Disciplinary Counsel v. Jacobs

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as

Disciplinary Counsel v. Jacobs, Slip Opinion No. 2014-Ohio-2137.]

NOTICE

This slip opinion is subject to formal revision before it is published in

an advance sheet of the Ohio Official Reports. Readers are requested

to promptly notify the Reporter of Decisions, Supreme Court of Ohio,

65 South Front Street, Columbus, Ohio 43215, of any typographical or

other formal errors in the opinion, in order that corrections may be

made before the opinion is published.

SLIP OPINION NO. 2014-OHIO-2137

DISCIPLINARY COUNSEL v. JACOBS.

[Until this opinion appears in the Ohio Official Reports advance sheets,

it may be cited as Disciplinary Counsel v. Jacobs,

Slip Opinion No. 2014-Ohio-2137.]

Attorneys—Misconduct—Felony conviction for filing false tax return—Two-year

suspension with credit for time served under interim felony suspension.

(No. 2013-1230—Submitted October 9, 2013—Decided May 27, 2014.)

ON CERTIFIED REPORT by the Board of Commissioners on Grievances and

Discipline of the Supreme Court, No. 12-074.

____________________

Per Curiam.

{¶ 1} Respondent, Leslie William Jacobs of Gates Mills, Ohio, Attorney

Registration No. 0020387, was admitted to the practice of law in Ohio in 1968.

On April 3, 2012, we suspended his license to practice law on an interim basis

following his January 17, 2012 felony conviction for filing a false tax return. In

re Jacobs, 131 Ohio St.3d 1495, 2012-Ohio-1485, 964 N.E.2d 436.

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{¶ 2} On October 8, 2012, relator, disciplinary counsel, filed a complaint

charging Jacobs with violations of the Code of Professional Responsibility and

the Rules of Professional Conduct arising from the conduct that led to his felony

conviction.1 The parties submitted stipulations of fact and misconduct and a

recommendation that Jacobs be suspended from the practice of law for two years

with credit for time served under the interim suspension.

{¶ 3} A panel of the Board of Commissioners on Grievances and

Discipline conducted a hearing and adopted the parties’ stipulations of fact and

misconduct and agreed with the recommended sanction. The board adopted the

panel’s report in its entirety, and no objections have been filed.

{¶ 4} We adopt the board’s findings of fact and misconduct and

conclude that a two-year suspension from the practice of law with credit for time

served under the interim suspension is the appropriate sanction in this case.

Misconduct

{¶ 5} For the tax years 2004 through 2007, Jacobs, a senior partner with

a large law firm, prepared federal income tax returns for himself and his wife

without the assistance of a professional tax preparer. During 2004 and through

2007, he incurred substantial business expenses for which he received

reimbursement from his firm, including travel expenses on client matters, costs of

attending meetings and events for bar associations and other professional and

civic organizations, seminar costs, and business entertainment expenses. Under

his firm’s procedures, he submitted detailed expense-reimbursement vouchers,

supported by receipts, for items that he personally paid for, usually by charges to

his personal credit card. The firm then issued reimbursement checks payable to

Jacobs that he deposited into his personal bank account.

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Relator charged Jacobs with misconduct under the applicable Disciplinary Rules for acts

occurring before February 1, 2007, the effective date of the Rules of Professional Conduct, which

superseded the Disciplinary Rules of the Code of Professional Responsibility.

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January Term, 2014

{¶ 6} Each year, Jacobs received an IRS Schedule K-1 from the law

firm, which reported his ordinary business income from the firm and other items.

On each of his income tax returns for 2004 through 2007, Jacobs included a

Schedule E on which he reported his partnership income. On that form he also

listed the amount of ordinary business income from his Schedule K-1 and

subtracted an amount that he claimed as deductions for business expenses,

resulting in a net amount of partnership income that he then reported on his tax

return. Each year in that period, Jacobs knew that the amount that he claimed as

business-expense deductions was inflated, which resulted in understating his

income, which in turn falsely reduced his tax obligation.

{¶ 7} He falsely inflated his business-expense deductions in a number of

ways. For the years 2004 through 2006, he inflated his deductions by reporting

business expenses for which he had received reimbursement from the law firm

and thus had no net out-of-pocket expense. He deducted such reimbursed

expenses both for travel on client matters, for which the firm sought

reimbursement from the clients, and for nonclient expenses borne by the law firm.

{¶ 8} Jacobs also claimed deductions for nondeductible dues for personal

memberships at private clubs and charges for personal meals and other personal

uses of the clubs. He deducted meal and entertainment expenses at 100 percent of

the cost, even though he knew that those expenses, even when properly deducted,

were deductible at only 50 percent of the cost.

{¶ 9} Jacobs leased one or two automobiles per year that he used to

commute to his office and to drive for both business and personal purposes. He

improperly deducted all those vehicle expenses even though he made personal

and nondeductible use of the cars and also received reimbursement from his firm

for the business miles he traveled.

