Committee on Professional Ethics and Conduct of the Iowa State Bar Ass'n v. Humphreys, 94-1099

• Decision Date: 23 November 1994
• Docket Number: No. 94-1099,94-1099
• Citation: 524 N.W.2d 396
• Parties: COMMITTEE ON PROFESSIONAL ETHICS AND CONDUCT OF the IOWA STATE BAR ASSOCIATION, Complainant, v. Lloyd E. HUMPHREYS, Respondent.
• Court: Iowa Supreme Court

Page 396

524 N.W.2d 396

COMMITTEE ON PROFESSIONAL ETHICS AND CONDUCT OF the IOWA STATE BAR ASSOCIATION, Complainant, v. Lloyd E. HUMPHREYS, Respondent.

No. 94-1099.

Supreme Court of Iowa.

Nov. 23, 1994.

Norman G. Bastemeyer and Charles L. Harrington, Des Moines, for complainant.

Lloyd E. Humphreys, Dallas, TX, pro se.

L. Charles Humphreys, Dallas, TX, for respondent.

Considered by McGIVERIN, C.J., and HARRIS, LARSON, LAVORATO, and SNELL, JJ.

LARSON, Justice.

In December 1991, this court temporarily suspended the license of Lloyd E. Humphreys following his conviction on five counts of federal income tax violations. See Ct.R. 118.14 (temporary suspension on plea of guilty or conviction). Our Grievance Commission conducted a hearing on a complaint filed by the Committee on Professional Ethics and Conduct and recommended a five-year suspension, giving the respondent credit for the time he had spent under the temporary suspension of 1991. On our review of the findings and recommendation of the Commission, pursuant to Court Rule 118.10, we order the respondent's license revoked.

The Committee charged four grounds for discipline under our Code of Professional Responsibility: (1) committing federal income tax violations (four felonies and one Class A misdemeanor under federal law), (2) commingling funds with clients', (3) improperly advancing money to a client, and (4) improperly entering into business with a client without full disclosures.

Our review is de novo. Ct.R. 118.11. The burden is on the Committee, as complainant, to prove the violations by a convincing preponderance of the evidence, a standard between a mere preponderance of the evidence and that beyond a reasonable doubt. See Committee on Professional Ethics & Conduct v. Hutcheson, 471 N.W.2d 788, 789 (Iowa 1991); Committee on Professional Ethics & Conduct v. Hurd, 375 N.W.2d 239, 246 (Iowa 1985).

I. The Income Tax Violations.

The Committee charged that respondent's tax convictions violated DR 1-102(A)(3) and (4) of the Code of Professional Responsibility (lawyer shall not engage in illegal conduct involving moral turpitude or other conduct involving dishonesty, fraud, deceit, or misrepresentation).

The respondent was convicted in a jury trial in federal court of four counts of willful tax evasion under 26 U.S.C. § 7201 (felonies) and one count of willfully filing a false tax return in violation of 26 U.S.C. § 7207 (a Class A misdemeanor). This conviction was affirmed by the Eighth Circuit. See United States v. Humphreys, 982 F.2d 254 (8th Cir.1992).

The three elements of federal income tax evasion are: (1) willfulness, (2) the existence of a tax deficiency, and (3) an affirmative act constituting an evasion or attempted evasion of the tax owed. Sansone v. United States, 380 U.S. 343, 351, 85 S.Ct. 1004, 1010, 13 L.Ed.2d 882, 888 (1965). The elements of the crime of willfully filing a false tax return are: (1) willfulness, and (2) filing a return known to be false or fraudulent. Id. at 352, 85 S.Ct. at 1010, 13 L.Ed.2d at 889.

Humphreys continues to insist that he was not guilty of the income tax charges. However, we deem his conviction and its affirmance on appeal as conclusive evidence of guilt. Under Iowa Code section 602.10122,

[t]he following are sufficient causes for revocation or suspension [of an attorney's license]:

1. When the attorney has been convicted of a felony. The record of conviction is conclusive evidence.

(Emphasis added.)

The Texas Supreme Court has recently discussed (in its disciplinary proceedings against Humphreys) the conclusive effect of a conviction, as well as Humphreys' claim that income tax violations do not involve moral turpitude. After a lengthy discussion of other states' disciplinary cases, the Texas court concluded that (1) income tax evasion does involve moral turpitude, and (2) conviction of the offense is conclusive evidence of guilt. In re Lloyd E. Humphreys, 880 S.W.2d 402, 408 (Tex.1994) (conclusiveness based on disciplinary rule, similar to Iowa Code section 602.10122, and principles of full faith and credit).

