CPA/client privilege bill is a positive step for Ohio

May 26, 2009

Right now, there’s an important piece of legislation being considered in the Ohio Senate that is long overdue for clients of CPAs: S.B. 80. The bill would be a major step forward for Ohio, and for thousands of business owners and Ohio citizens who rely on CPAs to provide qualified financial advice that affects their bottom line.

S.B. 80 would create a very narrow client testimonial privilege that would clear the way for business owners and taxpayers to have confidential, advice-seeking discussions with their CPA on both problems and opportunities before they make critical financial decisions. Right now, businesses and individual taxpayers don’t have the freedom to disclose sensitive details and explore financial strategies with their trusted advisor because their own CPA can be forced via a subpoena to reveal details of these discussions.

But current law puts Ohio businesses and CPAs in a vulnerable position by not giving clients the same testimonial privilege with CPAs — their most trusted financial advisors — as they enjoy with their attorneys, physicians, members of the clergy, and counselors.

The result is that critical conversations are not happening as often as they should, meaning a CPA’s advice is not as accurate as it could be and audit results — which shareholders rely on for investment purposes — are not as comprehensive as they should be.

Further, a business owner can’t have both its attorney and CPA present when trying to get advice on sensitive matters without waiving the attorney/client privilege, and attorneys can’t be as forthcoming as they want to be in the “legal letter” they give to auditors of a business they represent.

The bill cleared the Senate Judiciary-Civil Justice Committee on May 6 with strong support (8-1 vote) and will be put to a full Senate vote in the near future.

Sounds like a no brainer, right? Amazingly, it’s not. OSCPA is facing stiff opposition primarily from prosecuting and trial attorneys who argue its passage would hinder investigators from obtaining necessary evidence to prosecute white collar crime cases.

Nothing is further from the truth. This bill was intentionally written with a very narrow scope — not to protect those who commit crimes but to encourage greater disclosure among clients and CPAs so they can seek qualified financial advice to avoid potential problems or fix past problems.

In fact, investigators would still have access to 98% of the information they now can examine. Literally the only information that would be privileged would be the confidential, deliberative discussions between client and CPA, whether verbally or in writing. All other discussions and documents would be subject to discovery. And even that last bit of protected information could be subject to discovery should the plaintiff’s attorney show the judge (with the 98% of evidence still available) that fraud or crime was involved.

Could it be much ado about nothing on the part of law enforcement interests? While CPAs can be subpoenaed to reveal deliberative conversations right now, this step is very rarely taken. In addition, 17 other states have had a similar or broader statute in place for decades, and white collar crime isn’t running rampant in those locations.

A CPA and former detective/supervisor with the Columbus Division of Police’ Economic Crime unit recently told the Ohio Senate committee that in 15 years of investigating financial crimes, there was not a single case in which investigators in his office questioned an accountant or forced one to testify, and only one such occurrence on the part of the prosecutor. They relied on the financial documents to tell the story for them…documents which remain accessible under S.B. 80.

S.B. 80 is a critical piece of legislation that would encourage clients to more fully disclose strategic plans and discuss problems so they can seek solutions that would keep them in compliance with the law. In today’s troubling economy, Ohioans need all the help they can get.

The bill is supported by The Ohio Society of CPAs (OSCPA), the National Federation of Independent Business (NFIB), the Ohio Chamber of Commerce and the Ohio Manufacturers Association.

Lend your support to this important initiative. Ask your Ohio Senator to vote in support of S.B. 80 this month. For talking points on the issue, contact Barb Benton, OSCPA Vice President, Governmental Affairs at bbenton@ohio-cpa.com.

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