Andersen Legal partner Costas Condoleon is quitting the firm's Sydney practice – the third lawyer to do so in as many weeks.
The series of recent defections throws into doubt Andersen's attempt to become a major player in the Australian market.
Along with managing partner Phil Kapp and Anne Hargrave, Condoleon will be joining Australian number five firm Minter Ellison.
Hargrave says she is leaving because she believes Arthur Andersen is down-scaling its 24-partner legal arm.
Kapp, who left Blake Dawson Waldron in 1994 to found Andersen Legal, says he is “disillusioned”.
Minters' national managing partner Phil Clark adds: “We had been in discussions with Phil well before any decision Andersen had taken to down-scale its original plans.
“In fact, the general view is that the market has taken that decision for them, rather than them taking it.”
One senior Australian lawyer says: “The grandiose and expansive concept of a worldwide law firm taking on the established providers of high-end legal work has been scaled back to a much more modest plan of providing in-house services to those clients who are attracted to the one-stop shop feature.”
But an Arthur Andersen spokesman in the UK is unaware of Condoleon's departure.
He is also at pains to dispel rumours of Andersen Legal's Australian back-down.
He says of Kapp and Hargrave's resignations: “When these things happen you are always going to get a lot of flack but things are still very positive in Australia.”
Condoleon will join Minters next month.