TAX TALK

Message From The Chair*
Robin Williams Denick

*The views expressed in this article are the author’s only and do not reflect any position or opinion, official or unofficial, of the Internal Revenue Service or the Office of Chief Counsel.

Serving as Chair of the Section of Taxation has been a most rewarding experience and it has provided me (like it has for all prior Chairs) with a unique opportunity to hop up on the "soapbox" and express views concerning the profession and the practice of tax law. Observing some of the events that have occurred during this past year has caused me to reflect upon the reasons that I chose law as a profession and examine more closely how my actions impact the community. In that vein, I would like to touch upon one event in particular, simply referred to as "Enron," which has also caused me to ponder more seriously the future course of the legal profession.

Since Fall 2001, the Enron debacle has sparked conversations and debate in boardrooms and living rooms across the country. The factors contributing to that company’s rapid downward spiral into bankruptcy have fascinated the American public and sent shudders through investors, executives and rank-and-file employees alike. Currently, we are watching, with a mixture of dismay and sadness, the piecemeal dismantling of the venerable accounting firm Arthur Andersen, Enron’s auditing firm, which has experienced drastic client defections following Andersen’s indictment on obstruction of justice charges. While the particulars leading to the collapse of Enron and Arthur Andersen are just now emerging in greater detail via court proceedings, it is clear the repercussions will be far-reaching.

The relationships between clients and their legal and accounting advisors are not the only ones receiving special scrutiny. Recently, the New York Times ran a headline entitled "Requiem for an Honorable Profession" with the underlying article outlining the conflicts of interest among stock analysts on Wall Street. The article described how analysts were driven not to provide the best advice for investors, but were expected to generate investment banking fees by churning out positive research reports on companies to attain the highest ranking on the annual analyst rankings published each fall. As a result, that profession too is suffering its own woes with the New York State Attorney General’s office investigating the practices of many securities/investment banking firms.

What does all this mean for the legal profession and tax lawyers in particular? Certainly the fallout from negative public opinion resulting from the activities of corporate America and those of the professionals who have guided them, does not bode well for those in favor of multi-disciplinary practice. Rather, the events that have unfolded over the past six months suggest more strongly than ever that lawyers need to maintain their independence, if for no other reason, for the purpose of preserving ethical standards and avoiding conflicts of interest that are detrimental not only to the profession but to their clients as well. In this regard, I commend to your attention two provocative articles which were developed from separate lectures delivered by Randolph Thrower and Mortimer Caplin, respectively. Both gentlemen served as Commissioner of the Internal Revenue Service and are highly respected and prominent tax lawyers. Not only are the articles insightful and worth reading, but in hindsight the views expressed by the authors prior to "Enron" are uncannily timely commentaries highlighting the consequences when independence and ethical standards are compromised.

Mr. Thrower delivered the 2001 Erwin Griswold Lecture before the American College of Tax Counsel: "Is the Tax Bar Going Casual—Ethically?" reprinted in 54 Tax Lawyer 797 (Summer 2001). In his eloquently thoughtful, yet entertaining article, Mr. Thrower pulls no punches in outlining the current business climate and market forces affecting the legal profession. He succinctly outlines his views as to why the standards of the legal and accounting professions are "incompatible with each other or at least difficult to merge." Responding to the mantra of "one stop shopping" for all sorts of professional services, Mr. Thrower recommends that lawyers use their skills as advocates and "promote among clients and potential clients the irreplaceable value to the client of confidentiality, commitment to vigorous representation, loyalty, competence, and freedom from conflict of interests."

The second article, "The Viability of Multi-Disciplinary Practice," by Mortimer Caplin (based on his remarks of April 12, 2001, at the University of Virginia School of Law) appeared in the May 2002 issue of The Washington Lawyer. In that article, Mr. Caplin expresses his doubts about the claim made by the District of Columbia Bar Special Committee on Multi-disciplinary Practice that a less restrictive rule [than current D.C. Rule 5.4] could be accomplished without sacrificing the core values of the legal profession. Noting that the legal profession is unique, especially considering its "commitments to higher ethical and fiduciary conduct and pro bono and public interest service," Mr. Caplin writes:

I do not think the [Committee] has fully appreciated the weight of the "pressures that economic forces place on professionalism." The tradition, training, outlook and culture of other professions are quite different from those of the legal profession. *** When non-lawyer partners play leading roles in both firm management and firm policy, and when at stake are the retention of wealthy clients and other sources of huge fees, the pressures asserted on the lawyer’s independence of professional judgment can be enormous. ***

Some may dismiss the views articulated by Mr. Thrower and Mr. Caplin as those of attorneys now in the twilight of their careers who practiced law in a by-gone era. To not consider their positions carefully, however, demonstrates a cavalier irresponsibility. While it is true that the practice of law and the market forces thrust upon it have changed dramatically, have our ethical standards and obligations changed as well? In addressing the challenges posed by the marketplace, we must scrutinize whether the differences between the legal profession’s rules and those of other professions relating to confidentiality and lawyer-client privilege, conflicts of interest and client loyalty can ever be reconciled satisfactorily. How this generation of attorneys responds to these questions and challenges will have a profound and lasting impact upon the profession and, ultimately, our clients and the public.

On a lighter note, I wish to express my appreciation to all my colleagues on the Tax Section Council who have dedicated many hours this year to promoting, strengthening and improving the Section of Taxation for the benefit of its members, the profession and the community. In doing so, the members of the Tax Section Council have honored their commitment to pro bono activities and to public service. They, as well as the Past Chairs who have been a source of inspiration and guidance, have my deep respect and gratitude for their professionalism and enthusiasm. Thank you, too, to all members of the section for generously supporting the section’s endeavors. It has been a most memorable year serving as Chair of the Section of Taxation and I appreciate the confidence placed in me. I extend my best wishes for continued success to Jon May and the incoming cadre of officers, as well as the entire Tax Section Council. Enjoy the summer!