Less Than Disbarment

January 18, 2019

The New York Appellate Division for the First Judicial Department has accepted a three-year suspension as discipline for an attorney’s criminal conviction

On April 14, 2015 respondent pled guilty in the United States District Court for the Southern District of New York to corruptly endeavoring to obstruct and impede the due administration of the Internal Revenue law in violation of 26 USC § 7212(a), a felony. In an attempt to lower her tax liability and in response to an IRS audit, respondent, among other things, created false tax documentation indicating that two individuals (a medical professional who had performed medical services for a member of respondent’s family and a domestic employee) had provided services to her law practice and had been paid fee income by respondent as a result. In fact, neither of those individuals had provided such services. Respondent presented the false documentation to the IRS during the course of a 2013 audit of her and her husband’s joint tax returns for the 2010 and 2011 tax years to substantiate fake deductions and expenses. In addition to the false audit documentation, respondent’s guilty plea was entered in full satisfaction of any crimes relating to respondent’s payment of unreported cash wages to a domestic employee between 2007 and 2013.

Prior to her 2015 sentencing, respondent and her husband filed accurate amended tax returns and paid the past taxes owed to the IRS for the tax years 2007 through 2013, including interest and penalties in the total amount of $99,546. They also filed accurate New York State amended tax returns for the tax years 2007 through 2012, which showed an additional tax liability of approximately $155,000 which they are paying in installments pursuant to an agreement with New York State tax authorities. No criminal action has been commenced against respondent in connection with her New York State personal income tax returns.

On July 31, 2015, respondent was sentenced to a term of imprisonment of one year and one day, followed by one year of supervised release, 100 hours of community service, and was further directed to make restitution in the amount of $99,546, which, as noted, she paid prior to sentencing.

She has not practiced since the 2015 conviction.

Sanction

The parties have stipulated to the following aggravating factors: prior to the 2013 IRS audit, respondent and her husband were audited by the IRS between late 2007 and 2008 in connection with their return for the 2005 tax year. On their Schedule C, respondent and her husband collectively claimed tens of thousands of dollars in contractor and other services which were never actually rendered. Respondent, for her part, claimed false expenses on the 2005 tax return for commissions and fees purportedly incurred by her law practice and, in addition, falsely claimed personal expenses as legal expenses, including medical bills for a family member. Although the IRS auditor ultimately disallowed over $37,000 in expenses related to the 2005 tax return, which respondent and her husband agreed to, the auditor allowed tens of thousands of dollars of fraudulently claimed expenses based upon the false information respondent provided during the 2007-2008 audit, which did not result in criminal prosecution. Respondent and her husband earned a substantial gross income during the years that respondent engaged in the tax-related misconduct underlying this proceeding.

Additionally, the parties agree that under 22 NYCRR 1240.8(b)(2) and §§ 9.21 and 9.22(b) and (c) of the ABA Standards for Imposing Lawyer Sanctions, dishonest or selfish motive and a pattern of misconduct may also be considered in aggravation herein and may justify an increase in the degree of discipline to be imposed.

The mitigating factors stipulated by the parties include: respondent’s previously unblemished disciplinary history and the fact that she has not practiced law for nearly 3 1/2 years; that she has been under an interim suspension since January 2016; her misconduct did not involve the misuse of client funds, nor did it negatively impact any of her clients; she fully cooperated with federal criminal authorities and made full restitution; she promptly notified the AGC of her conviction and cooperated with the AGC’s investigation; she accepted full responsibility for her misconduct and expressed remorse and contrition therefor; since approximately 2014, respondent and her husband have retained the services of diligent accountants and attorneys to assist them in meeting their tax obligations and respondent is fully committed to continuing to meet such in the future; respondent is well regarded in the legal community and has an excellent reputation for the character traits of honesty and integrity; she has a long-standing reputation as a well respected wife, parent, and community member who volunteers her time; she has already suffered significant consequences as a result of her tax conviction, namely, 11 1/2 months of incarceration, financial penalties, and her interim suspension; and it is extremely unlikely that the misconduct at issue will recur in the future.

Additionally, the parties agree that under 22 NYCRR 1240.8(b)(2) and §§ 9.31 and 9.32 of the ABA Standards, absence of a prior disciplinary record, timely good faith effort to make restitution or to rectify consequences of misconduct, cooperation with disciplinary proceedings, character or reputation, imposition of other penalties or sanctions, and remorse may be considered in mitigation herein and may justify a reduction in the degree of discipline to be imposed.

The parties agree that the appropriate sanction to be imposed herein is a three-year suspension, effective nunc pro tunc to January 21, 2016, the date of respondent’s interim suspension.

Forbes covered the criminal case

“You’re two people who have great talent, who’ve been very successful in life, who I am going to send to prison,” Manhattan Federal Court Judge Denise Cote advised Dr. Jeffrey Stein and his wife, Marla Stein, shortly before handing down their sentence.

Both will spend time in federal prison for their respective roles in cheating the Internal Revenue Service (IRS). Dr. Jeffrey Stein, a vascular surgeon, was sentenced to 18 months while Marla Stein, a personal injury lawyer, was sentenced to a year plus one day (by way of explanation, crimes deemed a felony, by sentencing guidelines, are generally punishable by more than one year in prison and may then be eligible for early release). Both had hoped to avoid jail time with Marla Stein asking to serve her sentence at home in order to take care of her minor son.

Instead, the judge opted to have the couple stagger their jail terms, Giudice-style.

The Steins were also ordered to pay restitution to the IRS in the aggregate amount of $344,989.