June 7, 2005

Deloitte Touche Tohmatsu LLP
Attn: Mr. Charles A. Horstmann
1633 Broadway
New York, NY 10019-6754

Dear Mr. Horstmann:

The staff has reviewed your letter of May 25, 2005 concerning Deloitte Touche Tohmatsu (“DTT” or “DTT Member Firm”) separation of various legal practices (individually, a “Separated Legal Practice”) from DTT. In your letter, you detail key terms of the transaction and conditions that DTT, including entities that have been considered part of DTT under Rule 2-01(f)(2) of Regulation S-X, will comply with in connection with the completion of the separation. Your letter concludes that, based on its compliance with those terms and conditions, the DTT Member Firm should not be considered to be “providing legal services” to, or to have a “mutuality or conflict of interest” or a “direct or material indirect business relationship” with, or a “direct financial interest or material indirect financial interest” in, any audit client (1) that also is a client of, or enters into a business relationship with, such Separated Legal Practice, or (2) in which such Separated Legal Practice invests.

As you are aware, the Sarbanes-Oxley Act of 2002 (the “Act”) expressly prohibits any registered public accounting firm, or any associated person or entity of that firm, from providing certain non-audit services to its audit clients that are “issuers” as defined in the Act. The representations set forth in your letter indicate that the terms and conditions of each separation agreement among other things: (1) provide that no DTT Member Firm or partner/principal of a DTT Member Firm has received or retained any equity interest in the Separated Legal Practice, (2) impose limitations on the use by the Separated Legal Practice of the DTT names and logos, including that such names and logos only be used in the context of historical reference and that the Separated Legal Practice must adopt and use a distinctive name and logo from the effective date of the separation, (3) provide that there be a strict separation of the corporate governance of the DTT Member Firms and the Separated Legal Practice, (4) forbid any revenue or profit sharing between the DTT Member Firms and the Separated Legal Practice, (5) prohibit preferred collaboration relationships between the DTT Member Firms and the Separated Legal Practice and require in certain circumstances separate engagements by common clients of the DTT Member Firms and the Separated Legal Practice (provided that in jurisdictions where tax services are only permitted to be provided by licensed lawyers, the Separated Legal Practice may provide limited tax services, not to exceed 10 professional hours in any calendar year, without a separate client engagement letter), (6) limit any financial relationship between the DTT Member Firms and the Separated Legal Practice to transitional credit support, if any, that is provided to expedite the separation and not as an investment or as continuing support, is on terms that permit creditors to seek payment from the DTT Member Firms only after they have unsuccessfully sought payment from the Separated Legal Practice and its partners/principals, is restricted in time and scope and must be removed as soon as practicable but no later than the first to occur of the date that is nine months after the effective date of the separation or one year from the date of your letter, and (7) provide that any shared services between the DTT Member Firms and the Separated Legal Practice are limited and transitional in nature and are for a period of no more than five years (the initial term will be no longer than three years and the parties may include a clause in the agreement to extend the term for a maximum of two one-year renewal periods).

Assuming that the representations set forth in your letter continue to be accurate, and further assuming that DTT continues to comply with each of the terms and conditions set forth in your letter, the Office of the Chief Accountant (“OCA” or the “staff”) will not recommend an enforcement action asserting that DTT lacks independence as a result of non-audit services provided to DTT’s audit clients by the Separated Legal Practices or any Separated Legal Practice partner or employee. Of course, DTT otherwise remains fully subject to the Commission’s independence requirements, as well as the provisions of the Act, with respect to matters not expressly covered by your letter and this response. OCA has taken this position based on the specific facts and circumstances represented in your letter. DTT will consent to any review deemed necessary by the staff or the Public Company Accounting Oversight Board to ascertain compliance. If the divestiture is found not to have satisfied the terms and conditions represented to the staff or if any of the remaining terms or conditions in your letter are not met, the staff’s position will be vitiated, and the staff may recommend an enforcement action. Further, OCA has taken this position based on its evaluation of the relevant policy considerations and does not thereby adopt or endorse the analysis or conclusions set forth in your letter. This response expresses OCA’s position only on these particular facts and circumstances and does not purport to express any legal conclusions on this or any other matter.

