Summary of the Testimony of Stephen McGarry - Center for Professional Responsibility

Summary of the Testimony of Stephen McGarry

Before the Multidisciplinary Commission

Stephen McGarry, president and founder of Lex Mundi, presented the first testimony of the day. He explained that Lex Mundi is a worldwide organization of law firms, currently numbering 145, 60% of which are the largest in their state or country. This network, on the order of a bar association of law firms, consists of approximately 12,000 lawyers in 370 offices. It considers itself an alternative to MDPs in that its member firms are afforded access to information (through e-mails, publications and meetings) and coordination without the need to manage resources. In 1995 the organization set up an MDP Task Force that became the Renaissance Task Force with the larger mission of strengthening the organization.

Upon questioning Mr. McGarry stated that the network has been working on getting members in large jurisdictions - California, New York, Texas, Chicago and London - where the network previously did not have members, to provide incentive for members to stay with the network and remain independent and to avoid the threat that members may seek other arrangements. It effectively creates a transparency, a matrix of lawyers who practice in certain areas. Contrary to members of the accounting firm network of law firms that partake of common commissions, buildings and low cost loans, each Lex Mundi member law firm maintains its independence as Lex Mundi does not get involved with clients. Consequently there is no worry that the network, which merely provides resources, will create conflicts. If infrastructure and communication modes are already in place it’s easier and cheaper just to add people, which is the reason why association is a more efficient model than a firm setting up a foreign office itself. Lex Mundi is basically independent law firms that allow the client to pick whether a Lex Mundi firm is used. Mr. McGarry responded to the Chair that Lex Mundi assures competence despite different locations by being selective in its choice of members in the first place and, if needed, expending time and effort on-site. Law firms in the MDP networks are "captive" in that their contracts with accounting firms set up an exclusive global referral network and, in the case of Arthur Andersen, an MDP e-mail address. Lex Mundi plans a survey of client interest in MDPs; the target is 7,000-8,000 General Counsel from around the world, with the results completed by May 1, 1999. Mr. McGarry said he looked to the Big Five as an example for structuring Lex Mundi, as they are good models for worldwide communication and information gathering. He said that although Arthur Andersen is No. 3 in computer consulting, the others are not at the top of the pack in terms of all the other consulting categories, and that the $100 million an accounting firm may spend in advertising creates smoke and mirrors. He estimated that the Big Five, in the aggregate, spend $400 million annually on advertising. The Bar’s message of ‘law as a profession’ does not come near this marketing effort.

The real issues, he believes, will arise in about 10 years. Today the number of attorneys with the Big Five is negligible; he characterized the current scenario as the accounting firm buying a building, giving the lawyer tenants a low % loan and telling the lawyers to increase by a certain size in x years through management consulting referrals and fees associated with it. He responded that the Big Five is the only group, other than Lex Mundi, that’s global and that financial service firms (including accounting firms) see law as an associated service, not a "core competency". All Lex Mundi members who have been approached by the Big Five have been outside the U.S. (the accounting firm MDPs have started in the least difficult locations and worked from there), and a Lex Mundi member law firm in Malaysia that received an Arthur Andersen affiliated firm’s MDP newsletter in an Arthur Andersen envelope complained about it to the Malaysia bar. In response to Judge Friedman’s question, Mr. McGarry said the MDP firms would comply with lawyer regulation to the extent they need to comply. An MDP bid for an engagement bundles other than lawyer services, a reason the client may not get the same quality legal service as from an independent law firm lawyer.