SUNDAY, AUGUST 14, 2005 Business WWW.PHILLY.COM

When Sheldon M. Bonovitz, chair-man and chief executive officer ofPhiladelphia law firm Duane MorrisL.L.P., talks about increasing business,he’s not just talking about legal work.

The firm, one of the biggest in thecountry, owns nine side businesses,most of which have little to do withlegal services. While other big-namelaw firms have ventured outside thelaw business, few have gone as far asDuane Morris.

The latest venture is ImplantPurchasing Solutions L.L.C., a NewYork company launched in May thathelps hospitals finance the purchaseof expensive surgical implants forpatients. Others include a provider ofinvestment services to the wealthy, apublisher of training manuals forhealth-care professionals, and aprovider of malpractice insurance todoctors.

“Duane Morris has done more ofthis than anybody anywhere,” saidWard Bower, a principal at AltmanWeil Inc., of Newtown Square, a legal-industry consultancy with clientsacross the country.

While some suggest that such diver-sification got accounting firms intotrouble, Bonovitz says there is no sim-ilarity. Unlike some accounting firmsthat mixed auditing with consulting,he says that his firm’s legal practiceand subsidiaries are kept at arm’slength. The companies are led byexecutives who are independent of thelaw firm. While Duane Morris lawyersprovide legal counsel to the sub-sidiaries, none of the law firm’s part-ners is a CEO of the companies, hesaid.

This year, the 550-lawyer firmexpects its “ancillary businesses” to

make a profit of $7.5 million, on rev-enue of $30 million. By comparison,its legal services are expected to earnnearly $80 million on revenue of $290million this year.

Duane Morris, whose revenueplaces it at No. 72 among theAmerican Lawyer magazine’s list ofthe top 100 U.S. law firms, made itsfirst foray into entrepreneurship in1987 with fee-only financial advice.

Bonovitz said the idea for WescottFinancial Advisory Group L.L.C. camefrom discussions with Grant Rawdin,then a young employee in the law

firm’s tax-accounting division whowas attending night law school butwanted to run a business. Wescott wasstarted with a $60,000 investment byDuane Morris partners.

It was not an instant success. Clientswanted not just advice but everythingit takes to invest.

The firm began to thrive after itacquired the technology to broaden itsservices. By the end of this year, itshould have $1 billion under manage-ment, Bonovitz said.

He would not break out the financialperformance of individual companies,

By Porus P. CooperINQUIRER STAFF WRITER

Diversification gives lawyers a business edgeDuane Morris L.L.P. made its name as a law firm. It’s boosting profit by starting 9 subsidiaries. Critics see potential conflicts.

DAVID SWANSON / Inquirer Staff Photographer

Duane Morris is far more than the typical Torts R Us law firm. Its subsidiariesoffer malpractice insurance, finance surgical implants, offer restructuringadvice, and more. Sheldon M. Bonovitz (left) is the firm’s chairman. ThomasGaudiosi (center) and Karl Detweiler are top executives of two subsidiaries.

Copyrighted © 2005 by The Philadelphia Inquirer. Posted by permission.#1-11510944 Managed by Reprint Management Services, 717.399.1900. To request a quote online, visit www.reprintbuyer.com.

but he said they wereall doing well.

Bonovitz said thebenefits of such ven-tures went beyonddollars and cents.They inject “an entre-preneurial spirit” inthe law firm that isattractive to corpo-rate clients, he said.

“They say, ‘Gee, you guys are likebusinesspeople; you know the mean-ing of money,’” Bonovitz said. Aclient’s suggestion led to the creationof Implant Purchasing Solutions.

Bonovitz estimated the total finan-cial investment in the companies byDuane Morris partners at about $1million.

The 68-year-old Bonovitz’s own fas-cination with business is of long stand-ing. A dapper dresser with a prefer-ence for bow ties, he has been a boardmember at Comcast Corp. for years,advises venture-capital firms, and hasa Wharton School undergraduatedegree.

Comcast CEO Brian L. Roberts, whois a cousin to Bonovitz’s wife, Jill, saidhe found Bonovitz’s “deep legal per-spective” valuable, but considers hima fellow businessman these days.