Our cases have agreed; income tax violations involve "moral turpitude." See Committee on Professional Ethics & Conduct v. Baudino, 452 N.W.2d 455, 458-59 (Iowa 1990); Committee on Professional Ethics & Conduct v. McMillen, 449 N.W.2d 339, 340 (Iowa 1989); Committee on Professional Ethics & Conduct v. Crawford, 351 N.W.2d 530, 532 (Iowa 1984). We continue to hold that view.

We conclude that the Committee has proved by the requisite standard that the respondent was guilty of the income tax violations and the applicable disciplinary rules.

II. Commingling of Accounts.

The Committee charged that on several occasions the respondent had commingled his clients' funds in his own bank account. Our rules require that client funds be maintained in an identifiable client trust account.

All funds of clients paid to a lawyer or law firm, including advances for costs and expenses, except retainer fees paid on a regular and continuing basis, shall be deposited in one or more identifiable interest-bearing trust accounts maintained as set forth in DR 9-102(C). All such funds received from clients for matters arising out of the practice of law in Iowa, as the term "practice of law" is employed in court rule 121, shall be deposited only in trust accounts located in Iowa. No funds belonging to the lawyer or law firm shall be deposited in trust accounts except as follows....

DR 9-102(A).

The respondent admits that several clients' funds were involved in the commingling, but he claims that his mother, who was employed in his office, was responsible. We have held that commingling of clients' funds is an absolute offense, one that does not lend itself to the defense that the lawyer's employees were responsible. Committee on Professional Ethics & Conduct v. Davidson, 398 N.W.2d 856, 859 (Iowa 1987).

We believe that the Committee sufficiently established this count also.

III. Advancement of Funds.

The Committee charges that the respondent improperly advanced $1000 to a client in a workers' compensation case, then misrepresented to the client that the money came from a local bank. The charge is that the advancement of money for nonlitigation expenses is a violation of DR 5-103(B) and that misrepresentation to a client about the source of the loan violates DR 1-102(A)(4).

The respondent's client needed money to pay medical expenses (unrelated to the workers' compensation claim), according to the respondent. The respondent loaned him $1000 and told him that it had come from a local bank.

While representing a client in connection with contemplated or pending litigation, a lawyer shall not advance or guarantee financial assistance to a client, except that a lawyer may advance or guarantee the expenses of litigation, including court costs, expenses of investigation, expenses of medical examination, and costs of obtaining and presenting evidence, provided the client remains ultimately liable for such expenses.

DR 5-103(B).

DR 1-102(A)(4) provides that a lawyer shall not "[e]ngage in conduct involving dishonesty, fraud, deceit, or misrepresentation." The complaint alleges that the misrepresentation about the source of the loan violated this rule.

The respondent does not contest the Committee's finding that he loaned money to the client for nonlitigation expenses. He claims that his client was in serious financial need, and the loan was not made for the purpose of obtaining employment for the workers' compensation case. (At the time the loan was made, the respondent was already representing the client.)

Disciplinary rule 5-103(B), however, makes it clear that only under very limited circumstances may a lawyer loan money to a client. In Committee on Professional Ethics & Conduct v. Bitter, 279 N.W.2d 521 (Iowa 1979), the respondent contended that "[t]he act was done entirely for charitable and humanitarian reasons" because the clients "were in extremely dire financial need." Id. at 523.

We nevertheless concluded that this conduct violated DR 5-103(A).

The rule proscribing such acts ... makes no exceptions for these factors. It provides that the rule is intended to prevent an attorney's procuring an interest in a legal matter by advancements of money or the like. The rule does not require proof of such intent or effect, only that the conditions exist where such results might ... give rise to reasonable speculation that [the attorney] has thus [inserted] himself into the legal affairs of his potential clients.

Bitter, 279 N.W.2d at 523.

While this violation by the respondent by itself does not constitute a serious infraction, the evidence supports the Committee's conclusion that the rules were violated.

IV. The Conflict of Interest.

The last count of the complaint charges a conflict of interest in the respondent's business dealings with a...