Incoming Letter

May 25, 2005

Office of the Chief Accountant
United States Securities and Exchange Commission
450 Fifth Street NW
Washington DC 20549

Re: Terms and Conditions for the Proposed Separations of Various Legal Practices from their Respective DTT Member Firms

Ladies and Gentlemen:

We hereby request that the Staff of the United States Securities and Exchange Commission (the “SEC” or “Commission”) advise that, based upon and subject to the matters referred to herein, it will not recommend that the Commission take enforcement action against Deloitte Touche Tohmatsu, a Swiss verein, or any other firms conducting audit activities for SEC registrants under the name “Deloitte Touche Tohmatsu,” “Deloitte & Touche,” “Tohmatsu” or other derivations thereof (each a “DTT Member Firm” and, collectively, for the purposes of this letter only, the “DTT Firms”), asserting that any DTT Member Firm is not “independent” of any of its audit clients that are required to file reports with the Commission (each an “Audit Client”) based upon the attribution to any DTT Member Firm of the legal services activities of any legal practice that was an associate of or had another relationship with a DTT Member Firm (a “Legal Practice”), provided that such Legal Practice has effected a separation (a “Separation”) from the DTT Firms and become a “Separated Legal Practice” in accordance with the terms and conditions set forth herein.

Legal Analysis

Auditor Independence Requirement. The federal securities laws require that financial statements filed with the Commission by public companies, investment companies, broker-dealers, public utilities, investment advisers and others be certified (audited) by independent public accountants.¹ With respect to independence of auditors, the Commission has adopted Rule 2-01 of Regulation S-X.

General Independence Standard. The general standard set forth in Rule 2-01(b) of Regulation
S-X provides that:

The Commission will not recognize an accountant as independent, with respect to an audit client, if the accountant is not, or a reasonable investor with knowledge of all relevant facts and circumstances would conclude that the accountant is not, capable of exercising objective and impartial judgment on all issues encompassed within the accountant’s engagement.²

Rule 2-01(b) further provides that:

[I]n determining whether an accountant is independent, the Commission will consider all relevant circumstances, including all relationships between the accountant and the audit client, and not just those relating to reports filed with the Commission.³

The preliminary note to Rule 2-01 states that, in considering the standard set forth in Rule 2-01(b), the Commission looks to, among other criteria, whether a relationship or the provision of a service “creates a mutual or conflicting interest between the accountant and the audit client.”⁴

Prohibitions on Specified Relationships. Rule 2-01(c) applies the general standard of Rule 2-01(b) to particular circumstances that are considered to impair an accountant’s independence. With respect to the provision of legal services, Rule 2-01(c)(4) and new subparagraph (ix) thereof specifically provide that an accountant is not independent with respect to an audit client if, at any point during the audit and professional engagement period, “the accountant provides … any service to an audit client that, under circumstances in which the service is provided, could be provided only by someone licensed, admitted, or otherwise qualified to practice law in the jurisdiction in which the service is provided.”⁵ New subparagraph (ix) is the principal motivation for this request as many Legal Practices have determined that it is in their best interests to establish a clear separation from their respective DTT Member Firm (and announce such separation to the marketplace).

Rule 2-01(c) also provides that an accountant will not be considered independent with respect to an audit client if, at any point during the audit and professional engagement period, “the accountant has a direct financial interest or a material indirect financial interest in the accountant’s audit client. . . .”⁶ In addition, Rule 2-01(c) provides that an accountant will not be considered independent if, at any point during the audit and professional engagement period, “the accounting firm or any covered person in the firm has any direct or material indirect business relationship with an audit client, or with persons associated with the audit client in a decision-making capacity, such as an audit client’s officers, directors, or substantial stockholders.”⁷

For purposes of Rule 2-01, “accounting firm” means “an organization . . . that is engaged in the practice of public accounting . . . and all of that organization’s departments, divisions, parents, subsidiaries, and associated entities, including those located outside the United States.” 17 C.F.R. § 210.2-01(f)(2) (emphasis added). Although not expressly defined by rule, the Commission has stated that it intends the phrase “associated entity” to:

reflect our staff’s current practice of addressing these questions in light of all relevant facts and circumstances, looking to the factors identified in our staff’s previous guidance on this subject. While the rules we adopt do not provide accounting firms with the certainty of our proposed rule, we are convinced that a more flexible approach is warranted as the types and nature of accounting firms’ business arrangements continue to develop.

