Attorney Grievance Com'n of Maryland v. Deutsch

• Decision Date: 05 October 1982
• Docket Number: 18 and 19,Nos. 17,s. 17
• Citation: 294 Md. 353,450 A.2d 1265
• Parties: ATTORNEY GRIEVANCE COMMISSION OF MARYLAND v. Harold DEUTSCH. ATTORNEY GRIEVANCE COMMISSION OF MARYLAND v. Jack CWEIBER. ATTORNEY GRIEVANCE COMMISSION OF MARYLAND v. Martin B. LEVINSON.
• Court: Maryland Court of Appeals

Page 353

294 Md. 353

450 A.2d 1265

ATTORNEY GRIEVANCE COMMISSION OF MARYLAND v. Harold DEUTSCH.

ATTORNEY GRIEVANCE COMMISSION OF MARYLAND v. Jack CWEIBER.

ATTORNEY GRIEVANCE COMMISSION OF MARYLAND v. Martin B. LEVINSON.

Nos. 17, 18 and 19.

Court of Appeals of Maryland.

Oct. 5, 1982.

Melvin Hirshman, Bar Counsel, Annapolis (Glenn M. Grossman, Asst. Bar Counsel, Annapolis, Md., on the petition), for petitioner.

Marvin J. Land, Baltimore, for respondent Harold Deutsch.

Gerald P. Martin, Baltimore (Arnold M. Weiner, Baltimore, on the exceptions), for respondent Jack Cweiber.

Andrew J. Graham, Baltimore, for respondent Martin B. Levinson.

Before MURPHY, C. J., and SMITH, ELDRIDGE, COLE, DAVIDSON, RODOWSKY and COUCH, JJ.

RODOWSKY, Judge.

This disciplinary proceeding involves three attorneys who were all of the partners of a former law firm in Baltimore. They did not report their cash fees on the partnership or on their individual tax returns for 1974, 1975 and 1976. Two of the attorneys were convicted, upon guilty pleas, of violating 26 U.S.C. § 7206(1) as to 1976. The third attorney was given immunity as the key government witness. Under § 7206(1) any person who "[w]illfully makes and subscribes any return ... which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter" is guilty of a felony. This Court has previously said that the violation of § 7206(1) is a crime involving moral turpitude. Attorney Griev. Comm'n v. Lebowitz, 290 Md. 499, 507, 431 A.2d 88, 92 (1981). Because the conduct involved dishonesty for personal gain and there are no compelling, extenuating circumstances in this case, we shall order disbarment.

The respondents are Jack Cweiber (Cweiber), who was admitted to the bar of this Court in 1960, Martin B. Levinson (Levinson), who was admitted in 1961, and Harold Deutsch In the fall of 1978, Deutsch learned that the United States Attorney's Office had issued a subpoena for the records of the respondents' firm. This was part of a broad investigation of fraudulent personal injury claims in the Baltimore area. ¹ Deutsch engaged counsel and agreed to cooperate with the federal authorities in exchange for transactional immunity. Deutsch's disclosures resulted in criminal informations being filed against Cweiber and Levinson who pled guilty to violating 26 U.S.C. § 7206(1) with respect to their individual returns for 1976.

                (Deutsch), who was admitted in 1970.   When Cweiber's partnership with another attorney was dissolved, the respondents commenced practice January 1, [450 A.2d 1266] 1973 as a new firm.   Respondents' partnership terminated March 31, 1977 when Deutsch withdrew.   Cweiber was managing partner and the principal business producer.   The firm's practice was predominately plaintiffs personal injury work on a contingent fee basis
                

At Levinson's arraignment on April 18, 1980 the Government made a statement of facts which, in its material aspects, was as follows:

Deutsch would have testified that during 1973, '74, '75, '76, and up until he left the firm on April 1, 1977, it was the pervasive practice of the firm that none of the cash fees paid to the firm were reported by the firm on the partnership tax returns, prepared by Cweiber, nor by Cweiber, Levinson and Deutsch on their own individual income tax returns.

Furthermore, Deutsch would have testified that these cash fees were customarily placed into white envelopes and divided up by Levinson, Cweiber and Deutsch every Friday afternoon or every other Friday afternoon. None of the money was ever recorded and reported on any tax returns, either by the partnership or by the individual partners. The Deutsch would have estimated that during the calendar year 1976, which is the subject of the one-count criminal information, approximately $20,000 in cash fees were received by the firm, with Cweiber receiving approximately $10,000 and Deutsch and Levinson each receiving $5,000.

only income reported by the firm were non-cash fees, and this information [i.e., reporting] was given through accountant Barry Glass, who prepared the partnership returns ....

