June 2000

New York Bar Calls for MDPs with Ownership Prohibition by Nonlawyers

Panel Debates Issue at Annual Conference

The New York State Bar Association report on multidisciplinary practice (MDP) would prohibit multidisciplinary partnerships, but does anticipate two forms of cooperation between CPAs and attorneys. A panel debated MDPs at the NYSSCPA Annual Conference on June 4.

The May 2 bar report recommends allowing lawyers and law firms to provide ancillary nonlegal services and to offer services to clients in cooperation with nonlegal firms. The state bar proposal provides safeguards for the public to protect against the risks of nonlawyer involvement in the practice of law.

State bar President Thomas O. Rice, a partner with Wingate, Kearney & Cullen, participated in the Society panel and acknowledged that the accounting and legal professions have differing views regarding how to structure an MDP.

"This is an issue that needs to be resolved in a mutually acceptable way," Rice said. "We have mutual respect of the essential services that each side provides. Hopefully, the smoke can be cleared and we can come to a cooperative understanding."

The state bar report states:

To the extent that a demand exists for integration of legal services with those of other professions--and the evidence of such demand is equivocal at best--that demand can be satisfied by permitting lawyers to enter into strategic alliances and other contractual relationships with nonlegal professional service providers, as well as by permitting lawyers to own and operate nonlegal businesses. Subject in both cases to some additional regulation to ensure that lawyers remain completely in control of the rendering of legal services, the purported demand for integrated services is satisfied without sacrificing the independence of the bar. The only substantive difference between this approach and that favored by those who would permit multidisciplinary partnerships is that this approach does not permit nonlawyers and lawyers to call each other "partner."

The report recommends amendments to the bar's Code of Professional Responsibility, including two new disciplinary rules and 10 new ethical considerations.

Society panelist Francis T. Nusspickel, a member of the NYSSCPA multidisciplinary practice team and a partner with Arthur Andersen LLP, stated that MDPs will help CPA firms meet marketplace demand and better address client needs.

"What's in it for the investing public?" Nusspickel asked. "A MDP would be more robust. There would be shared knowledge, no duplicity, more entities to choose from to provide the services, more complete solutions, and fee savings through efficiencies."

(The MDP team recommended to the Society's board of directors that the Society support the development of a regulatory framework that better serves the public in an environment permitting multidisciplinary practice among CPAs, lawyers, and other professionals. The board voted on February 4 to support this recommendation.)

The annual conference panel also discussed obstacles to forming MDPs, including reconciling the different ethics responsibilities and regulations governing the accounting and legal professions.

"If you have MDPs, who will regulate them?" asked panelist Dan Goldwasser, an attorney with Vedder Price Kaufman & Kammholz. "There are conflicting regulations and neither side has said it will step aside."

Goldwasser believes that MDPs are inevitable in spite of the pockets of resistance with bar associations and regulators. He added that MDP success in Europe and client demands will accelerate the progress in the United States.

ABA to Act in July

MDPs have received increasing attention following a June 1999 American Bar Association commission report that recommended approving such practices. Although the ABA board of governors rejected the proposal last summer, the group will examine the issue again at its annual meeting in July. Other related actions include a May 19 Arizona bar report that recommends allowing fee-sharing and partnerships with nonlawyers but prohibits nonlawyers from providing legal services, and a Philadephia bar March resolution permitting MDPs with majority ownership by attorneys.

See the July issue of The Trusted Professional for more details on multidisciplinary practice issues. For more information, see also the Multidisciplinary Practice Center on the Society's website at www.nysscpa.org/home/mdpcenter/mdplinks.htm. *