In re Kazanas, SC 83033.

• Decision Date: 14 January 2003
• Docket Number: No. SC 83033.,SC 83033.
• Citation: 96 S.W.3d 803
• Parties: In re Daniel J. KAZANAS, Respondent.
• Court: Missouri Supreme Court

Page 803

96 S.W.3d 803

In re Daniel J. KAZANAS, Respondent.

No. SC 83033.

Supreme Court of Missouri, En Banc.

January 14, 2003.

As Modified on Denial of Rehearing March 4, 2003.

Alan D. Pratzel, Special Representative, St. Louis, Sharon K. Weedin, Office of Chief Disciplinary Counsel, Jefferson City, for Informant.

Maurice B. Graham, St. Louis, for Respondent.

William Ray PRICE, Jr., Judge.

I.

On August 4, 2000, pursuant to a plea agreement, Daniel J. Kazanas was found guilty of filing a false federal tax return in violation of 26 U.S.C. § 7206(1) (2001).¹ This crime is a felony. As part of his plea agreement, Mr. Kazanas promised to surrender his law license. On October 2, 2000, Mr. Kazanas deposited his law license in this Court. On January 18, 2001, Mr. Kazanas filed an application for voluntary surrender of license pursuant to Rule 5.25² with this Court. In the application, Mr. Kazanas recited that neither his attorney nor the assistant United States Attorney handling his case "anticipated or intended that Respondent would be unable for a period of five years [to] be eligible to apply for reinstatement or that he would only be eligible for reinstatement if he applied for, was allowed to take, and successfully passed the Missouri Bar Exam." Respondent admitted in his application for surrender that "he has violated Rule 4-8.4(b) and (c) of the Missouri Rules of Professional Conduct by his violation of section 7206(1), which adversely reflects upon his honesty in the handling of his 1996 personal income taxes." Mr. Kazanas sought to have his license suspended rather than suffer disbarment. This Court refused to accept Mr. Kazanas' voluntary surrender under these circumstances pursuant to Rule 5.25.

Respondent's conviction under 26 U.S.C. § 7206(1) (2001) and his violation of Rule 4-8.4(b), (c), and (d) warrant disbarment.

II. Factual Background

In a disciplinary proceeding, the disciplinary hearing panel's "findings, conclusions, and recommendations are advisory in nature. This Court reviews the evidence de novo, determines independently the credibility, weight, and value of the testimony of the witnesses, and draws its own conclusions of law." In re Oberhellmann, 873 S.W.2d 851, 852 (Mo. banc 1994). In attorney disciplinary proceedings, the truth of the allegations must be established by a preponderance of the evidence. In re Howard, 912 S.W.2d 61, 63 (Mo. banc 1995). "The purpose of attorney discipline is to protect the public and maintain the integrity of the legal profession." In re Caranchini, 956 S.W.2d 910, 918-919 (Mo. banc 1997). The Court finds the following facts:

Dan Kazanas worked his way through both college and law school. Mr. Kazanas was licensed to practice law in Missouri in 1983. Shortly thereafter, Mr. Kazanas joined the firm of Klutho, Cody & Kilo, P.C. A three-person executive committee consisting of the named partners managed all aspects of the firm, including hiring, termination, bonuses and opportunities for shareholder status. The firm did not recognize individual "ownership" of clients — all clients were "firm clients." All attorneys' fees collected from clients belonged to the firm and the firm maintained a proprietary interest in the work performed by firm attorneys on behalf of firm clients.

In 1994, after ten years as an associate with the firm, Mr. Kazanas requested a meeting with John Kilo to discuss his compensation and future with the firm. At the meeting, Mr. Kilo told Mr. Kazanas that he would become a shareholder in the firm and that Mr. Kilo would confer with the other members of the executive committee concerning Mr. Kazanas' salary. There is a dispute as to other topics of discussion at the meeting. Mr. Kazanas contends that Mr. Kilo promised him thirty percent of the fees collected from clients Mr. Kazanas brought to the firm. Mr. Kilo denies any agreement to divide fees.

Following the meeting, Mr. Kazanas became a shareholder of the firm and received a salary increase. In addition, Mr. Kilo made a series of personal loans to Mr. Kazanas to help him with his financial situation. However, Klutho, Cody & Kilo refused to pay respondent thirty percent of "his" attorney's fees. Frustrated, Mr. Kazanas told Mr. Kilo, "Well, I've been honoring the agreement. I'm going to continue to honor the agreement, and I'm going to enforce the agreement."

