DOWNTOWN- Dallas members of a Texas Supreme Court committee are investigating whether accounting firms Arthur Andersen L.L.P. and Deloitte & Touche L.L.P. are illegally practicing law in the state. The probe by the Unauthorized Practice of Law Committee underscores a growing concern among lawyers that Big Six accounting firms are moving into their territory.

The concern is spurred, in part, by pending federal legislation that would extend client-confidentiality privileges to accountants - and by the decision last year of Arthur Andersen to begin representing clients in tax court.

The concern is so widespread that the American Bar Association sponsored a January panel discussion in San Antonio on "Lawyers and Accountants," in which legal experts discussed how accounting firms are taking business from attorneys.

Although the UPL committee has not filed any charges against Arthur Andersen or Deloitte & Touche, both sides have sought counsel and appear ready to fight the matter in court.

Dallas-based Jenkens & Gilchrist P.C. considered representing the committee, said Emily Foshee, a spokeswoman for the firm. But Jenkens declined because it represents several large accounting firms.

The UPL panel, which has an annual budget of $ 60,000, will go up against the Dallas office of Weil, Gotshal & Manges, a New York-based law firm that is representing Chicago-based Arthur Andersen.

Richard Spivak, managing partner for Andersen's U.S. tax practice, said Arthur Andersen is complying with the Texas investigation. He also said the company has done nothing wrong.

"We are not engaged in the unauthorized practice of law in Texas or any other jurisdiction," Spivak said. "It's flatly against our policies to do so."

Officials at Deloitte & Touche's Connecticut headquarters declined to comment. But they provided a statement confirming the company had received a letter of inquiry from the UPL committee.

"Deloitte & Touche L.L.P. does not engage in the unauthorized practice of law in Dallas, Texas, or elsewhere," the statement said. The company "will not comment further while this matter is part of an active inquiry or investigation," the statement went on.

Rodney Gilstrap, chairman of the UPL committee, also declined to discuss the matter.

Mark Ticer, who leads the Dallas group conducting the probe, would neither confirm nor deny whether the two accounting firms were being investigated. But some accounting firms "offer legal services to clients far outside of what one could consider typical," Ticer said. Those services have included giving legal advice, filing pleadings and representing clients in court, Ticer said.

Arthur Andersen does draft legal documents and represent clients in tax court, Spivak said. Such actions are legal because practicing in tax court does not require a law degree, he said.

"It is perfectly appropriate for Big Six firms to practice in tax court," Spivak said. "This isn't done without the knowledge of the tax court, so they must think it's OK."

The UPL investigation is a hot topic in the Metroplex legal community, said Steve Good, a partner at Dallas' Gardere & Wynne L.L.P.

"It will be a high-profile issue, not just for Texas, but nationwide," he said.

Attorneys are concerned that the Big Six firms appear to be stepping up their hiring of lawyers, said Good, who heads Gardere's tax section.

"It's pretty direct competition," Good said. "They are trying to get more into the consulting line of work. That seems to be their business objective."

Arthur Andersen has 600 lawyers on staff across the nation, Spivak said. That number is proportionate to the number of lawyers who were working for the company in 1971 when he joined it, he said.

"Where people with law backgrounds choose to practice is usually based on what the market conditions are, and where they see the best opportunities to practice their professions," he said.

The practice of law is broadly defined in Texas, local lawyers agree. Where giving advice ends and practicing law begins is a "fairly undistinguished area," Good said. "People generally acknowledge that if you represent someone in litigation, it is the practice of law. When you get into reviewing contracts and drafting documents, is that the practice of law? I think it is."

Dallas attorney Bill Elliott, a former head of the state bar's tax section, said accounting firms cannot guarantee they have no conflict of interest when giving clients legal advice.

"The reason you practice law in law firms is that a code of ethics develops," said Elliott, who practices with Kane Russell, Coleman & Logan. "Lawyers owe undivided loyalty to their clients. The minute you have non-lawyers providing legal services, you might as well repeal the code of ethics."

Attorneys on the UPL committee are also concerned that CPAs might lack the expertise to give legal advice. "They are concerned about whether accountants have training to do the things lawyers normally do," Good said.

But Arthur Andersen's clients don't need attorneys looking out for them, Spivak said.

"These are sophisticated consumers, and they have a choice as to who they want to represent them," he said. "Those making the allegations want to restrict the choices consumers have."

James Turner, executive director of HALT, a Washington, D.C.-based organization advocating legal reform, said the UPL committee is protecting its own interests.

"There's a special hubris that lawyers have that makes them think only they can do what they do," Turner said. "There's a territorial reaction when others deliver practices that are cheaper but just as good."

Turner said he opposes investigations being conducted by the Texas UPL committee, because its members conduct the investigations in secret and fail to disclose the exact nature of their complaint. Gilstrap says such secrecy is needed.

"Most licensed professionals have self-regulating bodies, and most operate on the basis of confidentiality," he said. "You can't investigate something if you don't maintain confidentiality.

Section 81 of the Texas state statutes, which defines the practice of law, created the UPL committee and gives it the right to investigate companies or persons operating without a license. The state committee consists of six lawyers and three non-lawyers, who are appointed by the Texas Supreme Court.

Several regions and cities, such as Dallas, also have subcommittees that conduct investigations and make recommendations to the state committee. If the state committee cannot resolve the issue, it may elect to file a lawsuit.

The Dallas subcommittee is also investigating Nolo Press, a Berkeley, Calif.-based publisher of self-help legal books. A hearing in that matter is set for August.