Incompetent Not Dishonest

The Maryland Court of Appeals rejected Bar Counsel’s call for disbarment in favor of indefinite suspension in a case involving incompetent representation of two clients, a conflict between his clients’ and his own bankruptcy, frivolous litigation including a series of bankruptcies to stave off foreclosure of his home and related misconduct.

Disbarment was not appropriate in light of the court’s conclusions on charges of criminal conduct and dishonesty.

The trial court had found a Rule 8.4(b) violation

The Respondent violated Rule 8.4(b) related to his personal bankruptcy and tax filings. 18 U.S.C. § 1001 makes it a crime to falsify or conceal a material fact, or to make a false statement or provide a false document to the government or a government agent. Brogan v. United States, 522 U.S. 398 (1998). 18 U.S.C. § 1621 prohibits perjury. Bronston v. United States, 409 U.S. 352 (1973).

The court here

Typically, when this Court finds a violation of Rule 8.4(b), the respondent has been charged or convicted of a crime in a separate proceeding. In this case, Mr. Kane has not been charged or convicted of a crime. Rather, the hearing judge concluded that Mr. Kane violated criminal statutes in connection with his personal bankruptcy filings when he failed to disclose the Adversary Proceeding or identify the Trustee as an unsecured creditor and when Mr. Kane submitted multiple bankruptcy petitions that contained false and inconsistent information. The hearing judge further concluded that Mr. Kane violated 26 U.S.C. § 7206, which prohibits the filing of false tax returns, when he filed tax returns which included deductions for cell phone and internet expenses, including family use, and were unrelated to his law practice.

Mr. Kane has filed exceptions to the hearing judge’s conclusion of law that he violated Rule 8.4(b). Mr. Kane notes that he has not been charged with or convicted of a federal crime related to his tax returns or his personal bankruptcy filings. Mr. Kane asserts that there is no evidence in the record upon which the hearing judge could conclude that
he committed a federal crime in connection with his bankruptcy filings and tax returns. Mr. Kane notes that federal crimes require an element of scienter and it must be proven that the defendant committed such crimes “knowingly and willfully.” “Knowingly” is defined as “acting intentionally and voluntarily, and not because of ignorance, mistake, accident, or carelessness.” Leonard B. Sand, et al., Modern Federal Jury Instructions, Criminal, No. 3A-1, 3A-3 (2018). Similarly, “willfully” requires a person to “act with knowledge that one’s conduct is unlawful and with the intent to do something the law forbids . . . . [T]he conduct was not ‘willful’ if it was due to negligence, inadvertence, or mistake.” Id. at 3A-20.

But – as it was for Ned Racine in the great lawyer movie Body Heat – the attorney’s incompetence was a weapon

…our independent review of the record leads us to conclude that while Mr. Kane was incompetent, uninformed, and negligent, his actions were not taken with an intent to defraud the Bankruptcy Court. Mr. Kane brought his personal bankruptcy to the Trustee’s attention at the lunch break on the first day of the Adversary Proceeding against him. The colloquy between Mr. Kane, the Trustee, and the bankruptcy judge demonstrates that while Mr. Kane’s failure to disclose the matter in his bankruptcy petition was uninformed and inconsistent with the requirements of the Bankruptcy Code, it was not undertaken with an intent to defraud the Bankruptcy Trustee or the Bankruptcy Court. Mr. Kane explained to the bankruptcy judge that he was trying to keep his “professional matters” out of his bankruptcy for “personal privacy reasons.”

He also testified that he did not think he needed to identify the Adversary Proceeding because he thought that only his clients had monetary risk and that the claims against him were “inchoate claims.” Again, while Mr. Kane’s decision was without legal merit and demonstrates his lack of competence on bankruptcy-related matters, we do not find, based upon this record, that Mr. Kane had the requisite intent to commit a criminal act. Similarly, while the record reflects that Mr. Kane filed serial bankruptcies with schedules containing incorrect and incomplete information, his conduct lacks a knowing or willful intent to engage in bankruptcy fraud.

As to dishonesty

As noted above, with respect to Mr. Kane’s bankruptcy filings, while the filings were careless and reflect a lack of competence, we do not find by clear and convincing evidence that Mr. Kane’s mistakes and inconsistencies were intentionally dishonest conduct or were undertaken for the purpose of defrauding or deceiving the Bankruptcy Court.

With respect to his tax deductions, Mr. Kane asserts that he is a sole practitioner who operates from a virtual office. Mr. Kane took a deduction on his tax return for his cell phone usage, which also included cell phone service of family members. At oral argument, Mr. Kane’s counsel stated that there is nothing in the record upon which the hearing judge could find that taking a cell phone business deduction for his family’s coverage constitutes tax fraud, or that the IRS would consider the deduction unacceptable in an audit. Based upon the record before us, we do not find clear and convincing evidence that Mr. Kane’s cell phone deduction on his tax returns constitutes intentionally dishonest or fraudulent conduct in violation of Rule 8.4(c).

These conclusions affected the sanction

In light of our sustaining Mr. Kane’s exceptions to the Rule 8.4(b) and (c) conclusions of law, we agree that the violations in this matter support the imposition of an indefinite suspension. Our decisions in prior attorney discipline cases support suspending Mr. Kane indefinitely, with the right to apply for reinstatement. In cases similar to Mr. Kane’s where the attorney’s disciplinary actions do not involve dishonesty, the sanction has often been indefinite suspension.

(Mike Frisch)