Attorney Grievance Comm'n v. Worsham

• Decision Date: 23 December 2014
• Docket Number: Misc. Docket AG No. 14,Sept. Term, 2013.
• Citation: 105 A.3d 515,441 Md. 105
• Parties: ATTORNEY GRIEVANCE COMMISSION v. Michael Craig WORSHAM.
• Court: Maryland Court of Appeals

441 Md. 105
105 A.3d 515

ATTORNEY GRIEVANCE COMMISSION
v.
Michael Craig WORSHAM.

Misc. Docket AG No. 14, Sept. Term, 2013.

Court of Appeals of Maryland.

Dec. 23, 2014

Disbarment ordered.

[105 A.3d 517]

James N. Gaither, Asst. Bar Counsel (Lydia E. Lawless, Asst. Bar Counsel, Glenn M. Grossman, Bar Counsel, Attorney Grievance Commission of Maryland), for petitioner.

Michael Craig Worsham, Forest Hills, MD, for respondent.

Argued before BARBERA, C.J., HARRELL, BATTAGLIA, GREENE, ADKINS, McDONALD and WATTS, JJ. McDONALD, J.

Among other things, an attorney is an “officer of the legal system and a public citizen.” ¹ If this is a special role in a nation that prides itself on the rule of law, then it entails a special responsibility to abide by the law. It also means that, when acting as an advocate, a lawyer must advance only arguments that are good faith interpretations of existing law or good faith efforts to change existing law. Fraudulent conduct and frivolous argument to avoid a civic obligation are antithetical to the lawyer's role.

Respondent Michael Craig Worsham carved out a practice that concentrated in the private enforcement of federal and state laws prohibiting unsolicited faxes and telephone calls—a role specifically provided in those statutes that augments public enforcement efforts and that is sometimes referred to as a “private attorney general.” ² Mr. Worsham, however, proved to be less law-abiding in the conduct of his private affairs. As his practice grew more lucrative, he ceased to file income tax returns or pay income taxes. When detected, he attempted to justify his conduct with well-worn meritless arguments about the constitutionality and validity of the federal income tax—arguments that he repeated in his filings with us even after he had lost at every level in the federal courts and that, he ultimately conceded, had no bearing on his obligation to comply with State tax laws.

[105 A.3d 518]

We hold that the willful failure to file income tax returns and pay income taxes, when done with fraudulent intent, merits disbarment.

We appreciate the conscientious efforts of the hearing judge and the detailed nature of her findings as to all of the alleged violations. Although, as indicated above, we need rely on only her findings as to the tax-related violation to conclude that Mr. Worsham's misconduct merits disbarment, it was appropriate for the hearing judge to provide her assessment of the evidence presented as to all of the violations charged by the Commission.

Facts

The facts recounted in this section are derived from the hearing judge's findings of fact and undisputed matters in the record. Mr. Worsham's exceptions to the fact findings are noted and discussed below.

Bar Admission and Legal Practice

Mr. Worsham was admitted to the Maryland Bar in 1998. He is also licensed in the District of Columbia. During the period relevant to this proceeding, he operated a solo practice out of his home in Harford County focused on consumer rights under the federal Telephone Consumer Protection Act and its Maryland counterpart.⁴

Tax–Related Misconduct and Intent Failure to File Returns and Pay Income Taxes

Mr. Worsham filed returns and paid income taxes for the tax years 1988 through 2004. He apparently concedes, however, that beginning in 2005 and for the subsequent seven years, he neither filed federal and State income tax returns nor paid income taxes. The Internal Revenue Service (“IRS”) did not immediately react to this deviation from his previous pattern of tax compliance but eventually detected that he had not been in touch and took action.

Deliberate Attempt to Conceal Income from Federal and State Tax Agencies

Evidence introduced at the hearing concerning Mr. Worsham's relationships with clients and co-counsel indicated that he attempted to avoid notice by tax agencies. In particular, Mr. Worsham was co-counsel for a class of plaintiffs in a class action in the United States District Court for the District of Maryland. When the case settled in 2012, the sums due counsel for the plaintiffs were forwarded to his co-counsel, Brian L. Bromberg, an attorney licensed in New York. Mr. Worsham's share of the attorneys' fees and costs totaled $71,456.61.

In connection with the distribution of counsel fees, Mr. Bromberg asked Mr. Worsham to provide him with a completed IRS Form W–9.⁵ Mr. Worsham refused to provide a Form W–9 and instead insisted that a check totaling $71,456.61 “that is due to me for fees and costs” be made out to “Michael Worsham Attorney Trust Account.” Because Mr. Worsham refused to

[105 A.3d 520]

supply a W–9, Mr. Bromberg sent a check payable to Mr. Worsham for $51,448.75, which represented Mr. Worsham's share, less the mandatory 28% federal tax withholding. Mr. Bromberg also advised Mr. Worsham that a Form 1099 reporting the income would be filed with the IRS.

