Arthur Andersen in Texas held to account for practising law

ACCOUNTANCY giant Arthur Andersen is facing legal action in Texas after it was accused of practising law without a licence in the US state.

In what is thought to be the first case of its kind in the US, the Texas Supreme Court has formed a committee to investigate a formal complaint brought to it by a lawyer who claimed that the accountancy firm was encroaching on lawyers' territory.

Under 50-year-old Texan laws, accountants are not allowed to offer any kind of legal services, including tax law.

If the complaint is upheld by the committee, it will seek a legal injunction against Arthur Andersen preventing the firm from continuing to practise law in the state.

Although the State Bar of Texas has denied reports that it is behind the complaint, the head of the Bar's tax section, William Elliott, said it was being seen as a test case by the profession as a whole against all of the accountancy firms.

Elliott, of Dallas firm Kane Russell Coleman & Logan, said: “The case has been brought because the accountancy firms are seen by many to be providing traditional legal services such as drafting contracts and issuing court papers.

“Without question the feeling among lawyers is that accountants are encroaching on their turf and this is against Texas state law.”

He added: “This is very much a test case and Arthur Andersen was chosen because it is the biggest of the accountancy firms.”

But Andersens rejected the charges in a written statement. The statement said: “It is our policy not to engage in the unauthorised practice of law. We believe that the complaint reflects a misunderstanding of the facts and what the law allows us to do.”

The Supreme Court of Texas committee is expected to release its findings towards the end of the year. If it finds that Andersens is acting unlawfully, it will seek an injunction to prevent it continuing to practise law in Texas.