Disciplinary Counsel v. Smith

[Cite as Disciplinary Counsel v. Smith, 128 Ohio St.3d 390, 2011-Ohio-957.]

DISCIPLINARY COUNSEL v. SMITH.

[Cite as Disciplinary Counsel v. Smith, 128 Ohio St.3d 390, 2011-Ohio-957.]

Attorneys — Misconduct — Felony conviction for tax fraud and impeding IRS

investigation — Indefinite license suspension ordered, with credit for time

served under interim suspension, but petition for reinstatement not

permitted until completion of supervised release and restitution agreement

with federal government.

(No. 2010-1888 — Submitted January 4, 2011 — Decided March 9, 2011.)

ON CERTIFIED REPORT by the Board of Commissioners on Grievances and

Discipline of the Supreme Court, No. 10-029.

__________________

Per Curiam.

{¶ 1} Respondent, Joseph Harold Smith of Avon, Ohio, Attorney

Registration No. 0041412, was admitted to the practice of law in Ohio in 1989.

On April 24, 2009, we suspended respondent’s license to practice on an interim

basis pursuant to Gov.Bar R. V(5)(A)(4) upon receiving notice that he had been

convicted of a felony. See In re Smith, 121 Ohio St.3d 1456, 2009-Ohio-1891,

905 N.E.2d 195.

{¶ 2} In April 2010, relator, Disciplinary Counsel, filed a complaint

charging respondent with four violations of the Code of Professional

Responsibility arising from the conduct that resulted in his federal convictions:

failing to accurately report his income to the Internal Revenue Service (“IRS”),

conspiring to defraud the IRS, and corruptly endeavoring to obstruct and impede

the ensuing IRS investigation.

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

Discipline accepted the parties’ agreed stipulations of fact and misconduct and the

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recommendation that respondent be indefinitely suspended from the practice of

law in Ohio with credit for time served under his interim suspension. The panel,

however, recommended that respondent not be permitted to apply for

reinstatement until he completes his federal supervised release and enters into an

agreement with the federal government for payment of restitution. The board has

accepted the panel’s findings and its recommended sanction, as do we.

Misconduct

{¶ 4} The parties have stipulated that from 1983 through February 17,

2003, respondent was employed by the Catholic Diocese of Cleveland. He began

as the diocese treasurer. By 2000, he had been promoted to chief financial

officer, and was finally named financial and legal secretary. In August 2006, a

federal grand jury issued a 27-count indictment against respondent and a

codefendant. Respondent was charged with one count of conspiracy to commit

mail fraud, eight counts of mail fraud, eight counts of money laundering, 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 an IRS

investigation.

{¶ 5} A jury found respondent guilty of one count of conspiracy to

defraud the IRS, four counts of making false tax returns, and one count of

corruptly endeavoring to obstruct and impede an IRS investigation. He was

acquitted of mail fraud and conspiracy to commit mail fraud, and the court

dismissed the money-laundering charges.

{¶ 6} At the panel hearing, respondent testified that the conduct leading

to his federal convictions began in the late 1990s when he received a series of

offers to go into private or public practice. According to respondent, the priest

who oversaw respondent’s employment did not want respondent to leave the

diocese and agreed to pay him approximately $250,000 annually, but stated that

this compensation could not go through the diocese payroll. To conceal

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January Term, 2011

respondent’s compensation, respondent and his codefendant, who provided

comptroller services for the diocese through his company, moved money from the

diocese, through the codefendant’s company, and into two businesses owned by

respondent. Respondent failed to pay taxes on this compensation, and while

representing respondent in a 1999 audit, the codefendant presented fraudulent

documentation of expenses purportedly incurred by respondent and falsely stated

that respondent had no sources of income other than those reported on his tax

return.

{¶ 7} Respondent was sentenced to one year and one day in federal

prison and was ordered to perform 150 hours of community service. He was also

ordered to pay restitution of $395,154 to the IRS, based on the statutory default

tax rate of 28 percent as applied to his unreported income of $1,411,265.

Respondent was released from the federal prison in Morgantown, West Virginia

on November 14, 2009, and stayed at a halfway house in Cleveland for

approximately two months. He is currently serving a two-year period of

supervised release that will terminate in January 2012. At the time of the panel

hearing, he had paid approximately $2,000 in restitution, and upon the conclusion

of his supervised release, he will be required to enter into an agreement with the

IRS for continued payment of restitution.

{¶ 8} The panel and board concluded that the parties’ stipulated facts and

exhibits and respondent’s testimony clearly and convincingly established that

respondent’s conduct violated DR 1-102(A)(3) (prohibiting a lawyer from

engaging in illegal conduct involving moral turpitude), 1-102(A)(4) (prohibiting a

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

misrepresentation), 1-102(A)(5) (prohibiting a lawyer from engaging in conduct

that is prejudicial to the administration of justice), and 1-102(A)(6) (prohibiting a

lawyer from engaging in conduct that adversely reflects on the lawyer’s fitness to

practice law). We accept these findings of fact and misconduct.