{¶ 10} Jacobs testified that he engaged in this misconduct because of his

frustrations with the federal government for falsely advising that his father died in

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a plane crash in World War II and concealing the fact that he had been executed

in a Japanese prisoner-of-war camp. He also was angry at the IRS for its alleged

harassment of his mother—up to her death—about her failure to timely withdraw

funds from her retirement account.

{¶ 11} In February 2008, an IRS revenue agent notified Jacobs and his

wife that their 2005 income tax return was under audit. Jacobs met with the agent

and an IRS supervisor later that month, provided the requested records, and was

interviewed. Later in 2008, the revenue agent expanded the audit to include 2004.

In July 2008, Jacobs met with the agent and a supervisor and provided the

requested 2004 records and was interviewed about his 2005 taxes. Following that

meeting, Jacobs faxed a written statement to the agent, discussing some of the

issues addressed in that meeting. In July 2009, the IRS advised Jacobs that he

was under a criminal investigation for his 2004 through 2007 income taxes, and a

special agent and revenue agent interviewed him.

{¶ 12} During the two audit meetings, in the faxed letter, and during the

criminal-investigation interview, Jacobs made false statements regarding the

items for which he claimed inflated deductions. On November 2, 2011, Jacobs

pled guilty to a federal information charging him with one count of making and

subscribing false tax returns in violation of 26 U.S.C. 7206(1) for the years 2004

through 2007. In the false returns for those four years, Jacobs understated his

taxable income by $256,380 and overstated his expenses by $253,256, resulting in

unpaid taxes of $75,385. He paid this shortfall in full on January 17, 2012, the

day he was sentenced.

{¶ 13} Jacobs was sentenced to serve 12 months and one day of

incarceration and one year of supervised release, including four months minus one

day of home confinement, and to pay a fine and special assessment totaling

$10,100. He paid the special assessment of $100 on the day he was sentenced and

the $10,000 fine on February 19, 2012. Jacobs completed his term of

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January Term, 2014

imprisonment, less good-time credit, on January 17, 2013, his term of home

confinement on May 16, 2013, and his supervised release on January 17, 2014.

{¶ 14} The parties stipulated, and the panel and board found, that Jacobs’s

conduct violated DR 1-102(A)(3) (prohibiting a lawyer from engaging in illegal

conduct involving moral turpitude) and Prof.Cond.R. 8.4(b) (prohibiting a lawyer

from committing an illegal act that reflects adversely on the lawyer’s honesty or

trustworthiness); DR 1-102(A)(4) and Prof.Cond.R. 8.4(c) (both prohibiting a

lawyer from engaging in conduct involving dishonesty, fraud, deceit, or

misrepresentation); and DR 1-102(A)(6) and Prof.Cond.R. 8.4(h) (both

prohibiting a lawyer from engaging in conduct that adversely reflects on the

lawyer’s fitness to practice law).

Sanction

{¶ 15} When imposing sanctions for attorney misconduct, we consider

relevant factors, including the ethical duties that the lawyer violated and the

sanctions imposed in similar cases. Stark Cty. Bar Assn. v. Buttacavoli, 96 Ohio

St.3d 424, 2002-Ohio-4743, 775 N.E.2d 818, ¶ 16. In making a final

determination, we also weigh evidence of the aggravating and mitigating factors

listed in BCGD Proc.Reg. 10(B). Disciplinary Counsel v. Broeren, 115 Ohio

St.3d 473, 2007-Ohio-5251, 875 N.E.2d 935, ¶ 21.

{¶ 16} The parties stipulated that four of the mitigating factors set forth in

BCGD Proc.Reg. 10(B)(2) are present, namely, (a) the absence of a prior

disciplinary record, (d) a cooperative attitude toward the proceedings, (e) good

character and reputation, and (f) imposition of other sanctions and penalties.

They also stipulated that Jacobs’s misconduct was personal, that it was not

committed in his capacity as a lawyer, and that it caused no harm to his clients.

{¶ 17} The panel and board also concluded that Jacobs had made a good-

faith effort to provide restitution, BCGD Proc.Reg. 10(B)(2)(c), and that he had

acknowledged the wrongful nature of his conduct. The panel and board found

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two aggravating factors: a dishonest or selfish motive and a pattern of

misconduct. BCGD Proc.Reg. 10(B)(1)(b) and (c).

{¶ 18} The parties cited several cases to support their recommendation of

a two-year suspension retroactive to the date of Jacobs’s suspension on April 3,

2012. The panel and board found Disciplinary Counsel v. Pace, 103 Ohio St.3d

445, 2004-Ohio-5465, 816 N.E.2d 1046, most persuasive.

