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For nearly every sector of accounting giant KPMG, the Northern Virginia tech market is proving fertile ground. From routine tax returns to discreet securities investigations, KPMG says, its business is booming. While lawyers are a relatively small force in the company’s local operations, they are increasingly the target of KPMG leaders’ search for new talent. For example, KPMG is searching for both accountants and attorneys to staff its new 12-story office tower in McLean. “We are all in the same job market, and there just seems to be a dramatic shortage,” says Earl Hannum, the partner in charge of tax for KPMG’s Washington region. Hannum says one reason that his group is hiring an increasing number of lawyers is because there seems to be a bigger pool of available, qualified attorneys than accountants. In addition, he says, more lawyers are pursuing jobs at the accounting firms. The Big Five are not matching the new starting salaries at national law firms, say consultants, but pay at the more senior levels is comparable to partnership draws at midtier and upper-tier law firms. Hannum says many lawyers are also seeking ways to concentrate their practice in just one area. “If you want to focus strictly on tax, there are more opportunities” at the accounting firms, Hannum notes. But tax is not the only game lawyers can play at KPMG and other Big Five firms. The Northern Virginia market also is fueling demand for KPMG’s forensic and litigation services group, which helps clients with internal investigations and litigation analysis. Marc Sherman, who heads the practice nationally, estimates that the group’s work in Northern Virginia has doubled over the past five years. “The Northern Virginia market is just proliferating in terms of the number of businesses there,” Sherman says. “And greater numbers means greater opportunities for problems to occur.” Nearly a third of the Washington regional practice is in Northern Virginia, says Sherman. Sherman’s group gets called in when a company has an internal problem, such as embezzlement, or a litigation problem, such as a class action. Nationally, his group has about 300 accountants and lawyers, with lawyers representing about 10 percent of the total. The lawyers include former federal and state prosecutors, FBI investigators, and accountants who also have law degrees. Sherman, who works out of offices in Baltimore and the District, is a certified public accountant who got a law degree in 1983. Locally, KPMG has about 30 people in the forensic and litigation group based in downtown Washington, up from 20 just two years ago. Sherman expects the group here to grow to 40 to 45 people over the next year and ultimately to 100. The local practice encompasses Washington, Maryland, and Virginia. KPMG’s lawyers are particularly valuable in helping to break down the costs and potential pitfalls of litigation, Sherman says. “A large part of what we are hired to do in litigation is to analyze a case and estimate the damages,” he says. “Sometimes we get hired by the court to help a judge understand a particular business or industry.” Interestingly, Sherman’s group is most frequently hired by a client’s legal team, either by in-house counsel or an outside firm. That makes the lawyers on his team even more valuable, he says. “We can speak the attorney’s language,” he notes, adding that the lawyers on his staff are very clear on the fact that they are not practicing law. “Our job is not to second-guess the attorneys or question their interpretation of the law,” he says. So far, Northern Virginia is generating more work for the forensic side of the business than for litigation. That means looking into matters like suspected accounting irregularities, kickbacks, ethical misconduct, or regulatory violations. Sherman expects Northern Virginia to follow the same pattern as Silicon Valley by experiencing a proliferation of intellectual property infringement cases, along with shareholder suits. “Northern Virginia, to a large degree, is significantly behind Silicon Valley, but we expect it to catch up very fast,” he says. “The biggest thing in Silicon Valley is infringement and theft of intellectual property. And there’s a whole slew of stockholder and securities suits in Silicon Valley.” Sherman also supervises a team of about 30 people covering Silicon Valley and San Francisco. He says he could keep twice that number busy, but can’t find the candidates he wants in the tight labor market. Trade secrets are a big issue in both Silicon Valley and Northern Virginia, Sherman says, and the problem is exacerbated by the tight labor market and the high-tech cultural phenomenon of employees jumping from one company to another. “There is a great deal of movement,” Sherman says. “It is very difficult to have somebody who has knowledge leave one company and go to another. There are a significant number of complaints and allegations that employees are taking legally protected trade secrets from one company to another.” In litigation, Sherman’s group works on a lot of securities cases, particularly cases stemming from a company going public: “Generally, what we do is look at the transactional side and ask questions like ‘Did they know ahead of time?’ [and] ‘Could they have disclosed?’ And regardless of the answer, we help compute what the damage was.” SEEING MORE OF NORTHERN VIRGINIA Of course, KPMG is not known for its legal forensics work the way it is for accounting and tax advice. Indeed, its national tax and legislative groups are also beginning to feel the effects of the Northern Virginia boom, though their metro D.C. offices are on the west side of the Potomac. Phil Wiesner, the partner in charge of client services for KPMG’s national tax practice in Washington, says that the 200-member group, which has 80 to 90 lawyers, has gotten deeply involved in Internet and e-commerce issues. For example, the national tax group collaborated with other tax groups at KPMG on a guide to the e-commerce issues that companies face as they expand business operations onto the Web. “The traditional standards of taxation may no longer apply,” Wiesner says. KPMG’s national tax practice is the firm’s technical resource and focuses on the Treasury Department, the Internal Revenue Service, and big multinational clients. KPMG’s separate federal tax legislative and regulatory services group counts eight lawyers among its 10-member staff. “We advise clients with respect to the impact of proposed legislation, and we act as advocates with respect to pending legislation,” explains Harry ‘Hank’ Gutman, the partner in charge of the group. Gutman joined KPMG in 1999 from the D.C. office of Atlanta’s King & Spalding, and is a former chief of staff of the Joint Committee on Taxation. “Most of our clients tend to be big national companies,” Gutman says. “I am sure we will see more of Northern Virginia as Internet and e-commerce issues become more important.” In Hannum’s D.C. tax group, the number of attorneys remains small. Of about 200 accounting professionals in the tax group, approximately 16 are lawyers. The group is based in McLean and serves Northern Virginia, the District, the Maryland suburbs, and Baltimore. The D.C. tax group had a record year in 1999, with revenue up nearly 28 percent for the year ending June 30. The group is on track to record a 22 percent growth in revenue this fiscal year, Hannum says. Northern Virginia now accounts for about 80 percent of the tax group’s clientele. “Ten years ago, probably 70 percent of our work was in downtown Washington,” Hannum notes. The work runs the gamut from filling out tax returns to auditing a company’s books for prospective underwriters. Because of the tight labor market, Hannum says that a growing number of Northern Virginia companies are turning to KPMG to handle tax matters that normally would have been handled in-house. “They can’t get enough good quality people so they are willing to use us to be more involved in their tax departments,” he says. “Some companies are completely out-sourcing their tax departments,” Hannum says. More typically, he says, companies outsource tasks such as filing tax returns while holding on to research and planning efforts. Hannum, a 33-year veteran of KPMG who is not an attorney, says he likes hiring lawyers because of their analytical skills and because they can write. When it comes to writing memos to clients, Hannum often turns to a lawyer. “The lawyers do mostly tax research and writing,” he says. “Accountants don’t write as well as they do numbers.” Claudia MacLachlan is a free-lance writer based in Washington, D.C., and a regular contributor to Legal Times.

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