Disciplinary Action Against Gurstel, In re

• Decision Date: 22 December 1995
• Docket Number: No. C9-93-1390,C9-93-1390
• Citation: 540 N.W.2d 838
• Parties: In re Petition for DISCIPLINARY ACTION AGAINST Norman K. GURSTEL, an Attorney at Law of the State of Minnesota.
• Court: Minnesota Supreme Court

Page 838

540 N.W.2d 838

In re Petition for DISCIPLINARY ACTION AGAINST Norman K.

GURSTEL, an Attorney at Law of the State of Minnesota.

No. C9-93-1390.

Supreme Court of Minnesota.

Dec. 22, 1995.

Marcia A. Johnson, Director, Martin A. Cole, Sr. Asst. Director, Office of Lawyers Professional Responsibility, St. Paul, for appellant.

Michael J. Hoover, Minneapolis, for respondent.

OPINION

PER CURIAM.

At the direction of a panel of the Lawyers Professional Responsibility Board, the Director of the Office of Lawyers Professional Responsibility filed with this court a petition for disciplinary action against Norman K. Gurstel. The petition for disciplinary action relates to Gurstel's failure to timely file state and federal employer's withholding tax returns and to pay the withholding taxes when due. The petition for disciplinary action alleged that Gurstel violated Rules 8.4(b) and 8.4(d) of the Minnesota Rules of Professional Conduct.

The referee appointed by the Minnesota Supreme Court to hear this matter filed with this court his Findings of Fact, Conclusions of Law, and Recommendation for Discipline. The referee concluded that Gurstel's failure to timely file state employer's withholding tax returns and to pay the state withholding taxes when due violated Minn.R.Prof. Conduct 8.4(b) and (d). The referee also concluded that Gurstel's failure to timely file federal employer's withholding tax returns and to pay the federal withholding taxes when due violated Minn.R.Prof. Conduct 8.4(d). The referee recommended that Gurstel be suspended from the practice of law for a minimum of 60 days, and that he comply with all reinstatement requirements of Rule 18, Rules on Lawyers Professional Responsibility (RLPR). We conclude that Gurstel's failure to timely file federal and state employer's withholding tax returns and to pay the withholding taxes when due violated Rules 8.4(b) and (d) of the Minnesota Rules of Professional Conduct, and we agree with the referee's sanction recommendation.

Norman K. Gurstel was admitted to the practice of law in 1962. He began working as a sole practitioner in 1971, specializing in commercial and family law. Gurstel's current practice consists primarily of the collection of debt owed by businesses and individuals in Minnesota to businesses and individuals located outside the state. His practice changed in 1991 from a sole proprietorship to a professional corporation. He is currently the principal shareholder in the law firm of Gurstel & Associates, P.A., Minneapolis, Minnesota.

On August 20, 1993, Gurstel was placed on two years probation for various trust fund violations and for misrepresentations to a client concerning a collection matter. In re Gurstel, 504 N.W.2d 474 (Minn.1993). Gurstel is currently subject to that probation and is in compliance with the specific probationary conditions dealing with trust account maintenance. On November 23, 1994, the Director served upon Gurstel a petition for revocation of probation and for further disciplinary action, based on Gurstel's alleged failure to timely file state and federal employer's withholding tax returns and to pay the taxes when due.

After a contested hearing on May 8, 1995, the referee found that Gurstel failed to timely file state employer's withholding tax returns for 1993. Because Gurstel failed to timely pay state withholding taxes, the state filed tax liens against him and his law firm. In April of 1994, Gurstel entered into a payment agreement with the Minnesota Department of Revenue (MDOR) to pay $20,626.77 in tax, penalties and interest. He was unable to comply with the terms of the payment agreement. Gurstel subsequently reached a new agreement with MDOR and made the final payment of delinquent taxes to MDOR on May 3, 1995.

The referee also found that Gurstel failed to timely file federal employer's withholding tax returns. Because Gurstel was unable to timely pay federal withholding taxes, tax liens were filed against him and his law firm. His outstanding federal tax liability was in excess of $300,000. Gurstel made an offer in compromise to the IRS to pay $120,000, $115,000 by Gurstel & Associates, P.A., and $5,000 by Gurstel personally. The IRS accepted this offer in compromise. At the time of the hearing before the referee, the final payment of the offer in compromise had not been made to the IRS. ¹

The referee concluded that Gurstel's failure to timely file state employer's withholding tax returns and to pay the state withholding taxes when due violated Minn.R.Prof. Conduct 8.4(b) and (d). The referee also concluded that Gurstel's failure to timely file federal employer's withholding tax returns and to pay the federal withholding taxes when due violated Minn.R.Prof. Conduct 8.4(d). The referee recommended that Gurstel be suspended from the practice of law for a minimum of 60 days, and be required to comply with all reinstatement requirements of Rule 18 and the requirements of Rules 24 and 26, RLPR.