{¶ 19} In Pace, the attorney was convicted of failing to disclose on his tax

return that he had an interest in or authority over a financial account in a foreign

country. Pace was sentenced to a two-month term at a federal minimum-security

facility and one year of supervised release. Based upon his felony conviction,

pursuant to Gov.Bar R. V(5)(A), we suspended Pace’s license to practice law for

an interim period. In his subsequent disciplinary action, the board found in

mitigation that Pace had practiced law for more than 35 years, had no prior

disciplinary record, and cooperated completely in the disciplinary process. The

board did not find any aggravating factors. We held that he violated DR 1-

102(A)(4) and (6), and we imposed a two-year suspension with credit for time

served under his interim suspension.

{¶ 20} Another similar case is Disciplinary Counsel v. Blaszak, 104 Ohio

St.3d 330, 2004-Ohio-6593, 819 N.E.2d 689, in which the attorney had offered to

sell truthful testimony in a pending case in return for $500,000 and $5,000 a

month for his continuing legal services. The government charged him with

selling testimony after he accepted a $50,000 down payment. Upon his federal

felony conviction, the court sentenced him to three years of supervised probation,

fined him $5,000, and ordered him to complete 500 hours of community service.

We imposed an interim felony suspension pursuant to Gov.Bar R. V(5)(A)(3) and

subsequently found that his conduct violated DR 1-102(A)(4), (5) (prohibiting

conduct prejudicial to the administration of justice), and (6).

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January Term, 2014

{¶ 21} We imposed a lesser sanction than disbarment or indefinite

suspension, noting the “overwhelming evidence of mitigation that respondent has

presented here.” Id. at ¶ 24. We acknowledged the significant number of

reference letters that the attorney presented and emphasized “the extensive

gratitude and appreciation these authors express[ed] for respondent’s professional

assistance in their lives and his achievements in the courts and community.” Id.

Based on “[t]hese testimonials, together with respondent’s contrition, completion

of his sentence, cooperation, the over two years his license has already been

suspended, and his heretofore exemplary record of professional and community

service,” we determined that a two-year suspension from the practice of law, with

credit for time served under the interim suspension, to be the appropriate sanction.

{¶ 22} In this case, we agree with the findings of the panel and the board.

Jacob lacks a prior disciplinary record, cooperated in the proceedings, paid all

taxes, acknowledged the wrongful nature of his conduct, and suffered the

imposition of other sanctions and penalties, including a federal prison sentence,

home confinement, supervised probation, and a $10,000 fine. See BCGD

Proc.Reg. 10(B)(2)(a), (c), and (d).

{¶ 23} Further, throughout his legal career, Jacobs has demonstrated his

good character and reputation in both the legal community and the community at

large through a significant number of character letters that speak to his

professionalism and his contributions to the bar and to community organizations.

See BCGD Proc.Reg. 10(B)(2)(e). He has served the legal community in

capacities as the former president of the Ohio State Bar Association and as an

officer and committee chairman of the American Bar Association, and it is

apparent that he could further contribute if allowed to return to the practice of

law.

{¶ 24} Disciplinary Counsel v. Smith, 128 Ohio St.3d 390, 2011-Ohio-

957, 944 N.E.2d 1166, is distinguishable on its facts. There, Smith concealed

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approximately $250,000 in annual income from the IRS for several years, failing

to report $1,411,265 in income to the IRS. And in response to an audit, he

allowed his representative to present fraudulent documentation of expenses Smith

had not incurred and to falsely state that Smith had no source of income other

than that reported on his tax returns. A federal court convicted Smith of one

count of conspiring to defraud the IRS, four counts of making false tax returns,

and one count of corruptly endeavoring to obstruct and impede the ensuing IRS

investigation, and it sentenced him to one year and one day in federal prison and a

two-year period of supervised release. The court ordered restitution of $395,154

to the IRS; however, as of the panel hearing, Smith had only paid $2,000 in

restitution. Based on our holding that Smith’s conduct violated DR 1-102(A)(3),

(4), (5), and (6), we indefinitely suspended him from the practice of law in Ohio,

allowing him credit for time served under his interim suspension.

{¶ 25} In contrast to Smith, Jacobs has been convicted of one count of

making false tax returns and did not seek to obstruct the IRS investigation. And

unlike Smith, who still owed the IRS $393,154 in restitution as of the time of the

panel hearing, Jacobs had paid the $75,385 owed in delinquent taxes before

sentencing. Based on Jacob’s conduct, a sanction is warranted in accord with our

decisions in Pace and Blaszak.

{¶ 26} Accordingly, we accept the recommendation of the Board of

Commissioners on Grievances and Discipline and in this case suspend Jacobs

from the practice of law in Ohio for two years with credit for the time served

under the interim suspension that began on April 3, 2012. Costs are taxed to

Jacobs.

Judgment accordingly.

O’CONNOR, C.J., and PFEIFER, O’DONNELL, LANZINGER, KENNEDY,

FRENCH, and O’NEILL, JJ., concur.

____________________

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January Term, 2014

Scott J. Drexel, Disciplinary Counsel, and Donald M. Scheetz, Assistant

Disciplinary Counsel, for relator.

Schwartz, Downey & Co., L.P.A., Niki Z. Schwartz, and Brian P.

Downey, for respondent.

_________________________

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