Revision of the Commission’s Auditor Independence Requirements, 65 Fed. Reg. 76008, 76059 (Dec. 5, 2000) (footnote omitted). As part of this guidance, the Commission also cited numerous prior no-action letters that had been issued to address the separation of consulting businesses from accounting firms. Id. at 76059 n.491. The staff of the Commission’s Office of the Chief Accountant also recently issued a no-action letter addressing the separation of legal practices from accounting firms.⁸

On July 30, 2002, the Sarbanes-Oxley Act became law. Title II of the Sarbanes-Oxley Act, entitled “Auditor Independence,” required the Commission to issue final rules by January 26, 2003, final rules under which certain non-audit services will be prohibited, conflict of interest standards will be strengthened, auditor partner rotation and second partner review requirements will be strengthened, and the relationship between the independent auditor and the audit committee will be clarified and enhanced. However, Congress left the definitions of “accounting firm” and “associated entity” untouched. In its final rulemaking to incorporate Title II of the Sarbanes-Oxley Act into the SEC’s rules and regulations, the SEC also did not amend or modify its definitions of “accounting firm” or “associated entity.” See 68 Fed. Reg. 6006 (Feb. 5, 2003). Consequently, Rule 2-01 continues to direct firms to refer to the staff’s practice of addressing these questions in light of all relevant facts and circumstances, looking to the factors identified in the staff’s previous guidance on this subject.

The Commission’s interpretations of Rule 2-01 are collected in Section 600 of the Codification of Financial Reporting Policies (the “Codification”), entitled “Matters Relating to Independent Accountants.”⁹ Section 602.02.c of the Codification restricts the independent accountant from performing “bookkeeping and related professional services” that might cause a “mutuality of interest” to develop between the auditor and its client. In addition, Section 602.02.e of the Codification addresses business relationships— such as joint ventures, limited partnership agreements, and investments—that may impair an auditor’s independence. That section provides, in part, that:

Direct and material indirect business relationships, other than as a consumer in the normal course of business, with a client or with persons associated with the client in a decision-making capacity, such as officers, directors or substantial stockholders, will adversely affect the accountant’s independence with respect to that client. Such a mutuality or identity of interests with the client would cause the accountant to lose the appearance of objectivity and impartiality in the performance of his audit because the advancement of his interest would, to some extent, be dependent upon the client.

The Codification does not provide interpretations that specifically address the provision of legal services.

Application of the Auditor Independence Rules to the Relationship Between the DTT Member Firms and the Legal Practices. Deloitte Touche Tohmatsu believes that, if a Legal Practice has effected a Separation in accordance with the terms and conditions detailed in this letter (the “Terms and Conditions”), the DTT Member Firm should not be considered to be “providing legal services” to, or to have a “mutuality or conflict of interest” or a “direct or material indirect business relationship” with, or a “direct financial interest or material indirect financial interest” in, any Audit Client (1) that also is a client of, or enters into a business relationship with, such Legal Practice, or (2) in which such Legal Practice invests.¹⁰

Deloitte Touche Tohmatsu’s conclusions are based on the Terms and Conditions, which, with respect to each Separation, among other things: (1) provide that no DTT Member Firm or partner/principal of a DTT Member Firm has received or retained any equity interest in the Separated Legal Practice, (2) impose limitations on the use by the Separated Legal Practice of the DTT Firms’ names and logos, including that such names and logos only be used in the context of historical reference and that the Separated Legal Practice must adopt and use a distinctive name and logo from the effective date of the Separation, (3) provide that there be a strict separation of the corporate governance of the DTT Member Firms and the Separated Legal Practice, (4) forbid any revenue or profit sharing between the DTT Member Firms and the Separated Legal Practice, (5) prohibit preferred collaboration relationships between the DTT Member Firms and the Separated Legal Practice, and require in certain circumstances separate engagements by common clients of the DTT Member Firms and the Separated Legal Practice (provided that in jurisdictions where tax services are only permitted to be provided by licensed lawyers, the Separated Legal Practice may provide limited tax services without a separate client engagement), (6) limit any financial relationship between the DTT Member Firms and the Separated Legal Practice to transitional credit support, if any, that is provided to expedite the Separation and not as an investment or as continuing support, is on terms that permit creditors to seek payment from the DTT Member Firms only after they have unsuccessfully sought payment from the Separated Legal Practice and its partners/principals, is restricted in time and scope and must be removed as soon as practicable but no later than the first to occur of the date that is nine months after the effective date of the Separation or one year from the date of this letter, and (7) limit any shared services between the DTT Member Firms and the Separated Legal Practice.

