No Probation For Multiple Ethics Violations

The Kansas Supreme Court has rejected probation in favor of suspension in a matter involving misconduct towards an elderly couple who had received bad tax planning advice and retained the attorney to pursue relief. 

From the hearing panel report finding numerous violations

In DA12475, once the respondent threatened to sue G.N. and D.N. over the fee, the respondent was required to withdraw from the representation because of the conflict of interest which developed between the respondent and G.N. and D.N. See Rule 1.16(a)(1). The respondent was also required to withdraw from the representation of G.C. when her physical health impaired her ability to adequately represent G.C. See Rule 1.16(a)(2). The respondent acknowledged that she should have withdrawn from her representation of G.N. and D.N. Because the respondent was required to withdraw from the representation of G.N., D.N., and G.C., the hearing panel finds that the respondent violated Rule 1.16.

False statement to a judge

In DA12475, the respondent engaged in conduct that involved a misrepresentation when she stated, ‘[t]his is the first I was aware that the clients were unhappy with my services. I was not informed that they were unhappy or didn’t want me to represent them until I just heard him speak.’ The respondent knew for more than a year that D.N. was unhappy with her conduct. The hearing panel concludes that the respondent violated Rule 8.4(c)…

The respondent engaged in conduct that adversely reflects on her fitness to practice law when she threatened to sue G.N. and D.N. and take other adverse action if they did not pay her $80,000 in attorney fees despite her agreement to accept the representation on a contingency fee basis.

Motive

The respondent threatened to sue her clients, the respondent threatened to withdraw statements the respondent made to the IRS, and the respondent threatened to suggest to G.N. and D.N.’s accountant that she withdraw her signatures on their tax returns. The respondent testified at the hearing on the formal complaint that she never intended to follow through with those threats. Thus, the repeated threats made by the respondent establish a dishonest motive. Further, the respondent’s misconduct in making the threats was to entice G.N. and D.N. to pay her attorney fees which, under the fee agreement, she was not entitled to receive. As such, the hearing panel concludes that the respondent’s misconduct in this regard was motivated by selfishness.

Probation was deemed insufficient by the court

The panel acknowledged that probation is generally not appropriate in cases involving dishonest conduct, but it was persuaded by the mitigating circumstances here. This court is unconvinced that the mitigating circumstances render the respondent’s egregious conduct toward her elderly clients amenable to probation. The respondent attempts to explain her threatening conduct toward them as an attorney-to-attorney negotiation because of D.N.’s status as an attorney. But her conduct in threatening to withdraw her statement to the IRS and to file a petition against her clients was simply wrong for several reasons.

First, the respondent had special influence over her clients’ taxes because she was also co-owner of the financial firm that had prepared their tax returns. She exerted this influence in her December 30, 2014 email, stating, “First, if you get audited, you will need me and my files to prove to the IRS that the income Transamerica declared to you was phantom, and caused by a Ponzi scheme.” The email also referenced legal opinions “on which the accountant relied in completing the tax return that saved you from $198,000 in taxes,” with both the respondent and the clients aware that the accountant was the respondent’s employee, a fact which amplified the threat. Even if her characterization of “attorney-to-attorney” negotiation was reasonable, her dual role as financial advisor and attorney gave her unfair leverage.

Second, her characterization of “attorney-to-attorney” negotiation was unreasonable in light of her recommendation for a guardian ad litem for D.N. at the January 22, 2016 hearing before the district court. The record is not clear on whether the respondent was sincere when she told the district court D.N. might need a guardian ad litem. But it is an aggravating factor either way. If the recommendation for a guardian ad litem was insincere, then the respondent’s attempt to discredit her client before the court was unethical. If the recommendation was sincere, then the respondent was unethical for engaging in hardball negotiations with a retired attorney whose capacity she knew to be diminished.

This complaint came after she was granted diversion for earlier misconduct

Moreover, the respondent had an opportunity to show she could satisfactorily perform on diversion but failed. While she was on diversion for loaning $20,000 to her client in violation of Rule 1.8(e), two new complaints were filed. And she did not contest the Disciplinary Administrator’s later request to revoke her diversion which was granted in January 2017.

The oral argument video is linked here . (MIke Frisch)