Major accounting firms and some ABA attorneys assert
that the wave of the future involves partnerships, strategic alliances and entrepreneurial
unions between lawyers and other professionals, giving clients one-stop shopping.
This is known as multidisciplinary practice. Those promoting the concept maintain that its
already a done deal. Still, traditional lawyers adhere to the core values of
confidentiality, loyalty and independent judgment. They are reticent to abdicate control
On Jan. 2, the New York Times reported, Most partners [at] the worlds
largest accounting firm violated rules prohibiting conflicts of interest by
possessing investments in companies for which they performed independent audits.
An estimated 86.5 percent of the 2,698 partners had at least one such violation, for a
total of 8,064 cases.
Lawyers are tightly bound by conflict of interest restrictions,
currently contained in Rules of Professional Conduct 3-300 and 3-310. These rules mandate
that we refuse business, terminate existing relationships, cautiously hire staff (from
clerks to librarians) and walk a tight rope because of the mergers and acquisitions
occurring among our clients in this constantly morphing economy.
Attorneys can be disciplined, disqualified and required to disgorge
fees for having a conflict of interest without proper consent. Disgorge-ment is not
considered punitive but a contractual remedy. The client bargained for a lawyer with the
full panoply of fiduciary obligations and did not get the benefit of that bargain
conflict-free representation. Fees are generally disgorged from the occurrence of the
Conflicts come in all shapes and sizes. (Manfredi &
Levine v. Superior Court (1998) 66 Cal.App. 4th 1128, quoting Aceves.) Beyond an
impermissible unconsented conflict between clients, even more egregious conduct involves
hidden kickbacks, secret profits or personal conflicts. Each company involved paid the
accounting firm for an independent audit. How should the additional profit the
accountants enjoyed from the inflated value of the stock be characterized?
More importantly, if the accountants were lawyers, or were in
business with lawyers (a multidisciplinary scenario), would not the lawyers also be guilty
of a hidden kickback, a secret profit, from the accountants conduct being imputed to
the lawyers as well?
Although fee forfeiture for a violation of an ethical rule is not
automatic (Pringle v. La Chapelle (1999) 73 Cal.App.4th 1000), if the conduct
is inconsistent with the character of the profession, tainted with fraud or shrouded in
unfairness, it is likely. The Restatement of the Law of Lawyer-ing requires a clear
and serious violation, and discusses criteria such as wilfulness, actual harm,
gravity and timing. The accounting firm knew it was under scrutiny, because of a prior SEC
investigation, yet most partners still had improper investments.
If the accountants were partners with lawyers, the lawyers would now
be drafting 8,064 refund checks, representing the disgorged fees, or face even worse
consequences from the rampant conflicts.