In addition, Deloitte Touche Tohmatsu notes that the provision of legal services is a regulated activity in the relevant jurisdictions, and Deloitte Touche Tohmatsu believes that the regulators of legal and accounting services in each such jurisdictions would view a Legal Practice that effected a Separation in accordance with the Terms and Conditions as providing professional services on an independent basis from the DTT Member Firms and vice versa.

Accordingly, Deloitte Touche Tohmatsu desires to obtain assurance that, based on the transactions described below, a Separated Legal Practice would not be considered an associated entity of any DTT Member Firm, and, accordingly, to the extent that a Separated Legal Practice that has effected a Separation in accordance with the Terms and Conditions provides legal services to, enters into business relationships with, or makes investments in, any Audit Client, the DTT Member Firm’s independence will not be deemed impaired with respect to that Audit Client pursuant to Rule 2-01 or any other provision of the Commission’s auditor independence rules.

Factual Background

General. As of May 1, 2005, there were Legal Practices in approximately 22 jurisdictions, comprising approximately 1100 lawyers, with the practices in five countries (i.e., those in Netherlands, Belgium, Luxembourg, Germany, and Austria) accounting for approximately 57% of the revenues (in US dollars) generated by these Legal Practices. None of the Legal Practices is located in the United States or practices U.S. law.

Relationships between the Legal Practices and their Respective DTT Member Firms. At the time Rule 2-01(c)(4)(ii) was adopted, the relationships between the Legal Practices and their respective DTT Member Firms varied from jurisdiction to jurisdiction and from insignificant to extensive.¹¹ In many of the jurisdictions, the Legal Practices operated as independent legal entities that were controlled and managed separately from the respective DTT Member Firms. In these jurisdictions, the relationships between the Legal Practices and the DTT Member Firms were principally of an operational nature (e.g., common information technology platforms, common office service arrangements and coordinated marketing, including related names, trademarks and trade dress).

In other jurisdictions, the DTT Member Firms and the Legal Practices were (and many remain) organized as multi-disciplinary professional practices or similar organizations. This organizational structure has been driven by various factors, including (1) that multidisciplinary practices have been encouraged by regulators in some of these jurisdictions and (2) that in many of these jurisdictions the DTT Member Firm and the Legal Practice have not serviced Audit Clients to any significant extent. In these jurisdictions, the governance, capital structure and operations of the DTT Member Firm and the Legal Practice often overlap.

Relationships among the Legal Practices. From an operational perspective, the relationships among the Legal Practices vary, depending on which Legal Practices are being analyzed, but generally these relationships are common in the international legal community. There is no coordinating association between the Legal Practices through Deloitte Touche Tohmatsu or the DTT Firms.

Provision by the Legal Practices of Professional Services to Audit Clients. As far as the provision of professional services to Audit Clients is concerned, the relationships among the Legal Practices and the DTT Member Firms are limited.

Timing of the Separations. Because the relationships between the Legal Practices and their respective DTT Member Firms vary from jurisdiction to jurisdiction, it is not practical to effect all Separations simultaneously. Various Legal Practices have undertaken significant steps to separate themselves from their respective DTT Member Firms and the DTT Member Firms expect that the first Separations will be effective on or shortly after the date the Staff issues the confirmation requested by this letter.¹² We understand that the confirmation requested by this letter may apply only to Separations effected prior to December 31, 2006.

Terms and Conditions of No-Action Confirmation

We request that, subject to compliance with the following Terms and Conditions, the Staff not recommend enforcement action to the Commission based upon the attribution to any of the DTT Firms of the legal service activities of any Legal Practice that has effected a Separation from its respective DTT Member Firm. For purposes of the Terms and Conditions, Legal Practices that have effected a Separation are referred to as “Separated Legal Practices” and those that have not effected a Separation are referred to as “Incumbent Legal Practices.”