Mr. Worsham responded by returning the check and filing a motion to enforce the settlement. In his motion, Mr. Worsham alleged that attorneys' fees and costs, totaling $71,456.61 were due to him under the settlement agreement and that he was not obligated to provide a Form W–9 because the form did not have a federal Office of Management and Budget control number.

Mr. Bromberg then filed an interpleader action and deposited the full amount ($71, 456.61) of Mr. Worsham's share into the registry of the Circuit Court for Harford County. He advised the court that he did so to avoid a possible violation of the tax laws when processing Mr. Worsham's payment.⁶

Before the hearing judge in this case, Mr. Worsham testified that he wished to deposit his share of the funds into his attorney trust account because, at the time, he believed that it included client funds. He testified that he later came to understand that the funds did not belong in his trust account, but that he had never considered asking Mr. Bromberg for a check payable to his business account.

The hearing judge found that Mr. Worsham “willfully, knowingly, and purposefully attempted to deposit his earned fees into his Maryland attorney trust account for the sole purpose of defrauding and hiding this income from the federal and state taxing authorities.” The hearing judge discounted Mr. Worsham's testimony that he originally thought the sum included client funds as dishonest, noting that Mr. Worsham had referred to the funds at that time as “my fees and costs.”

Tax Litigation with the IRS

In September 2009, the IRS issued to Mr. Worsham a Notice of Deficiency alleging that he owed $6,357.00 in income taxes and penalties for tax year 2006 based on information from certain 1099 forms filed with the IRS. Mr. Worsham responded by filing a petition with the United States Tax Court challenging the Notice of Deficiency and arguing that the federal government did not have the authority to tax his earnings as income. On September 28, 2010, after learning that the IRS had issued a subpoena to his bank for his account records in connection with that proceeding, Mr. Worsham sought to dismiss his petition in the Tax Court. That same day, he sent a fax to the bank indicating that the subpoena should no longer be valid as a result of his effort to dismiss the case and that the bank should not be required to produce his bank account records. The Tax Court subsequently denied his motion to dismiss and the bank evidently produced the records sought by the IRS.

The Tax Court found that Mr. Worsham failed to report nearly $200,000 in taxable income for 2006 and found him liable for the related deficiency. ⁷ Worsham v. Comm'r of Internal Rev., T.C. Memo. 2012–219, 2012 WL 3101491 (July 31, 2012). The Tax Court also found by clear and convincing evidence that the deficiency

[105 A.3d 521]

for 2006 was due to fraud and listed a number of factors on which it relied—Mr. Worsham's pattern of failing to file tax returns in light of a previous history of tax compliance; the coincidence of the failure to file returns with the increasing profitability of his practice; his assertion of “tax-protester arguments” upon detection; his education, training, business experience, and intelligence; and his effort to prevent the IRS from obtaining his bank records by attempting to dismiss the Tax Court action. 2012 WL 3101491, at *6–8. The Tax Court also found that Mr. Worsham had raised a “multitude of frivolous and groundless positions.” ⁸ The Tax Court did not sanction Mr. Worsham for taking those positions, noting that it was the first time he had made such arguments to that court, but warned him that repetition of those arguments in the future would likely result in the imposition of sanctions.

Mr. Worsham appealed to the United States Court of Appeals for the Fourth Circuit. Before the Fourth Circuit, Mr. Worsham did not deny that he had failed to pay income taxes, nor did he dispute the amount of the deficiency. Instead, he reiterated his argument that the federal government lacked the authority to tax his earnings as income. The Fourth Circuit affirmed the Tax Court in an unpublished opinion. Worsham v. Comm'r of Internal Rev., 531 Fed.Appx. 310 (4th Cir.2013) ( per curiam ), cert. denied, ––– U.S. ––––, 134 S.Ct. 960, 187 L.Ed.2d 786 (2014). The Fourth Circuit stated that it found Mr. Worsham's argument that his earnings are not taxable income to be “meritless” and affirmed the Tax Court's finding that Mr. Worsham failed to file a 2006 federal return with fraudulent intent.

Subsequent Efforts to Resolve Tax Deficiencies

At the evidentiary hearing in this matter and at oral argument before this Court, Mr. Worsham contended that he was attempting to resolve his income tax liabilities. Although Mr. Worsham claimed to have satisfied the 2006 federal income tax liability that was the subject of the tax litigation after the United States Supreme Court denied his petition for certiorari, he failed to produce any documentation to support his testimony. He stated that he had sent a check to the...