by Roger Russell

The movement to multidisciplinary practices involving CPAs and attorneys is showing signs of losing momentum.

While much of the accounting industry remains hopeful of widespread acceptance of accounting-legal MDPs, some industry insiders say that the movement has been thwarted by the Enron scandal and the legal profession’s apprehension to combine with non-legal practices.

"I suspect that, in light of the Andersen situation, in the wake of Enron and the public perception of offering non-audit services to audit clients, MDPs will be on hold for a significant amount of time," said James Woehlke, counsel to the New York State Society of CPAs. "However," he said, "public demand reflects market realities, and market realities could turn on a dime and make MDPs popular again."

Although two MDP proposals before the Chicago-based American Bar Association at its February meeting were withdrawn, the likelihood is that the proposals will be considered at the next ABA meeting in August. The proposals - one from the New York delegation and one from the Standing Committee on Ethics and Professional Responsibility - both lean toward to a more restrictive view of attorneys and accountants practicing together.

Because the ABA position is merely advisory, each state sets its own guidelines governing the extent to which attorneys can collaborate with non-attorneys.

Currently, about one-third of the states are in favor of attorney-accountant MDPs, while roughly one-third are against combining practices. Meanwhile, the remaining third are continuing to study the measure.

Although MDPs are widespread in Europe, where more than half of the countries allow at least some form of accounting-legal services bundling, the situation was muddied by a European Court of Justice decision in February upholding the Netherlands rules, which prohibit MDPs between accountants and attorneys.

The court said that there may be a degree of incompatibility between the "advisory" activities carried out by a lawyer and the "supervisory" activities carried out by an accountant. "Accountants, who perform a task of certification of accounts, are not, in the Netherlands, subject to a duty of secrecy comparable to that of members of the Bar.

"That being so," the court said, "it was reasonable for the Netherlands rules to impose binding measures, despite the effects entailed, which are restrictive of competition, because those measures are necessary for the proper practice of the legal profession."

However, accountants are hopeful that the current setbacks thwarting MDPs are temporary. "The attorney/CPA MDP will happen. The concept is broader than any one profession," said Tom Wilson, chief operating officer of the Sarasota, Fla.-based Academy of Multidisciplinary Practice.

"To be sure," Wilson added, "attorneys will be slower to adopt the MDP concept than CPAs, many of whom already partner with other professionals. But the advantages of lower cost, economies of scale, comprehensive service offerings and collaborative synergies will put competitive pressure on members of different professions to work together."

"The reluctance of some attorney groups to sanction MDPs with other professionals reflects a different professional culture, and a view of professional services firms that focuses on situations where the professions are least compatible," said Woehlke. "For example," he said, "an MDP doing both audit and litigation for the same client would create a problem. The question is, are there other services that are more compatible, perhaps doing contract drafting and auditing or retirement planning and auditing."

According to Wilson, the Andersen woes may actually help set the stage for more MDPs. "It will accelerate the discussion around critical items, such as ethics, disclosure, confidentiality, attorney-client privilege and conflict of interest. The government regulatory agencies will institute aggressive change and control measures and these may serve as parameters for defining MDPs. Now, at least, there’ll be some rules to bring to the table and make a part of the discussion."

"Any kind of income stream needs to have an attorney, a CPA or CFP with tax expertise, investment advice and insurance advice," said Lou Garday, chief executive of the Certified Financial Planning Board of Standards. "The marketplace is starting to create these synergies. The question is, do we provide the structure and formalize it or let the marketplace do it in an informal fashion?"

Dan Goldwasser, an attorney at New York-based Vedder Price Kaufman & Kammholz who specializes in the accounting profession, believes that once successful CPA-attorney MDPs are established in the one or two states that permit them, more states will follow. "Once these prove to be successful - that clients like them and they work - other states will fall into line," he said.

Meanwhile, the course of how CPA firms practice in tandem with law firms may be taking a different direction, with a greater emphasis on strategic alliances. Major CPA powerhouse BDO Seidman has launched the BDO Seidman Alliance of Law Firms, intended to expand the distribution channels for BDO Seidman services beyond the accounting and consulting arenas.

"The BDO approach recognizes our current professional ethics regimes," said C. Dennis Brislawn Jr., a principal in Brislawn Lofton PLC, a law firm with offices in Kirkland, Wash., and Portland, Ore. "It provides us with the resources of an interdisciplinary practice that we can go to market with in the Pacific Northwest, across the country and around the globe."

BDO Seidman general counsel Scott Univer said that the alliance, which was launched last June, is more than meeting expectations. "The alliance structure that we came up with holds many of the advantages of MDPs without the drawbacks of true MDPs, which involve ownership," he said. "It’s consistent with all the ethics rules - it’s do-able now, and has most of the advantages of the MDP form."

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