Attorney Grievance Com'n of Maryland v. Post

• Decision Date: 01 September 1996
• Docket Number: No. 53,53
• Citation: 350 Md. 85,710 A.2d 935
• Parties: ATTORNEY GRIEVANCE COMMISSION OF MARYLAND v. Alan Franklyn POST. Misc. AG,
• Court: Maryland Court of Appeals

Page 85

350 Md. 85

710 A.2d 935

ATTORNEY GRIEVANCE COMMISSION OF MARYLAND v. Alan Franklyn POST.

Misc. AG No. 53, Sept. Term, 1996.

Court of Appeals of Maryland.

June 9, 1998.

Melvin Hirshman, Bar Counsel, James P. Botluk, Asst. Bar Counsel, for the Attorney Grievance Com'n of Maryland.

Ronald B. Rubin, Washington, DC, for respondent.

Argued before BELL, C.J., ELDRIDGE, RODOWSKY, CHASANOW, RAKER and WILNER, JJ., and ROBERT L. KARWACKI, Judge (retired), Specially Assigned.

BELL, Chief Judge.

The Attorney Grievance Commission of Maryland (the "Commission"), by Bar Counsel, filed a Petition for Disciplinary Action against Alan Franklyn Post (the "Respondent"). ¹ On the complaint of Robin Aro, the petition alleged that, by failing timely to file withholding income tax returns, to remit the taxes withheld, and to hold the withheld taxes in trust, the respondent violated Rule 8.4 of the Maryland Lawyers' Rules of Professional Conduct. ² The Petition was referred, pursuant to Maryland Rule 16-711(a), ³ to the Hon. James C. Chapin, of the Circuit Court for Montgomery County, for hearing and to make finding of fact and conclusions of law.

A hearing was conducted on the petition. The parties, having jointly stipulated to fifty-six matters of fact, which the court accepted, testimony having been taken, and other evidence having been considered, the court, as required, determined the facts, stating that they were supported by clear and convincing evidence. ⁴

The respondent, admitted to the Bar of the State of Maryland in 1972, has, since 1986, been engaged in the private practice of law, as a solo practitioner, specializing in personal injury cases on behalf of plaintiffs. He also is admitted to the bar of the District of Columbia. Until 1996, when it was declared bankrupt, the respondent's practice was known as Alan. F. Post, Chartered. Because he was allocated a portion of the debt of the previous firm with which he had been associated when it dissolved, the respondent started Alan F. Post, Chartered, his first solo practice, in debt, and with virtually no cash reserves. In March, 1996, the respondent formed Alan F. Post & Associates, P.A. He was its sole shareholder, as was also the case with the prior professional corporation he formed. Moreover, while operating each of these corporations, he employed at least one employee and sometimes more.

Because the records of the Maryland Comptroller of the Treasury (the "Comptroller") do not reflect the activity on respondent's withholding tax account before 1993, the hearing court's findings related to that period and after. The records do reflect that the respondent made payments in March, 1993, which were applied to taxes and interest outstanding from 1990. In addition, the stipulation reveals that, although at all relevant times, the firms maintained separate employee payroll accounts as required under Section 10-906 of the Tax-General Article, ⁵ with few exceptions, the respondent filed his withholding tax returns late and usually did not timely remit the taxes withheld.

The respondent and the comptroller's office agreed to a payment plan in February of 1993, when the firm's outstanding State withholding tax liability was $12,406.32. As the stipulation attests, from the inception of the plan, the respondent's payments were late. Furthermore, the respondent only made two monthly payments, prompting the Comptroller to attach his bank account. On October 5, 1993, the respondent made his next voluntary payment of 1993. At that time, he also filed his June, 1993 return, due July 31, 1993. The respondent continued to file withholding tax returns, however but they too were frequently filed late and, of course, filed without the withheld taxes.

There was a similar pattern in 1994. A new payment plan was established on January 13, 1994; however, as was true the previous year, the two payments the respondent made were late. While everything was in order with respect to the January, 1994 return, it was both on time and remitted the taxes withheld, the February, 1994 return was filed late, on March 25, 1994, without the withholding taxes. The respondent neither made payments pursuant to the payment plan nor filed any other withholding tax returns until November, 1994. The Comptroller having again obtained liens and attachments, the respondent paid the outstanding balance, then $7,102.70, on November, 15, 1994. The returns for March through November of 1994 were filed, but without the withholding taxes, on January 6, 1995.