Accounting firms drew conflict-of-interest charges by trying to sell bothauditing and consulting to clients.Such concerns have discouraged mostlarge law firms from heading too fardown this path since a flurry of inter-est in the late 1980s and early 1990s.

Arnold & Porter L.L.P., ofWashington, a leader in those efforts,soon abandoned them. By 1995, it hadsold all three businesses it had start-ed, including one that helped universi-ties and other nonprofit institutionsdevelop real estate.

The firm sold them in part becausethere was too much uncertainty aboutwhat was permitted by professionalrules of conduct, said James W. Jones,a managing partner then.

In 1994, the American BarAssociation came up with a model ruleto explicitly permit nonlegal business-

es. Many state highcourts, includingPennsylvania’s, butnot New Jersey’s,have adopted ver-sions of it.

Bonovitz saidDuane Morris tried tobe “pure as the drivensnow.” There is littlecross-marketing of

legal and nonlegal services to clients.The widest overlap is at WescottFinancial Advisory Group L.L.C.,where about 25 percent of the clients— a dwindling proportion — also areDuane Morris legal clients.

Even so, running side businesses outof law firms compromises the “specialstatus” of the profession, saidLawrence J. Fox, a partner at DrinkerBiddle & Reath L.L.P. in Philadelphiawho is a prominent critic of DuaneMorris’ strategy.

Lawyers have privileges, such asnot being forced to testify againstclients, and fiduciary duties to clients,said Fox, a former chairman of theABA’s Standing Committee on Ethicsand Professional Responsibility.

He is worried that clients might con-fuse the obligations of law firms andsubsidiaries, and mistakenly thinkthey get special protections when theydo business with a subsidiary.

Still, an array of ancillary business-es has been started (and sometimesfolded) by law firms: a trade consul-tancy at Katten Muchin ZavisRosenman L.L.P., Chicago; a service atMcGuire Woods L.L.P., in Richmond,Va., to help out-of-state businesseslocate in Virginia and Georgia; atranslation service at Holland &Knight L.L.P. in Washington nowabsorbed into the law firm.

Locally, there is Bond ResourcePartners L.P., which advises issuers oftax-exempt bonds and is partly ownedby Ballard Spahr Andrews &Ingersoll, and the Wolf Institute, atWolf, Block, Schorr and Solis-CohenL.L.P., which offers courses forhuman-resources personnel.

Government lobbying is one of the

most prolific side businesses amonglaw firms.

But even here there is potential tostumble, as Duane Morris found outrecently when Mark Singel, a formerPennsylvania lieutenant governor,suddenly left its Public AffairsManagement subsidiary.

The law firm sued Singel, alleginghe did not give proper notice andlured away clients. The suit was set-tled. Singel called it a misunderstand-ing.

Contact staff writer Porus P. Cooper at 215-854-4761 or pcooper@phillynews.com.

www.philly.com THE PHILADELPHIA INQUIRER Sunday, August 14, 2005

Corporate clients“say, ‘Gee, you guys arelike businesspeople;you know the meaningof money.’ ”Sheldon M. BonovitzDuane Morris chairman

Duane MorrissubsidiariesPublic Affairs Management L.L.C.,government lobbying.Philadelphia. (Founded 2000)RG/2 Claims Administration L.L.C.,claims administration inclass-action cases. Philadelphiaand San Francisco. (2002)Wescott Analytics L.L.C., damageassessment in securities-fraudcases. Philadelphia. (2001)Wescott Financial Advisory GroupL.L.C., financial planning andinvestment advisory services.Philadelphia. (1987)Wescott Healthcare L.L.C., helpshospitals recoverhealth-insurance underpayments.Philadelphia and Atlanta. (2004)Wescott Professional PublicationsL.L.C., publishes educationalmanuals for health-careprofessionals. Harrisburg. (2002)Wescott Strategic ManagementL.L.C., provides restructuringservices for financially troubledbusinesses. Philadelphia andAtlanta. (2001)American Healthcare ProvidersInsurance Services Co., L.L.C., aprovider of medical-malpracticeinsurance. Philadelphia. (2002)Implant Purchasing SolutionsL.L.C., helps hospitals financepurchases of surgical implants.New York. (June 2005)