David Kluft asks: “If opposing counsel needs to prove my income in 2023, and she learned my income while representing me in 2021, does she have a conflict?” —

• “An AL lawyer briefly represented a man in a lease dispute in 2021. In 2023, the lawyer represented a party adverse to the same man in a custody and child support trial. The man moved to disqualify the lawyer because, although the lease dispute was otherwise unrelated to the custody dispute, the lawyer did learn information about the man’s income in 2021, and his income was relevant to the issue of child support.”
• “The Court of Appeals acknowledged that this might have created a former client conflict of interest under Rule 1.9. However, it turns out the man changed jobs in between the two cases, so anything the lawyer knew about his income back in 2021 had become irrelevant. Motion denied.”
• Decision: here.

“Uvalde CISD votes to keep law firm amid conflict of interest concerns” —

• “The Uvalde Consolidated Independent School District voted to continue to use legal services from a law firm that also represented a former officer facing charges in connection with the Robb Elementary shooting, despite concerns of a conflict of interest.”
• “On Monday night, the UCISD board voted to continue to use Thompson & Horton legal services, as assigned by the district. The board also authorized the superintendent to obtain an independent ethics attorney to review ‘any actual or potential conflict of interest’ related to the Robb Elementary litigation.”
• “In addition, the board passed a motion to waive attorney-client privilege to the independent attorney to produce Thompson & Horton’s conflict of interest ethics analyst.”
• “‘We’ve been trying to do what’s right, but you’re only as good as your legal team,’ trustee Jesse Rizo said. ‘We’ve been failed…time and time again.'”
• “Walsh Gallegos represented the district during a lawsuit from KSAT and other media organizations to make the records public, as the district had sought to withhold documents and information connected to the massacre. Two teachers and 19 students died in the shooting on May 24, 2022.”
• “Court records show that Thompson & Horton attorneys represented former UCISD officer Adrian Gonzales and current UCISD board Vice President JJ Suarez in a separate federal lawsuit related to the shooting filed by several families of the victims.”
• “The school board voted to release all records in July and end the lawsuit after a Texas appeals court ruled in favor of KSAT and the other news outlets.”

“Private Equity Deals Leave State Accounting Boards on Sidelines” —

• “State regulators are sounding the alarm as private equity-backed accounting firms test the limits of longstanding rules and laws designed to protect the objectivity of licensed CPAs. Firms that have cut PE deals rely on a complex legal structure that has touched off a cascade of ethics and professional conduct concerns. State regulators fear the evolving ownership models could erode the value of professional accounting licenses and ultimately undermine the capital markets that depend on auditors’ work.”
• “State laws hamper regulators’ ability to oversee the new arrangements because of the narrow scope of firm licensing requirements—a gap some state boards aim to close.”
• “‘It’s a very profit-driven, short-term ownership structure,’ said Haley Lyons, chair of the Oregon Board of Accountancy. ‘How do we ensure long-term relationships for members of the public? How do we ensure quality standards are upheld over time?'”
• “The effort to bolster oversight comes as a rising number of US accounting firms have cut deals with third party investors in the last six years, with nearly half of the top 30 firms now at least partially owned by private equity.”
• “The volume and speed of the ownership overhauls has caught boards of accountancy flat-footed as they look to enforce state ownership and ethics requirements for licensed CPA firms meant to ensure companies and private individuals work with a dependable, independent accountant.”
• “Firms themselves are looking for more guidance. Grant Thornton Advisors LLC, one of the biggest US firms with private equity ownership, said in its latest transparency report that it put in place its own safeguards to ensure its auditors make critical decisions regarding promotions, staffing and its client roster. But the firm and others are calling for updated conflict of interest rules to help manage a complex mix of threats to their independence.”
  “The largest private equity-backed accounting firms operate nationwide and are licensed in multiple states, making it harder for individual states to police requirements that at least 51% of a registered firm’s owners are credentialed CPAs. In some cases, regulators don’t know that a firm has new non-CPA owners.”
• “The difference for private equity-backed firms is they have a contractual agreement spelling out what the firm has to achieve in order to earn periodic payments from the outside investors, said Joe Tarasco, CEO of Accountants Advisory Group LLC.”
• “Industry watchers fear the profit targets common among private equity-backed businesses might encourage auditors to take shortcuts or accept work that falls outside their qualifications.”
• “State accounting boards are also monitoring an industry ethics committee that is working to provide clearer guidance as firms navigate potential conflicts of interest among their auditors, the PE-backed business, and the universe of companies also held by their outside investors.”
• “An initial proposal from the American Institute of CPAs ethics body doesn’t go far enough to address the pressures CPAs will face to meet their investors’ demands, state regulators have told the committee.”
• “‘The guidance cannot resolve a fundamental structural issue: the inherent conflict between private equity investment objectives and professional independence requirements,’ the Washington State Board of Accountancy in a letter to the committee. The board didn’t respond to a request for comment.”
• “Firms should set up a framework to preserve the independence of their accountants before any deals close, Grant Thornton said in a statement to Bloomberg Tax.”
• “Many state regulators want to see the ethics committee’s approach before revising their own licensing requirements.”
• “‘I haven’t seen a case where the existence of private equity on the attest side of an audit practice has resulted in a negative impact,’ said Mullen, who serves on the Virginia board. ‘This is not to say that we will wait until that problem occurs. We won’t.'”