Terms and Conditions for the Separation of a Legal Practice from its
Respective DTT Member Firm

1. As a consequence of the Separation, no DTT Member Firm or its partners/principals will have received or retained any equity, or similar interest in the Separated Legal Practice, and the Separated Legal Practice will not have received any equity or similar interest in any DTT Member Firm. Notwithstanding the foregoing, the DTT Member Firm in the relevant jurisdiction may provide limited transitional credit support to the Separated Legal Practice (e.g., in the form of a guarantee of a working capital revolving credit facility), provided that (a) the credit support is provided to expedite the Separation and not as an investment or as continuing support, (b) the credit support is on terms that permit creditors to seek payment from the DTT Member Firm only after they have unsuccessfully sought payment from the Separated Legal Practice and its partners/principals, (c) the DTT Member Firm and the Separated Legal Practice use their reasonable best efforts to secure stand-alone financing for the Separated Legal Practice as promptly as practicable, (d) the credit support is provided only in respect of financing for the working capital needs of the Separated Legal Practice and not for capital expenditures, investments or similar uses, (e) the compensation for the credit support, if any, is determined on an arm’s length basis, and (f) the credit support does not extend beyond the first to occur of the date that is nine months after the effective date of the Separation or twelve months from the date of this letter.
    
2. The Separated Legal Practice may be permitted to use the name and logo of any DTT Member Firm for historic reference purposes (e.g., “formerly known as . . .”) for a transitional period of not more than 12 months from the effective date of the Separation, provided that from the effective date of the Separation:
    
1. The Separated Legal Practice has adopted a name and a logo that are distinct from the names and logos of the DTT Firms;
    
2. All publications, letterhead and stationery, name plates, office signage, business cards and similar materials clearly designate the Separated Legal Practice as separate from the DTT Member Firms (e.g., if any historical or other reference to the DTT Firms is made, a phrase such as “an independent law firm” is used);
    
3. No DTT Member Firm represents in any publication, advertisement, press release, name plates, office signage, business cards or other similar material that it is the same firm, or controls, manages, governs or is affiliated with the Separated Legal Practice or any other affiliate, subsidiary or division of the Separated Legal Practice; and
    
4. The Separated Legal Practice does not represent in any publication, advertisement, press release, name plates, office signage, business cards or other similar material that it is the same firm, or controls, manages, governs or is affiliated with a DTT Member Firm or any affiliate, subsidiary or division of a DTT Member Firm.
    
3. From the effective date of the Separation, the DTT Member Firms and the Separated Legal Practice will maintain separate corporate governance, management and financial structures and interests, including separate governing bodies,¹³ executives, employees, capital, credit lines or facilities, client bases, governing documents, operating policies, financial operations and financial and accounting policies. No DTT Member Firm will exert any financial or other influence over the Legal Practice’s corporate governance, management and financial structures or interests and the Legal Practice will not exert any such influence over any DTT Member Firm.
    
4. From the effective date of the Separation, no DTT Member Firm will accrue, pay to or receive from the Separated Legal Practice any royalty, interest, dividend or other similar payment, whether or not tied to the performance of the Separated Legal Practice, except for payments under the Transition Services Agreement described below. In addition, no DTT Member Firm will share profits or revenue from the provision of legal services or any other engagements or agreements with the Separated Legal Practice.
    
5. From the effective date of the Separation, no DTT Member Firm will make any compensatory or similar payments to the partners/principals of the Separated Legal Practice, except under fully funded retirement or other benefit plans available to partners/principals or under retirement or other benefit plans available to employees of the DTT Member Firm generally, in each case for the amount of benefits accrued through the effective date of the Separation.
    
6. The DTT Member Firms will not enter into any separate licensing agreements with the Separated Legal Practice with respect to the intellectual property owned by the Separated Legal Practice, provided that in the areas of tax services and other non-prohibited services, such licensing agreements may be entered into on an arm’s length basis.
    