Between 1994 and 1996, Mr. Kazanas misappropriated at least $169,172.17 in fees from Klutho, Cody & Kilo. He deposited twenty-four checks, totaling $63,644.44, made payable to the law firm into his own account. He altered a Klutho, Cody & Kilo address stamp by covering the address portion to make it appear to be a bank deposit stamp. He then forged John Kilo's signature on the back of each check, signed his own name to each check and deposited the checks into his personal bank account.

Mr. Kazanas also misappropriated an additional thirty-eight checks, totaling $105,527.73. These checks were made payable to respondent personally. Each check represented payment by Klutho, Cody & Kilo clients for hours worked by firm attorneys, including Mr. Kazanas. In some cases, respondent specifically requested the clients to make checks payable to him personally instead of to the firm. Mr. Kazanas deposited these checks into either his personal checking account or the account of the firm he joined after leaving Klutho, Cody & Kilo. In at least one instance, Mr. Kazanas misappropriated attorneys' fees from Klutho, Cody & Kilo by bartering with a client for personal services in exchange for payment of the firm invoice.

In January 1997, Mr. Kazanas left Klutho, Cody & Kilo. In 1998, a Klutho, Cody & Kilo client told Vic Klutho that Mr. Kazanas had directed the client to make a check for attorneys' fees payable to Mr. Kazanas personally. Based upon this information, the firm began an internal investigation of the manner in which Mr. Kazanas handled firm clients and firm fees. The firm also notified the United States Attorney's Office of Mr. Kazanas' conduct.

The United States Attorney's Office, along with the Federal Bureau of Investigation, conducted an investigation of Mr. Kazanas' conduct. This investigation resulted in a nine-count indictment against Mr. Kazanas. Counts I through VII charged that Mr. Kazanas defrauded and embezzled $150,000 from Klutho, Cody & Kilo. Counts VIII and IX alleged that Mr. Kazanas willfully filed tax returns that he knew to be untrue by underreporting income to the Internal Revenue Service.

Mr. Kazanas ultimately reached a plea agreement with the government. In exchange for his plea of guilty to Count IX, the government agreed to dismiss the other eight counts. The elements of Count IX include the falsity of the tax form, that Mr. Kazanas knowingly put materially false information in the form and that he acted willfully. By signing the stipulation, Mr. Kazanas acknowledged that he understood the elements of the crime and admitted committing them. As part of the plea, Mr. Kazanas agreed to cooperate with the IRS in resolving his tax liability, to give Travelers Property Casualty — Klutho, Cody & Kilo's bonding company — a consent judgment and settlement agreement in the amount of $164,374.04, to repay in full the loans made by Mr. and Mrs. Kilo and to "voluntarily surrender his law licenses immediately at the time of sentencing if the Court accepts this plea bargain." On August 4, 2000, the Federal District Court accepted the plea agreement and convicted Mr. Kazanas of the Count IX felony of filing a false federal tax return.

Mr. Kazanas did not immediately surrender his law license as he had agreed. One week after signing the stipulation of facts relevant to sentencing, Mr. Kazanas requested a sample surrender application from the Office of Chief Disciplinary Counsel (OCDC). The OCDC informed respondent that the Rule 5.25 voluntary surrender procedure would require him to advise this Court of the ethical misconduct underlying his application, and that he would have to admit or deny that the misconduct had occurred. It was also explained that voluntary surrender results in disbarment, that he could not apply for reinstatement for five years after disbarment, and that he would have to retake and pass the bar examination within one year prior to filing for reinstatement.

Mr. Kazanas wound up his law practice and notified his clients that he must surrender his license to practice law. Although respondent deposited his law license with the Court on October 2, 2000, he did not apply to surrender his license to this Court. On October 16, 2000, this Court suspended Mr. Kazanas from the practice of law pursuant to Rule 5.21(c) and ordered him to show cause why an order for disbarment should not issue. On October 27, 2000, the United States of America filed a motion to revoke defendant's sentence because Mr. Kazanas had yet to surrender his law license. Finally, on January 18, 2001, more than five months after Mr. Kazanas was sentenced, he filed his application for voluntary surrender of license pursuant to Rule 5.25. Although he admitted in the application that he was convicted of violating 26 U.S.C. § 7206(1) (2001) and that he violated Rule 4-8.4(b) and (c), he nonetheless requested that he not be disbarred and that his license be suspended instead. The Court refused to accept Mr. Kazanas' surrender on that basis.

This Court appointed McCormick Wilson as special master to inquire into issues of appropriate discipline. The master recommended that Kazanas be disbarred from the practice of law.

III. Discussion

A. Surrender of License

It is obvious that Mr. Kazanas misunderstood the result of surrendering his law license when he entered into his plea agreement with the United States Attorney and was subsequently convicted of violation of 26 U.S.C. § 7206(1) (2001). When the Court accepts the surrender of a license to practice law the standard language used in its order reads that:

...the surrender of the...