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Sanction

{¶ 9} 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 Section 10(B) of the Rules and Regulations Governing Procedure on

Complaints and Hearings Before the Board of Commissioners on Grievances and

Discipline (“BCGD Proc.Reg.”). Disciplinary Counsel v. Broeren, 115 Ohio

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

{¶ 10} Respondent has admitted that he engaged in a course of conduct

designed to conceal the true value and source of the compensation he received for

services provided to the Catholic Diocese of Cleveland, that he failed to

accurately report his income to the IRS, and that during an IRS audit, his agent

falsely stated that all of respondent’s sources of income were reported on his tax

return. As a result of this conduct, respondent has been convicted of conspiracy

to defraud the IRS, making false tax returns, and corruptly endeavoring to

obstruct and impede an IRS investigation. He has served a federal prison

sentence, has spent time in a halfway house, will remain on supervised release

until January 2012, and has been ordered to pay almost $400,000 in restitution to

the IRS.

{¶ 11} As aggravating factors, the parties stipulated and the panel and

board found that respondent had acted with a dishonest or selfish motive and had

engaged in a pattern of misconduct. See BCGD Proc.Reg. 10(B)(1)(b) and (c).

Mitigating factors include respondent’s lack of a prior disciplinary record, his full

and free disclosure to Disciplinary Counsel and cooperative attitude toward these

proceedings, and evidence of his good character and reputation, including letters

from an auxiliary bishop of the Catholic Diocese of Cleveland and a paralegal,

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January Term, 2011

both of whom worked with respondent at the diocese, and a family friend who is

also an attorney. See BCGD Proc.Reg. 10(B)(2)(a), (d), and (e). The panel and

board also found that other penalties had been imposed, including incarceration.

See BCGD Proc.Reg. 10(B)(2)(f).

{¶ 12} In light of these factors and our precedent, the board recommends

that we adopt the parties’ recommendation to indefinitely suspend respondent,

with credit for time served under his interim suspension, but suggests that we

condition his reinstatement upon completion of his federal supervised release and

consummation of a final restitution agreement with the federal government.

{¶ 13} In Dayton Bar Assn. v. Brunner (2001), 91 Ohio St.3d 398, 746

N.E.2d 596, we imposed an indefinite suspension with credit for time served

under an interim felony suspension on an attorney who had violated DR 1-

102(A)(4) by structuring and orchestrating a commercial real estate transaction in

contravention of federal regulations that prohibited the seller from financing 100

percent of the purchase price. Mitigating factors in Brunner included the

respondent’s cooperation with the federal investigation, his completion of a

federal prison term, his halfway-house confinement, and his payment of his

criminal fines.

{¶ 14} More recently, in Cincinnati Bar Assn. v. Kellogg, 126 Ohio St.3d

360, 2010-Ohio-3285, 933 N.E.2d 1085, we sanctioned an attorney for his role in

a scheme to shield $14 million of his employer’s assets from the Federal Trade

Commission and future legal claims, concluding that his conduct, which resulted

in multiple federal felony convictions, violated DR 1-102(A)(3) through (5), as

well as 7-102(A)(7) (prohibiting a lawyer from counseling a client in conduct he

knows to be illegal) and (8) (prohibiting a lawyer from knowingly engaging in

illegal conduct), and 7-109(A) (prohibiting a lawyer from suppressing evidence

he has an obligation to produce). Kellogg at ¶ 10, 12. Citing Kellogg’s assistance

to the employer’s bankruptcy trustee, which helped preserve the jobs of more than

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200 innocent employees, his cooperation in a related federal investigation, and

evidence of his good character, we imposed an indefinite suspension rather than a

permanent disbarment. Kellogg at ¶ 25-26. Observing, however, that Kellogg

had served less than one year of his three-year term of federal supervised release

at the time of our decision, we conditioned his reinstatement upon completion of

that term. Kellogg at ¶ 11, 26.

{¶ 15} Here, in contrast, respondent’s license to practice law has been

suspended for almost two years, and respondent has accepted responsibility and

expressed genuine remorse for his misconduct. Moreover, his supervised release

is scheduled to terminate in January 2012. Under these facts, we agree that an

indefinite suspension with credit for time served, with reinstatement conditioned

upon both the completion of federal supervised release and execution of a final

agreement for payment of restitution, is the appropriate sanction for respondent’s

misconduct.

{¶ 16} Accordingly, Joseph Harold Smith is hereby indefinitely

suspended from the practice of law in Ohio. He shall receive credit for time

served under his interim suspension, but he shall not be permitted to petition for

reinstatement until he has completed his federal supervised release and entered

into a final agreement with the federal government for payment of restitution.

Costs are taxed to respondent.

Judgment accordingly.

O’CONNOR, C.J., and PFEIFER, LUNDBERG STRATTON, O’DONNELL,

LANZINGER, CUPP, and MCGEE BROWN, JJ., concur.

__________________

Jonathan E. Coughlan, Disciplinary Counsel, and Joseph M. Caligiuri,

Senior Assistant Disciplinary Counsel, for relator.

Joseph H. Smith, pro se.

______________________

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