Steffensen v. Office of Prof'l Conduct (In re Steffensen)

• Decision Date: 24 September 2018
• Docket Number: No. 20170058,20170058
• Parties: In the MATTER OF the DISCIPLINE OF Brian W. STEFFENSEN Brian W. Steffensen, Appellant, v. Office of Professional Conduct, Appellee.
• Court: Utah Supreme Court

428 P.3d 1104

In the MATTER OF the DISCIPLINE OF Brian W. STEFFENSEN

Brian W. Steffensen, Appellant,

v.Office of Professional Conduct, Appellee.

No. 20170058

Supreme Court of Utah.

Filed September 24, 2018

Billy L. Walker, Barbara Townsend, Adam C. Bevis, Salt Lake City, for appellee

Brian W. Steffensen, Salt Lake City, for appellant

Justice Himonas authored the opinion of the Court, in which Chief Justice Durrant, Associate Chief Justice Lee, Justice Pearce, and Justice Petersen joined.

On Direct Appeal

Justice Himonas, opinion of the Court:

INTRODUCTION

¶1 Brian Steffensen appeals the judgment of the district court disbarring him from practicing law for violations of the Utah Rules of Professional Conduct involving, inter alia , failure to file taxes. Mr. Steffensen asks this court to reverse the district court’s findings of misconduct, direct that the case against him be dismissed, and vacate the sanction of disbarment. We affirm the district court’s findings of misconduct, reverse the district court’s imposition of sanctions, and remand to the district court for a new sanctions determination.

BACKGROUND

¶2 After graduating from Stanford Law School in 1980, Mr. Steffensen became a member of the bar and began working as a lawyer in a large firm.¹ He primarily represented a major bank focused on transactional work and real estate development. He left the firm approximately seven years later, continuing to work as a lawyer in a sole proprietorship. Then, in 1995, Mr. Steffensen incorporated the first of his many professional law firms.

¶3 Mr. Steffensen repeatedly failed to maintain accounting practices that would keep his law firms viable. Mr. Steffensen acknowledges his "gross[ ] negligen[ce]" in "failing to file ... employee withholding tax returns." Additionally, Mr. Steffensen opened a new law firm each time the previous one financially floundered. To date, Mr. Steffensen has incorporated five firms subsequent to his sole proprietorship. Financial trouble led to the demise of at least three previous firms,² with taxes left unpaid. The law firm currently in operation is AAA Law, PC.

¶4 Mr. Steffensen’s first incorporated law firm—Brian W. Steffensen, a Professional Law Corporation (Firm #1)—operated from 1995 to 2001 and closed, resulting in an Internal Revenue Service (IRS) seizure of all assets "because of his failure to pay withholding taxes." Mr. Steffensen also had problems with the Utah State Tax Commission with Firm #1. Mr. Steffensen admits having someone apply for a withholding account number for Firm #1 in 1995. So he has known since at least 1995 that he had a responsibility to withhold money from the employees’ paychecks and pay that money to the Tax Commission. He also admits to knowing that filing a return was required even if no taxes were due and claims that he filed all returns for Firm #1. And, although he filed returns, he never remitted the taxes.

¶5 Upon the heels of the IRS seizure, Mr. Steffensen established Steffensen Law, PC (Firm #2), which operated from 2002 to 2003. Operations under this firm ended due to "the exact same problems with payroll and the Tax Commission" as the first. In the same year, 2003, Mr. Steffensen started his third law firm, S Law, P.C. (Firm #3), which ceased operation in 2007 "because the financial and tax irregularities continued to exist." When Firm #3 closed, Mr. Steffensen established his next firm, SB Law, PC (Firm #4), which remained in operation until 2013. When that firm was in financial jeopardy, he established AAA Law, PC (Firm #5), Mr. Steffensen’s currently operating law firm.

¶6 The Tax Commission began to scrutinize Mr. Steffensen’s employee tax withholding practices in 2006 when the filing process of one of his employees was suspended and came under review by the Tax Commission because her W2 from Firm #3 did not have a state withholding tax number. The Tax Commission investigated both Mr. Steffensen’s business and personal taxes. While the Tax Commission started with investigating only Mr. Steffensen’s law firm listed on the questionable W2, it soon discovered several withholding accounts for other businesses and began investigating those as well.

