“A Bright And Accomplished Lawyer”

The Utah Supreme Court accepted findings of misconduct in an attorney’s various tax lapses but remanded the district court’s disbarment order for reconsideration of the sanction

After graduating from Stanford Law School in 1980, Mr. Steffensen became a member of the bar and began working as a lawyer in a large firm. He primarily represented a major bank focused on transactional work and real estate development. He left the firm approximately seven years later, continuing to work as a lawyer in a sole proprietorship. Then, in 1995, Mr. Steffensen incorporated the first of his many professional law firms.

Mr. Steffensen repeatedly failed to maintain accounting practices that would keep his law firms viable. Mr. Steffensen acknowledges his “gross[] negligen[ce]” in “failing to file . . . employee withholding tax returns.” Additionally, Mr. Steffensen opened a new law firm each time the previous one financially floundered. To date, Mr. Steffensen has incorporated five firms subsequent to his sole proprietorship. Financial trouble led to the demise of at least three previous firms, with taxes left unpaid. The law firm currently in operation is AAA Law, PC.

This situation led to trouble

In May 2009, Mr. Steffensen was charged with one count each of Failing to Render a Proper Tax Return (for tax years 2003– 2008), Intent to Evade (for tax years 2003–2008), and Unlawful Dealing of Property by a Fiduciary (for years 2003–2006). On March 1, 2010, Mr. Steffensen entered into a diversion agreement with the State in which he did not admit to guilt but did admit there was probable cause for the charges against him. In that agreement, the charges were amended to an “attempt to commit a crime,” UTAH CODE § 76-4-101, namely “knowingly and intentionally, and without a reasonable good faith basis, fail[ing] to make, render, sign or verify any return within the time required by law,” id. § 76-8-1101(1)(c)(i). Mr. Steffensen in turn paid all taxes along with penalties.

The matter was reported to the Bar in September 2009.

In these proceedings brought before the district court by the OPC, the court concluded Mr. Steffensen violated both rule 8.4(b) and (c). Mr. Steffensen challenges the admissibility of evidence that the court allowed in his adjudication hearing as well as the court’s determination of his mental state. He argues that the evidence was irrelevant and prejudicial. We hold that the evidence was relevant and admissible. Mr. Steffensen also argues that the district court’s determination that his actions were “knowing and intentional” was not supported by the evidence. We disagree and affirm the district court’s findings of fact and conclusions of law at the adjudication hearing.

The court found the conduct was knowing

The district court’s findings regarding Mr. Steffensen’s mental state were certainly not clearly erroneous. Mr. Steffensen has had a lengthy career as a practicing lawyer. “Mr. Steffensen is a bright and accomplished lawyer, not someone with ignorance of the laws.” He has worked for large firms, as a solo practitioner, and at small law firms he owned and operated. Mr. Steffensen testified that he knew about the requirements surrounding withholding taxes. Mr. Steffensen had dealt with the ramifications of failing to pay federal taxes and as a result “would have been acutely aware of his obligations going forward.” “There were numerous offenses” and “numerous occasions of his failure to remit.” Mr. Steffensen also testified that because he failed to remit withholding taxes, he has paid penalties and fines (totaling about $100,000), approximately double what he would have paid had he remitted the taxes timely.

But…taxes

Taxes generally fail to provide the payer with a warm and fuzzy feeling. “Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.” 10 Letter from Benjamin Franklin to Jean Baptiste Le Roy (Nov. 13, 1789), in THE WRITINGS OF BENJAMIN FRANKLIN 68, 69 (Albert Henry Smyth ed. 1907). Certain or not, “knowingly and intentionally” failing to file taxes is a crime that reflects adversely on a lawyer’s fitness to practice law…

Because disbarment is so harmful to an attorney, we do not take its imposition lightly. And, in this case, we find disbarment under rule 14-605(a)(1) or (a)(2) of the Rules Governing the Utah State Bar unsubstantiated, and we remand for a new determination of the appropriate sanction.

The Rules

Rule 14-605 distinguishes between behavior that qualifies for disbarment, suspension, reprimand, and admonition. Not all professional misconduct defined in rule 8.4(a), (d), (e), or (f) results in presumptive disbarment, and it is therefore graded using specific criteria as shown in rule 14-605(a)(1), (b)(1), (c)(1), and (d)(1). Violations of rule 8.4(b) or (c) are notably absent from 14-605(a)(1), (b)(1), (c)(1), and (d)(1). Instead, the appropriate sanctions for violations of rule 8.4(b) or (c) appear in other subsections of rule 14-605.

. ..Because neither of the criminal acts found by the district court have one of the necessary elements listed in rule 14-605(a)(2), we hold that disbarment is unwarranted under that subsection.

Remand is the answer

Without specific findings that a violation of rule 8.4(c) falls under the requirements of rule 14-605(a)(3), including that it “seriously adversely reflects on the lawyer’s fitness to practice law” and is “intentional misconduct” other than conduct that would fall under rule 14-605(a)(1) or (a)(2), we will not presume disbarment is the appropriate sanction under rule 14-605(a)(3). “[A]lthough we always give serious consideration to the findings and [rulings] of the [district court],” we will not hold that disbarment is appropriate without clear documentation of the rationale and reasoning for the court’s conclusion.

With a request

Without reopening the proceedings, we leave it to the district court to interpret its own order and encourage the court to include more detailed findings specific to each violation and the rationale behind the sanction imposed for each violation. In doing so, we implore all state district courts to be detailed in their findings and to be clear in tying the sanction imposed to the professional misconduct found. Therefore, having rejected disbarment under rule 14-605(a)(1) and (a)(2), we remand to the district court for clarification of its findings of fact and conclusions of law in its order regarding Mr. Steffensen’s sanctions for professional misconduct under rule 8.4(b) and (c).

(Mike Frisch)