Professional Issues


Texas Turf War Ends Peacefully

It wasn't as violent as the Old West battles between sheep farmers and cattlemen, but a legal skirmish in Texas revealed long-standing mistrust between lawyers and CPAs. Arthur Andersen LLP was accused of engaging in the unauthorized practice of law. But, after an 11-month investigation, the Unauthorized Practice of Law Committee of the Texas Supreme Court dismissed all charges before the firm even had a chance to fully present its own defense.

The complainant, whose identity was not publicly revealed, accused the firm of preparing legal documents and legal tax opinions on behalf of clients, among other violations. Andersen responded that some of the practices mentioned in the complaint are allowed under federal and state law and that it has written policies forbidding practices that are not. After the dismissal, an Andersen spokesman said publicly that the complaint was the result of lawyers' trying to expand their practices by curtailing some of the tax and accounting services Andersen clients had become accustomed to. Andersen also said that there has always been considerable overlap between tax lawyers and tax accountants, and it's best for the public to have a wide choice of professionals to turn to for tax services.

Tip of the iceberg

The Journal spoke with John Niemann, head of Andersen's tax practice in Texas, about the implications of the case. Why was this accusation raised now? "I think there's been a lot more rhetoric from lawyers recently about CPAs crossing into legal territory. The level of concern has gone up." Part of the problem may be that CPAs have expanded into new areas. "Arthur Andersen, like other large firms, does practice law in jurisdictions outside the United States where it's allowed, for example, in some European countries. The U.S. legal community has exhibited a certain paranoia: If we're doing it in Europe, we must be doing it here." In the end, he said, the committee realized it was all just a misunderstanding about what Andersen and CPA firms generally do and do not do.

Niemann said he never doubted Andersen would be vindicated but had worried that the accusations would develop into an expensive, time-consuming case. "I think this quick dismissal will save Andersen—and other firms in similar situations—a lot of time and money in the future," he said. "CPAs don't draft documents. It's as simple as that, and I don't believe there are widespread violations throughout the profession."

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