest in forming an MDP not to combine audit and legal work, but to combine consulting and legal work. He described his MDP firm as a law firm with other fee earners, and described accounting firms as its chief competitors as they advise, incorporate entities and draft legal documents. Accounting firms, in fact, can do just about anything in a commercial matter. Mr. Verhoeven considered that to be eligible to partner with a lawyer a person must adhere to the same legal confidentiality standard as determined by statute and caselaw. He listed doctors, accountants, tax advisors, and priests as examples, although he stated that doctors and people who are engaged in some kind of trade can not be affiliated with lawyers. In-house lawyers in Germany do not afford confidentiality and privilege to their employer’s work, as they are considered employees and do not view the employer as their client.