I.

Gurstel challenges the referee's findings of fact, conclusions of law, and recommended discipline. Because Gurstel timely ordered a transcript pursuant to Rule 14(e), RLPR, the referee's findings are not conclusive. In disciplinary hearings, the standard of review for this court is whether the referee's findings and conclusions were clearly erroneous. In re Pyles, 421 N.W.2d 321, 325 (Minn.1988). While this court places great weight on the disciplinary recommendations made by the referee, the final responsibility for determining appropriate discipline rests solely with this court. In re Schmidt, 402 N.W.2d 544, 545 (Minn.1987).

Gurstel first argues that the referee erroneously failed to consider "substantial evidence"--essentially his testimony and that of his office manager--that the returns were timely filed. Gurstel argues that the referee erroneously failed to consider his testimony regarding the state withholding tax returns. The state returns for the first and second quarters of 1993 were completed on MDOR Employers' Withholding Delinquency forms sent to Gurstel because MDOR allegedly did not receive his original returns. Gurstel testified that when he received these withholding delinquency forms, he took the office copies of the original returns, copied the information contained therein, signed and dated the withholding delinquency forms on January 19, 1994, and mailed them to MDOR. Gurstel argues that because MDOR "lost" the original returns, MDOR records erroneously show the dates MDOR received the withholding delinquency forms, not the dates Gurstel claims to have sent the original returns. Gurstel offered no evidence other than his own testimony in support of his theory that MDOR lost his returns. We note, however, that although on probation, he did nothing to follow up on MDOR's alleged loss of his returns other than to complete and mail the withholding delinquency forms. While bureaucratic snafus do occur, we conclude that the referee was justified in discounting Gurstel's testimony.

Gurstel's office manager testified that she would always prepare the employer's withholding tax returns, present them to Gurstel, see that they were signed prior to the due dates, and mail them on a timely basis. She testified that the failure to timely file one of the returns may have been due to a mail clerk inadvertently changing the month on the postal meter, thus "fudging" the postmarked date. On cross-examination, she agreed that it was mere speculation that the postal meter was "fudged," indicated that she was unaware of any other mail that was postmarked incorrectly, and conceded that she could lose her job if Gurstel was suspended. Due to the obvious problems with the office manager's testimony, we conclude that the referee was justified in discounting her testimony.

Gurstel next asserts that several of the referee's factual findings were erroneous. Gurstel argues that the referee erroneously relied on MDOR records to determine filing dates and failed to consider substantial evidence that the returns were timely filed. Gurstel notes that one MDOR letter submitted to the referee contained three erroneous filing dates. Gurstel contends that because this letter contained errors, MDOR records are not reliable evidence, and it was improper for the referee to conclude that MDOR records are authoritative in determining the filing dates.

Gurstel's argument that the referee erroneously relied on MDOR records in determining filing dates lacks merit. Counsel for the Director brought the errors in the MDOR letter to the attention of the referee, who adopted the correct filing dates in his findings. Gurstel thus fails to show any prejudice suffered by the referee's consideration of the MDOR letter. Moreover, this court has approved the use of correspondence and other records from tax agencies to establish filing dates. See In re Mathias, 495 N.W.2d 413, 414 (Minn.1993) (IRS letter). We conclude that the referee correctly relied on MDOR records in determining filing dates.

We next consider Gurstel's contention that several of the referee's legal conclusions were erroneous. Gurstel questions the referee's conclusion that he violated Minn.R.Prof. Conduct 8.4(b), which provides that it is professional misconduct for a lawyer to "commit a criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer." Gurstel argues that although a conviction for a criminal act is not a prerequisite to discipline, the findings of fact must be sufficient to support the conclusion that the attorney committed a criminal act. Gurstel further asserts that because violation of a criminal statute generally requires a showing of scienter, the referee must find that the attorney violated the tax laws.

This court has concluded that so long as it is implicit in the recommended discipline and the referee's findings that an attorney intentionally filed tax returns untimely, the referee need not make an...