Bar Complaint From Ex-Husband’s Girlfriend Leads To Suspension

The Iowa Supreme Court is having a big bar discipline day with four published opinions.

This case involves an attorney who had failed to pay taxes for an extended period of time and split the court on sanction with the majority imposing at least a six-month suspension.

The attorney had stipulated to the facts

After the parties submitted briefs on the question of the appropriate sanction, a division of the grievance commission held a hearing to determine what sanction it would recommend to this court. By the date of the hearing, Taylor had already filed her federal and state income tax returns for tax years 2003 through 2013.

During the hearing, Taylor testified regarding her work and personal history, the circumstances that led to her failure to file her federal and state income tax returns, and the recent efforts she had made to address her outstanding tax liabilities with federal and state authorities. Taylor also expressed remorse for her actions, acknowledged her conduct violated her ethical obligations, and accepted responsibility for her actions without attempting to offer excuses or shift blame to others.

In 1997, Taylor was married. A few years later, in approximately 2002, her husband stopped earning a regular income. In 2004, the couple believed they did not have the money to pay their income taxes. Consequently, they procrastinated on filing their federal and state income tax returns for tax year 2003. Towards the end of her marriage, finances became a major issue. Taylor and her husband struggled to pay their bills for the next several years. They consistently failed to file their federal and state income tax returns.

In 2010, Taylor filed a petition for dissolution of the marriage. It had been approximately nine years since her husband had earned a regular income, and the couple had failed to file federal and state income tax returns for years. The court dissolved the marriage. The decree entered by the district court upon the dissolution of the marriage ordered Taylor and her former husband to file their outstanding federal and state tax returns separately.

Following the entry of the dissolution decree, Taylor and her former husband shared joint legal custody and joint physical care of their two minor children, and Taylor paid her former husband $657 per month in child support. Though Taylor initially began working with an accountant to file her delinquent tax returns, she ultimately persisted in her failure to file the returns despite the court ordering her to file them in the dissolution decree.

In 2014, Taylor became concerned the relationship between her former husband and his girlfriend had caused his relationship with their children to deteriorate. In August, Taylor informed her former husband that she was contemplating filing a petition to modify the joint physical care award in the dissolution decree. The following day, her former husband’s girlfriend filed a complaint with the Board alleging Taylor had not filed her income tax returns for tax years 2002 through 2007.

Taylor eventually filed a petition seeking modification of the joint physical care award in the dissolution decree. Following a child custody modification hearing, a district court awarded Taylor primary physical care of her minor children. Months later, her former husband began paying her $752 per month in child support. The court of appeals subsequently upheld the district court decision awarding Taylor physical care of the minor children. Thus, at the time of her hearing before the grievance commission, Taylor resided in a rented house in Waukee with her two minor children and an adult son who was in college.

Upon learning the complaint alleging she failed to file her tax returns been filed with the Board, Taylor responded in writing. In the response, Taylor acknowledged she had failed to keep current on filing her federal and state income tax returns, indicated she had already hired an accountant to assist her with preparing the delinquent returns, and anticipated she would file the delinquent returns within thirty days.

Though Taylor stated she accepted full responsibility for her actions, she also indicated she believed her former husband’s girlfriend filed a complaint against her with the Board in an attempt to destroy her law practice and get even with her for issues related to the custody dispute. Following its investigation, the Board filed a formal complaint against Taylor with the grievance commission on June 30, 2015. 

The majority on sanction

We conclude the one-month suspension the grievance commission recommended is an inadequate sanction based on the following significant aggravating circumstances present in this case. The period during which Taylor persisted in failing to file her tax returns far exceeds the period during which the attorney in Schall failed to do so. See Schall, 814 N.W.2d at 214 (suspending attorney’s license for a minimum of six months). Moreover, though only the attorney in Schall engaged in additional conduct that clearly constituted an independent violation of our ethical rules, see id., Taylor repeatedly violated a court order when she persisted in her failure to file her tax returns after the court issued the dissolution decree. We also find Taylor’s conduct is not as egregious as the conduct in Cross. Cross involved trust account violations and misrepresentations on his client security commission form. 861 N.W.2d at 218–30. In Cross, we suspended Cross’s license for only one year. Id. at 230.

Were it not for the numerous mitigating circumstances counseling in favor of a lighter sanction in this case, we would conclude a suspension longer than that we imposed in Schall to be appropriate. In light of those mitigating circumstances, however, we conclude a sanction in line with the one we imposed in Schall to be appropriate. We therefore conclude suspending Taylor’s license to practice law for at least six months is the appropriate sanction for her misconduct. 

Justice Waterman

I respectfully dissent because the majority’s six-month suspension is too lenient in light of our precedent. Attorney Taylor willfully failed to pay any self-employment taxes or income taxes or file her state and federal tax returns for eleven years. The majority acknowledges without elaboration that “Taylor had a substantial income over this time period that would have allowed her to pay her taxes.” Her actual income, of course, is relevant to the sanction. This is not a case where the lawyer failed to realize her income was high enough to require a tax return, or where the lawyer was incapacitated or financially unable to pay. In fact, Taylor’s net business income averaged $138,000 annually. She knowingly failed to pay tens of thousands of dollars owed to our state and federal governments every one of those years. She candidly admitted in 2015 that she “managed to increase [her] disposable income by thirty or forty percent each year by not paying income tax.” Specifically, her tax accountant belatedly determined that during the years 2003 through 2013, she owed state taxes totaling $83,048 and federal taxes totaling $385,025, for a combined total of $468,073 exclusive of interest and penalties…

What we said in Bromwell remains true: There is “no significant moral distinction between willfully cheating a client and willfully cheating the government.” 221 N.W.2d at 780; see also Katz, 116 A.3d at 1013 (holding cheating the government “is equally as reprehensible as cheating a client”).

For these reasons, I would impose a one-year suspension.

Justice Zager joined the dissent. (Mike Frisch)