Review of the year 2003: MDPs in crisis

2003 was the year KLegal met its Waterloo, as the law firm partner of big four accounting firm KPMG finally buckled. The weight of Sarbanes-Oxley, it seems, finally proved too much for the alliance.

The Lawyer broke the story first on 13 October, with the news that the KLegal and McGrigor Donald partnership was set to vote on the future of the firm. The partnership was deeply divided on the issue, with McGrigors partners keen to distance themselves from KPMG, and KLegal partners reluctant to give up the association.
Around 20 per cent of turnover derived from KPMG referrals and work with the accountant.

But in a statement issued in early November, KPMG announced that it was discontinuing its associated legal network. Sources close to McGrigors ruled out any kind of continued relationship with KPMG, saying: “They couldn’t see the benefit of a two-pronged approach, where part of the firm continued to work with KPMG and the other part didn’t. They just didn’t think riding both horses would work.”

The news sparked a wave of crises across the KLegal European network. Jean-Louis Paul, a member of the KLegal international board, told The Lawyer: “KLegal International is in the process of liquidation.” From the ashes, a new international network was under construction, but it would operate without KPMG’s Italian firm Studio Associato, which decided to go it alone.

It was the final nail in the coffin for a network that had been haemorrhaging partners since its inception, culminating in July, with the news that KLegal founding partner James Hodgson was leaving the firm.

In November, The Lawyer revealed that KLegal and McGrigors were in the process of renegotiating the lease on their Dorset Rise offices, and were disentangling their IT systems from KPMG. Paul commented: “The aim now is for a restructuring, which will allow legal practices to become independent of KPMG.”