7. The DTT Member Firms and the Separated Legal Practice may, but will be under no obligation to, refer clients to one another (other than as described below); and the DTT Member Firm and the Separated Legal Practice may not pay referral fees or other compensation for such referrals to each other nor to any subsidiary, affiliate, employee or agent of the other. Notwithstanding the foregoing, the DTT Member Firm and the Separated Legal Practice may use reasonable efforts, consistent with applicable professional standards, to refer professional services engagements to each other on a non-exclusive basis and at no cost to each other, provided that neither party may publicize such referral arrangements to clients. The DTT Member Firms and the Separated Legal Practice will not enter into any co- or joint marketing, advertising or similar agreements or arrangements which are inconsistent with the foregoing conditions or which do not clearly state that the DTT Member Firms and the Separated Legal Practice are separate firms. On the date that is the latest of the dates that (a) the Separated Legal Practice ceases to occupy office space subleased from any DTT Member Firm, (b) the Separated Legal Practice ceases referring to its historic relationship with the DTT Firms, (c) any transitional credit support arrangements have been terminated, and (d) services provided by the DTT Member Firms to the Separated Legal Practice are no more extensive and of no longer duration than provided in the Transitional Services Agreement, and if (e) all other Terms and Conditions have been, and continue to be, satisfied, the Separated Legal Practice and the DTT Member Firms will be free to contract and enter into business relationships with one another as would any other two independent entities, including compensated referral and joint marketing arrangements, provided that such arrangements are consistent with Regulation S-X and other applicable laws, regulations and professional standards.
    
8. The Separated Legal Practice and the DTT Member Firm may purchase each other’s professional services, including tax services, in exchange for customary arm’s-length compensation or may agree to provide such services to each other upon demand or otherwise on an arm’s length basis. In addition, the DTT Member Firm and the Separated Legal Practice may cooperate in the provision of tax services pursuant to arrangements consistent with the terms and conditions described in this letter. Prior to the date that all transitional credit support arrangements (if any) have been terminated, when providing professional services to the same client, the DTT Member Firm and the Separated Legal Practice will do so only pursuant to separate individual agreements with that client.¹⁴ During this period, the DTT Member Firm and the Separated Legal Practice will not enter into prime/subcontractor relationships to provide professional services to the same client.¹⁵
    
9. In connection with the Separation, the DTT Member Firm and the Separated Legal Practice may enter into a Transition Services Agreement for internal accounting and information services, office facilities and other services specified therein. The services provided under this arrangement may have varying terms. Services and facilities may be provided in accordance with the Transition Services Agreement so long as (a) the Separated Legal Practice is physically distinct from the DTT Member Firm’s other businesses and (b) charges for such use are determined at arm’s length and appropriate provision is made so that confidential information is not communicated between the DTT Member Firm and the Separated Legal Practice. Under the Transition Services Agreement, the DTT Member Firm will not receive transition services from the Separated Legal Practice and the DTT Member Firm will not generate a profit on the services it provides to the Separated Legal Practice. The term for the provision of the services pursuant to the Transition Services Agreement initially shall be no longer than three years from the effective date of the Separation (the parties may include a clause in the agreement pursuant to which they may mutually agree to extend the term for a maximum of two one-year periods). To the extent that the Separated Legal Practice and the DTT Member Firm have entered into sublease arrangements for office space currently occupied by the Legal Practice, in connection with the Separation, and as necessary whenever the main lease is modified, each sublease arrangement will be modified such that the Separated Legal Practice will pay the pro rata cost of such space, including related services and capital costs, based on the total square footage of each facility used by the Separated Legal Practice. No sublease arrangement will extend beyond the term of the main lease currently held by the DTT Member Firm (the leases have remaining terms ranging from approximately 1 year to approximately 15 years), and the DTT Member Firm will use commercially reasonable efforts to assist the Separated Legal Practice in its efforts to enter into a lease directly with the relevant landlord. The Separated Legal Practice and the DTT Member Firm will not enter into new leases or subleases with each other for office space after the effective date of the Separation. To the extent that the Separated Legal Practice and the DTT Member Firm occupy adjacent space (as lessor/sublessor or otherwise), the DTT Member Firm and the Separated Legal Practice will have separate and distinct office signage and their offices will be physically separate and clearly distinguishable from one another.
    
10. The DTT Member Firm will consent to periodic reviews by Commission Staff or an independent party designated by the Commission or its Staff to ascertain that the DTT Member Firm is complying with the conditions herein provided.