¶7 In September 2008, the Tax Commission completed an investigation of Mr. Steffensen and recommended he be criminally charged with violating: (1) Utah Code section 76-8-1101(1)(c)(i), Failure to File; (2) Utah Code section 76-8-1101(1)(d)(i), Willful Evasion; and (3) Utah Code section 76-6-513(2), Unlawful Dealings of Property by a Fiduciary.³

¶8 The Tax Commission’s investigation uncovered a number of potential violations of tax law on Mr. Steffensen’s part. As of July 2008, Firm #1 had an unpaid outstanding withholding tax account balance of $44,395.46. Mr. Steffensen broke seven payment arrangements regarding this balance. Regarding Firm #2, Mr. Steffensen perpetuated the same problems he had with the first firm. Additionally, Mr. Steffensen used invalid state withholding tax identification numbers, and the W2s he distributed to employees falsely declared that money had been withheld and remitted. And, as of September 2008, he still owed $48,895.17 for withholding taxes, penalties, and interest for tax years 2002–2006. Moreover, in operating Firm #3, Mr. Steffensen failed to file withholding returns for 2003 through 2006. He failed to remit withholdings for this firm’s entire existence.

¶9 In May 2009, Mr. Steffensen was charged with one count each of Failing to Render a Proper Tax Return (for tax years 2003–2008), Intent to Evade (for tax years 2003–2008), and Unlawful Dealing of Property by a Fiduciary (for years 2003–2006). On March 1, 2010, Mr. Steffensen entered into a diversion agreement with the State in which he did not admit to guilt but did admit there was probable cause for the charges against him. In that agreement, the charges were amended to an "attempt to commit a crime," UTAH CODE § 76-4-101,⁴ namely "knowingly and intentionally, and without a reasonable good faith basis, fail[ing] to make, render, sign or verify any return within the time required by law," id . § 76-8-1101(1)(c)(i). Mr. Steffensen in turn paid all taxes along with penalties.

¶10 After receiving notice of Mr. Steffensen’s criminal charges in September 2009, the Office of Professional Conduct (OPC) alleged three violations in its case against Mr. Steffensen. The first claim under rule 8.4(b) of the Utah Rules of Professional Conduct is that Mr. Steffensen engaged in criminal conduct that reflects adversely on his fitness to practice law. The second claim under rule 8.4(c) is that he engaged in dishonest conduct. And the third claim under rule 8.4(a) is that he engaged in misconduct by violating or attempting to violate the Utah Rules of Professional Conduct.⁵

¶11 The district court concluded that Mr. Steffensen violated rule 8.4(b) and (c) of the Utah Rules of Professional Conduct. The court found professional misconduct under rule 8.4(b) for "committ[ing] the criminal act [under Utah Code section 76-8-1101(1)(c)(i) ] of Failing to Render a Proper Tax Return [and] ... committ[ing] the criminal act [under Utah Code section 76-4-101 ] of Attempted Failing to Render a Proper Tax Return." The district court concluded that these "committed criminal acts," established "[b]y a preponderance of the evidence," "reflect adversely on [Mr. Steffensen’s] honesty, truthfulness or fitness as a lawyer [i]n other respects."

¶12 The district court concluded that Mr. Steffensen committed professional misconduct under rule 8.4(c) because he "engaged in conduct involving dishonesty, fraud, deceit, or misrepresentation."⁶ In addition to the criminal acts under rule 8.4(b), the district court found (1) that Mr. Steffensen, "in the context of operating the law firm," failed "to remit to the Tax Commission the amounts that [his] employees were ultimately obligated to pay in their taxes," which was "dishonest;" (2) that he distributed "W2s to [his] employees stating that the tax monies had been withheld and remitted" when they had not, which constituted a misrepresentation; and (3) "that he presented [financial statements] to his bank in order to get a loan" that were in conflict with "forms he presented to the Tax Commission to obtain a financial hardship exemption" and therefore that "Mr. Steffensen’s statements about his income and finances [that] he presented to the Tax Commission to receive a financial hardship exemption contained material misrepresentations."

¶13 The district court held a sanctions hearing and concluded that the violations of the Utah Rules of Professional Conduct justified the disbarment of Mr. Steffensen under Rule Governing the Utah State Bar 14-605(a)(1) and (a)(2). Mr. Steffensen appeals. We have jurisdiction pursuant to article VIII, section 4 of the Utah Constitution and Utah Code section 78A-3-102(3)(c).

STANDARD OF REVIEW

¶14 The Utah Supreme Court has a constitutional mandate to "govern the practice of law, including ... the conduct and discipline of persons admitted to practice law." UTAH CONST. art. VIII, § 4. Because of this mandate, professional discipline cases form a unique subset of the cases we hear and have a unique standard of review.

¶15 While we generally "presume that the [lower tribunal’s] findings of fact are correct" unless clearly erroneous, in attorney discipline cases we "reserve the right to draw inferences from basic facts which may differ from the inferences drawn by the [lower tribunal]." In re Discipline of Babilis , 951 P.2d 207, 213 (Utah 1997) (alterations in original) (citations omitted). Additionally, although "we always give serious consideration to the findings and [rulings] of the [district court]," "we must treat the ultimate determination of discipline as our responsibility." Id. (alterations in original) (citations omitted). We therefore must "make an independent determination of the correctness of the discipline the district court imposed." In re Discipline of Lundgren , 2015 UT 58, ¶ 9, ...