KLegal seeks to head off Sarbanes-Oxley tax fear

LITIGATION: clients turned away to avoid conflicts of interest

KLegal - the law firm tied to big four auditor KPMG - has indicated that it will follow rival Landwell in encouraging clients that are registered on the US Stock Exchange to seek alternative tax litigation advice in the wake of the Sarbanes-Oxley Act.

A spokesman for KPMG this week told the Gazette that where KPMG audit clients had a need for tax litigation advice - considered to be the area richest in potential conflicts of interest between legal and audit work - it would 'tell them to find a different law firm'.

However, he added that in some circumstances - where the advice did not involve the firm going on the record, or appearing as advocates - KLegal may be able to continue to give advice.

He insisted that the effect on KLegal would be less onerous than at Landwell, which recently lost its six-lawyer team of tax litigators to US firm Dorsey & Whitney's London office.

Landwell claimed the Sarbanes-Oxley Act made the move inevitable.

The KPMG spokesman added: 'We don't act for many companies that are registered [with the Securities & Exchange Commission], so there will not be many cases where this will arise at all.'

But one lawyer who has recently left a tied firm told the Gazette: 'This is a tough enough market without the extra hurdles.

A number of clients are concerned about taking audit and legal services from associated firms, and this is causing problems in areas such as property and litigation, where the perceived risks of conflicts are greater.'

Meanwhile Landwell said last week that Celia Gardiner - a banking and insolvency partner who is joining City firm Richards Butler with two assistants - is leaving the firm for reasons not connected with Sarbanes-Oxley.

Jeremy Fleming