Terms and Conditions Applicable to Relationships with the Separated Legal Practices

1. All relationships, whether direct or indirect, between Incumbent Legal Practices and Separated Legal Practices will be subject to the terms and conditions described above for the relationships between DTT Member Firms and Separated Legal Practices.
    
2. No Incumbent Legal Practice, until such time as it has effected a Separation from its respective DTT Member Firm, will exert financial or other influence over the governance, management and financial structures or interests of any Separated Legal Practice. Furthermore, no Incumbent Legal Practice will accrue, pay to, or receive from, any Separated Legal Practice any royalty, interest, dividend or similar payment, whether or not tied to the performance of the Separated Legal Practice.
    
3. From the effective date of the first Separation, a Separated Legal Practice will restrict its activities vis-ą-vis the Incumbent Legal Practices to (a) assisting such Legal Practices with preparing for, and effecting separations from, their respective DTT Member Firms, (b) acting as a referral resource for Legal Practices seeking expertise in other jurisdictions, provided that such arrangements are not mandatory and no referral fees are paid, and (c) conducting seminars and other training sessions for the Legal Practices, provided that all participants from Incumbent Legal Practices reimburse the Separated Legal Practice for the cost of such services. From the effective date of the first Separation, a Separated Legal Practice will not receive funding from the DTT Member Firms or the Incumbent Legal Practices, except that any outstanding funding commitments that are fixed in amount at such effective date may be satisfied in accordance with their original terms but in no event beyond three years from the date of this letter.¹⁶

Certain Confirmations

In connection with its request herein, Deloitte Touche Tohmatsu hereby confirms to the Staff that:

1. After the effective date of the first Separation, the DTT Member Firms will continue to be subject to the independence requirements of the securities laws and the Commission’s independence rules and interpretations issued thereunder to the same extent as they were so subject prior to such date.
    
2. Deloitte Touche Tohmatsu has communicated the above conditions to the applicable DTT Firms and has furnished a copy of this letter (and will furnish any response from the Staff on this subject) to the Legal Practices. In connection with each Separation, the relevant Legal Practice will expressly acknowledge that it has been furnished a copy of such correspondence.

Confirmation Requested

Based upon the foregoing representations and subject to compliance with the Terms and Conditions, we hereby request that the Staff advise that if an Audit Client of a DTT Member Firm also is a client of, enters into a business relationship with, or is invested in by a Separated Legal Practice, the Office of the Chief Accountant will not recommend an enforcement action asserting that the DTT Member Firm lacks independence. Deloitte Touche Tohmatsu acknowledges that the relief requested by this letter will become effective if the first Separation occurs within 120 days of the date of the issuance by the Staff of the confirmation requested above and will apply to all Separations effected between such date and December 31, 2006. In the event the first Separation does not take place within 120 days of the receipt of such confirmation, Deloitte Touche Tohmatsu may reapply for the relief requested in this letter.

* * *

Certain matters described above have not yet been publicly announced. Accordingly, pursuant to 17 C.F.R. § 200.81(b), we hereby request confidential treatment of the contents of our communications with the Staff with respect to all issues relating to this letter (the “Confidential Material”) until a date 120 days after release of your response to us, or such earlier date as the Staff is advised by us that all of the information contained in the Confidential Material has been made public. However, when the Staff determines to grant the no-action relief requested herein, we understand and agree that the letter itself and the text of your response to the letter may be made public immediately. In addition to this request for confidential treatment, we will request, under separate cover, confidential treatment for the transaction documentation and the other materials furnished to you in connection with this letter pursuant to the provisions of 17 C.F.R. § 200.83.

* * *

If for any reason you do not concur with the views expressed in this letter, we respectfully request an opportunity to discuss this matter with the Staff prior to any written response to our letter. If you have any questions or need any additional information concerning the foregoing, please do not hesitate to call Scott Bayless of Deloitte & Touche LLP, a Delaware limited liability partnership and an affiliate of the Unites States member firm of Deloitte Touche Tohmatsu at (202) 879-5315, or Douglas Cox of Gibson, Dunn & Crutcher LLP at (202) 887-3531, who have been requested to facilitate answering any questions you might have.

copy to:
W. Scott Bayless – Deloitte & Touche LLP, a Delaware limited liability partnership
Douglas R. Cox – Gibson, Dunn & Crutcher LLP

¹ See, e.g., 15 U.S.C. §§ 77aa(25) and (26), 15 U.S.C. §§ 78l(b), 78q(e), and 78m(a), 15 U.S.C. §§ 79e(b), 79j(a) and 79n, 15 U.S.C. §§ 80a-8, 80a-29(g) and 80b-3(c).

