Texas Court Drops Charges of Unauthorized Practice of Law

By Danielle D'Angelo

In a big win for the accounting profession, the Supreme Court of Texas' Unauthorized Practice of Law Committee dropped charges that Arthur Andersen LLP engaged in unauthorized practice of law in its tax advisory services to clients.

A complaint filed in August 1997 (the identity of the complainant was not revealed) accused the firm of the unauthorized practice of law because it allegedly prepared legal documents, formed and registered companies, prepared legal tax opinions on behalf of clients, and hired lawyers.

"This complaint was an effort by some lawyers to expand their practice by barring our firm from offering the full range of accounting and tax services that are authorized by federal and state law and to which our clients are accustomed," said John Niemann, head of Arthur Andersen's tax practice in Texas. "The public is entitled to a choice between competent providers of these services."

Both CPAs and attorneys have closely watched the case as testing ground in the escalating controversy over services historically offered by both professions. The quick dismissal of the case, after about an hour, according to Niemann, is a clear win for CPAs providing tax advisory services.

A similar inquiry against Deloitte & Touche LLP is now pending with the same Texas Court committee. And the turf battle between the two professions may only escalate with the recent extension of the confidentiality privilege to CPAs and others licensed to practice before the IRS. The provision, included in the IRS Restructuring Act, has drawn the attention of the New York State Bar Association which recently established the Committee on Multi-Disciplinary Practice and the Legal Profession to look into issues raised by the extension of privilege.

"Even in the limited context of the tax courts, [this] is a dangerous first step down a slope that could lead to a blending of the two professions. In the process, the unique perspectives and strengths of each would inevitably be compromised," said NYSBA President James C. Moore. Moore also noted that the largest private employer of lawyers in the U.S. is PriceWaterhouseCoopers.