October 05, 2011

Oral Testimony of the Co-Chairs of the National Conference of Lawyers and Certified Public Accountants - Center for Professional Responsibility

Oral Testimony of the Co-Chairs of the National Conference of Lawyers and

Certified Public Accountants,

Irwin L. Treiger representing the ABA and

William J. Lipton representing the AICPA

The Co-Chairs of the National Conference of Lawyers and Certified Public Accountants, Irwin L. Treiger representing the ABA and William J. Lipton representing the AICPA, spoke next to the Commission. As well as being a CPA and a member of the AICPA, Mr. Lipton is licensed to practice law in New York and is a member of the ABA. A joint conference of the ABA and the AICPA, the National Conference consists of nine members appointed by the president of the ABA and nine members appointed by the president of the AICPA, with a co-chair from each of the two professions. The National Conference meets twice a year and circulates papers on occasion. They arrived at a consensus position on the multidisciplinary practice issue the weekend before and it was presented in their written statement. Mr. Treiger listed among the issues surrounding lawyers practicing in a multidisciplinary setting, whether the ethics rules should be applied at the firm level and the attorney level or merely at the individual attorney level, where the regulatory authority should lie with respect to lawyers delivering legal services in a MDP firm and the obligations of lawyers in MDP firms to the public with respect to pro bono services. He said the National Conference had not had an opportunity to discuss these issues or to analyze the Commission’s hypotheticals and intended to do that at its May meeting and offer their thoughts and possible recommendations to the Commission. He counseled that time is not an ally of the Bar in this exercise as lawyers have not been on the same playing field as accountants for the last few years. The Chair sought (and got) confirmation that the National Conference’s prepared statement was unanimous (it was) and that it, in capsule form, recommended a relaxation of Model Rule 5.4 and an appropriate adjustment of the other applicable rules.

Professor Daly was told the National Conference had not taken a position on the compatibility of MDP participants question. Asked about any problems lawyers and accountants from different practice environments might find with MDPs Mr. Treiger said he found, from discussions, that very many people thought multidisciplinary practice would be very beneficial to lawyers from smaller firms. Mr. Lipton concurred and added that most of the AICPA is not comprised of members from the Big Five and providing more value to clients is an opportunity for CPAs and lawyers regardless of the size of the firm. Dean Powell asked, as a follow-up to Mr. Lipton’s premise that the marketplace is a control point with respect to the responsibilities of lawyers operating in MDPs, over what period of time the marketplace is going to be an effective regulator. That is, he questioned whether it isn’t the responsibility of a profession to write rules that represent an ideal aspired to and that may cost or be against what the marketplace considers an acceptable standard. Mr. Lipton responded that he didn’t quarrel with that characterization but that he opposed rules that are so paternalistic that they present the profession as knowing better than the sophisticated client. Dean Powell also questioned Mr. Lipton about the position that the increasing use of conflict waivers confirms a need to change the ethics rules, contending that isn’t increased use of waivers indication that lawyers are thinking seriously about conflict situations and disclosing them and getting conflicts waivers where appropriate. Mr. Lipton said the National Conference framed the question as whether or not it’s an efficient process. Asked by Mr. Rosner what he thought about a regulatory scheme that would regulate MDP firms, qua firms, Mr. Treiger, presenting his personal opinion, said a series of rules that apply to a firm might be appropriate but not in all respects as he thinks there still need to be certain rules that apply at the individual lawyer or accountant or actuary level. Mr. Rosner asked Mr. Lipton whether the difference between the level of client sophistication of the High Street and Main Street practitioner should elicit different recommendations. Mr. Lipton said the National Conference referred to some sort of analog to SEC sophisticated investor rules whereby disclosure requirements for the less sophisticated client would be more stringent and very precise. Mr. Treiger expressed concern that ethics rules that talk about giving the client the opportunity to seek the advice of independent counsel create, by virtue of the second legal opinion, absurd costs for the client. Asked about the instance of litigation lawyers in MDPs and the National Conference stance that anything is waivable if there is disclosure (as compared to direct conflicts not being waivable in the case of lawyers), Mr. Treiger said they had not excepted out litigation but he could not imagine a situation where there would be consent to direct adversity. Mr. Lipton said that in the instance of direct conflict it is bad business not to withdraw and that if the rules were changed the accounting firm would then decide whether to engage in the practice of law and abide by the lawyers’ nonwaivable direct adversity conflict rule. Asked about the prospect of an Am Express or Blockbusters or Wal-Mart practicing law if there is a relaxation of the fee-splitting rule Mr. Lipton did not see a difference between that and the general counsel situation and he would regulate the lawyer and let the market control. Mr. Lipton would agree to a MDP organization that would separate legal services into a legal department run by a lawyer. Asked by Judge Friedman how to assure that a single lawyer partner working in an MDP environment without law mentors or ethics panels or partners adheres to high standards of practice and the consumer is protected, Mr. Treiger said it’s not just a MDP issue as those in a small or solo law practice face the same problem of lack of opportunity for consultation. The Co-Chairs clarified to Mr. Simmons that the National Conference was not recommending the bifurcation of the rules into those relating to the sophisticated SEC-type client and everybody else; the majority of those involved in the discussion would prefer one set of rules. Mr. Lipton, speaking for Ernst & Young, answered the Chair’s inquiry regarding the pro bono death penalty case request by saying that lawyers in the accounting firm’s legal department would be subject to all the rules as well as expectation that lawyers in a law firm would be required to observe.