Levinson's counsel then made certain corrections:

First of all, we accept such facts as are sufficient to constitute an offense under the statute.... There were certain aspects of the proffer, however, that we don't accept ....

First of all, the proffer concerns facts in years other than 1976, which we won't accept. This is a one-count information and it only concerns 1976 so I would ask the Court to draw no inference from the fact that other years were discussed in the proffer.

Second of all, we do not accept Mr. Deutsch's estimate of either the amounts which were divided outside the flow of the firm's business that was reported in its tax returns nor the frequency of the division of funds.

However, there were, as the statute requires, and we do admit, substantial funds, significant funds beyond those reported on the income tax returns.

THE COURT: Is that correct?

MR. LEVINSON: That's correct, your Honor.

Cweiber was arraigned immediately following Levinson. The Government read into the record as to Cweiber essentially the same statement of facts quoted above and Cweiber's attorney made essentially the same corrections as did Levinson's attorney. The court then addressed Cweiber and asked:

And with the corrections that were made by your attorney, do you agree to the operative facts in there, that you did falsify your income tax?

to which Cweiber replied:

Yes, I do, your Honor.

Deutsch acknowledged to this Court that he is no less culpable than the other respondents.

The inquiry panel hearing under Md. Rule BV6 d covered three days. The respondents, their accountant, their former file clerk and their former law clerk (later an associate attorney) testified, as well as numerous character witnesses. Because there are no records of the unreported income, the testimony is less than specific as to the amounts involved.

Cweiber estimated personal injury claims represented 90% of the fees earned by the firm. He attributed 4% to workmen's compensation cases and the remaining 6% to domestic relations and criminal (including traffic) matters. There were two bank accounts maintained by the firm, the general attorneys, or operating, account and the separate escrow account. Income generated from personal injury cases was in the form of checks received from insurers. These were deposited into the escrow account, from which the appropriate distributions were made, including distribution of legal fee to the firm. Fees were deposited into the attorneys account in the form of a check drawn on the escrow account. These fees were recorded and picked up by the accountant for financial and tax reporting. Fees in workmen's compensation cases, which were always in the form of an insurer's check, and fees paid by check in domestic and criminal matters, were also deposited, recorded and picked up by the accountant for financial and tax reporting. But in domestic and criminal matters, fees, or part payments on fees, would also be received in cash. Cash payments almost always were hand delivered by a client, and not mailed. The payment would be received by an available partner, or, if none were available, the employee who accepted payment would turn the cash over to a partner.

This cash was kept in a locked drawer in Cweiber's desk and used for business purposes and for personal, non-business purposes by the respondents.

The control point in the bookkeeping system at which income items were recorded was the deposit to the attorneys account. By the simple expedient of not depositing receipts of cash, respondents avoided ever bringing the cash income under reporting control.

Respondents' independent accountant told the inquiry panel that his engagement included maintenance of the firm's general ledger and preparation of quarterly and annual financial statements, of employer's reports, and of the partnership and partners' individual tax returns. His accounting firm also balanced the attorneys account checkbook, a task which respondents were unable to perform. The accountant obtained partnership income data from the deposits into the attorneys account. It was the accountant's understanding that all of the income of the firm was represented by deposits into the attorneys account from the escrow account, and the accountant had no responsibility with respect to the escrow account. At the inquiry panel hearing, the accountant was asked: "The only documents you looked at are the records for the attorney account and you assumed that all deposits in the attorney account reflected the sum of all income received by the firm?" He replied: "Yes, because that's what the principals of the firm told me. I had no reason to doubt their word." He did not believe that it was necessary for the firm to maintain a fee journal because of his understanding that all funds (trust or otherwise) received by the partnership were first deposited into the escrow account and that the fees earned by the firm were represented by deposits into the attorneys account of checks drawn on the escrow account.

Office personnel, in addition to the partners and file clerk, were three to four secretaries. No particular employee seems to have been assigned bookkeeping responsibility. Deposits to the accounts were made only once a week, usually on Fridays, by the file clerk. This clerk, who was in the firm's There was at least one other record from which the respondents might have reconstructed most of the amounts received in cash in order to include that income in tax returns. Receipts for cash payments were generally given. Throughout its existence, the firm acquired from a stationer and used books of preprinted receipts, which produce a write through carbon copy. There is no evidence that copies of these receipts...