² 17 C.F.R. § 210.2-01(b) (2003). Under Rule 2-01, the term “accountant” includes “any accounting firm with which the certified public accountant or public accountant is affiliated.”

³ Id.

⁴ 17 C.F.R. § 210.2-01 (2003) (para. 2 of Preliminary Note).

⁵ 17 C.F.R. § 210.2-01(c)(4)(ix) (2003). Rule 2-01(c)(4)(ix) was adopted by the Commission pursuant to the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) and became effective on May 6, 2003. Rule 2-01(e)(1)(iii) provides transitional relief and provides that legal services provided prior to May 6, 2004 pursuant to contracts in place on May 6, 2003 will not be deemed to impair an accountant’s independence, provided that such services did not impair the accountant’s independence under pre-existing requirements of the Commission.

⁶ 17 C.F.R. § 210.2-01(c)(1) (2003).

⁷ 17 C.F.R. § 210.2-01(c)(3) (2003).

⁸ Letter of Andrew D. Bailey, Jr., Deputy Chief Accountant, SEC, to Neil Lerner, KPMG LLP (UK) (May 14, 2004) (the “May 14 No-Action Letter”).

⁹ Financial Reporting Codification, Section 600 - Matters Relating to Independent Accountants, reprinted in SEC Accounting Rules (CCH) 73,251 et seq.

¹⁰ Deloitte Touche Tohmatsu expects that, as a result of a variety of jurisdiction-specific factors, the Separations of Legal Practices from their respective DTT Member Firms will occur at varying times.

¹¹ Deloitte Touche Tohmatsu believes that in some jurisdictions the relationship between the Legal Practice and the DTT Member Firm is so limited that the activities of the Legal Practice would not be attributed to the DTT Member Firm under applicable SEC rules. For example, in certain jurisdictions professional responsibility standards applicable to the legal and auditing professions have required these practices to adopt safeguards similar to the Terms and Conditions. Nonetheless, in the interest of clarity and consistency, the DTT Member Firms intend to ensure that all Legal Practices adopt a policy of requiring compliance with the Terms and Conditions as a prerequisite for the provision of legal services to Audit Clients.

¹² It is expected that in some jurisdictions the Legal Practices may not effect Separations. In these jurisdictions, the Commission’s auditor independence rules will still apply to the Legal Practices.

¹³ For example, there will be no contractual right by any DTT Member Firm to representation on the Separated Legal Practice’s governing body and no service on the Separated Legal Practice’s governing body by any then-active partner/principal or employee of a DTT Member Firm or former partner/principal or employee of a DTT Member Firm with continuing financial ties to a DTT Member Firm other than under fully-funded retirement benefit plans available to broad categories of former personnel.

¹⁴ This restriction will not prohibit a Legal Practice in a jurisdiction where tax services are only permitted to be provided by licensed lawyers from providing tax services to a DTT Member Firm client without a separate agreement with the client provided that such services are of the type provided by the Legal Practice in the ordinary course and the aggregate amount of professional time devoted by the Legal Practice on this basis for the client and its affiliates does not exceed 10 professional hours in any calendar year.

¹⁵ Deloitte Touche Tohmatsu acknowledges that, for purposes of Rule 2-01(c)(4)(ix) of Regulation S-X, acting as a prime contractor for legal services (and subcontracting such services to an independent law firm) is deemed to be equivalent to providing such services directly. Accordingly, no DTT Member Firm will enter into any prime/subcontracting arrangements with any firm for the provision of legal services to an Audit Client.

¹⁶ It is expected that the Separated Legal Practices may form a new organization for the purpose of coordinating activities among themselves and with other legal practices that are not associated with the DTT Firms. Separated Legal Practices and Incumbent Legal Practices will not be members of the same coordinating organization and any coordinating organization that includes Separated Legal Practices will not have any relationship with any coordinating organization that includes Incumbent Legal Practices that is inconsistent with the Terms and Conditions.

http://www.sec.gov/info/accountants/staffletters/dtt060705.htm