As of March 30, 1995, the respondent's arrearage was $8,821.60, without considering the three returns which then were due. That arrearage had been paid by early April and the overdue returns filed. The respondent made no additional payments on the arrearage until he made two payments in late February and early March 1996. The respondent's payments under the payment plan continued to be consistently late. On one occasion, in August, 1995, the respondent's payment check was returned for insufficient funds, when his bank account had been attached by another creditor. For a time, the respondent filed his withholding tax returns on time, enclosing the withheld taxes. That was not the case in June, 1995. The June return was filed late and was not accompanied by interest or penalty payments. Withholding tax returns for August through November 1995 did not include the taxes; however, those for the next three months did and they were timely.

When the respondent formed Alan F. Post and Associates, P.A., he opened a withholding tax account with the Comptroller's office for the new firm. At that time, Alan F. Post, Chartered owed $6306.68 in taxes, exclusive of unpaid interest and penalty. The new entity had not, as of April 29, 1997, remitted withholding taxes to the Comptroller.

The respondent does not dispute that he was aware of his obligation to file withholding tax returns, to remit the taxes withheld, and to hold those funds in trust for the State and federal governments. Although the parties have stipulated that the respondent "did not intend to defraud the Comptroller or to deprive the Comptroller permanently of the funds," he acknowledged, and the court found, "that the withheld funds were not placed in his payroll account on multiple occasions due to his cash flow problems and that he used the funds withheld from his employees' wages to pay business expenses of the law firm."

The court also found some facts that may explain why the respondent had difficulty staying current with his withholding taxes, including that the respondent handles his personal injury claims on a contingency basis, incurring "substantial out-of-pocket expenses," for a time, he was paying a monthly rental that he could not afford, a portion of which, approximately $20,000, he presently is paying, in addition to his current rental payments, and his involvement for about six years in a complex case, which, in addition to his time, contributed to the economic hardship his practice has experienced. The court found that the respondent's "actual salary income for 1996 was approximately $36-$38,000," noting that he always drew checks to himself in the amount of $1000 each month, but would not cash the checks if there were insufficient funds to cover them.

Finally, the court wrote:

"Petitioner readily acknowledged that Respondent has been cooperative in the investigations of this complaint and has promptly supplied requested documents. He has never been the subject of prior disciplinary actions by Maryland Bar Counsel. Paul T. Stein, Esquire, a member in good standing of the Maryland bar and a senior partner in an established Montgomery County law firm testified that he has known the Respondent for well over twenty years, attended law school with Respondent and has personal knowledge of his character and legal ability. He further testified that Respondent is a man of good character, a truthful person, and a good attorney who has given his clients good advice and has served them well."

As we have seen, Bar Counsel charged the respondent with violation of Rule 8.4(b) and (d). The court concluded that the respondent violated Rule 8.4(d). The respondent agrees. Recognizing that "[i]n order to establish a violation of Rule 8.4(b), there must be a violation of a criminal statute and that specific violation must adversely reflect on the lawyer's honesty, trustworthiness or fitness as a lawyer," the court also concluded that that section was violated. As to the first prong, the court reasoned:

"Respondent violated Sections 10-817, ⁶ 10-822 ⁷ and 10-906 ⁸ of the Annotated Code of Maryland, Tax General Article. Pursuant to Section 13-1007[ (d) ] ⁹ of that Article, a willful failure to pay withheld taxes is a criminal act.

The court finds that Respondent's conduct was willful since he voluntarily failed to comply with a known legal duty. Attorney Griev. Comm'n v. Baldwin, 308 Md. 397, 519 A.2d 1291 (1987). Respondent acknowledges that he understood that he was legally required to hold the withheld funds in trust, to promptly remit the funds to the Comptroller and the Internal Revenue Service, and to timely file returns reporting the withholdings. Respondent failed to do so, at least in part because of his election to apply those funds to pay other obligations of his law firm. Respondent's conduct was willful and in violation of both federal and state law. The court does not believe, however, nor is it contended by Bar Counsel, that Respondent intended to defraud the Comptroller or the federal authorities or to deprive the Comptroller [or] the federal authorities permanently of the funds." (Footnote omitted)

With respect to the second prong, the court was not convinced that the respondent's conduct adversely reflected on his honesty or trustworthiness. Focusing on what it believed to be the root of the respondent's problem, the respondent's "endeavors to operate his office in a...