State ex rel. Okla. Bar Ass'n v. Friesen

• Decision Date: 26 May 2015
• Docket Number: No. SCBD–6178.,SCBD–6178.
• Citation: 350 P.3d 1269,2015 OK 34
• Parties: STATE of Oklahoma ex rel. OKLAHOMA BAR ASSOCIATION, Complainant, v. Larry Douglas FRIESEN, Respondent.
• Court: Oklahoma Supreme Court

350 P.3d 1269

2015 OK 34

STATE of Oklahoma ex rel. OKLAHOMA BAR ASSOCIATION, Complainant

v.Larry Douglas FRIESEN, Respondent.

No. SCBD–6178.

Supreme Court of Oklahoma.

May 26, 2015.

Gina L. Hendryx, General Counsel, Oklahoma Bar Association, Oklahoma City, Oklahoma, for Complainant.

Mack K. Martin and Amber B. Martin, Oklahoma City, Oklahoma, for Respondent.

COMBS, V.C.J.

FACTS

¶ 1 On March 21, 2014, a Criminal Information was filed in the United States District Court for the Western District of Oklahoma, against the Respondent, Larry Douglas Friesen (Respondent), an attorney and member of the Oklahoma Bar Association.¹ The Criminal information accused the Respondent of willfully failing to pay income and FICA taxes to the Internal Revenue Service (IRS). The Respondent withheld these taxes from his law office employees' wages in three quarterly periods of calendar year 2007 but failed to pay them in violation of 26 U.S.C. § 7203.² He was charged with one misdemeanor count for each of the three quarterly periods. Approximately one month later the Respondent entered into a plea agreement and pled guilty to the charges.

¶ 2 The United States Magistrate Judge entered judgment and sentence on September 25, 2014, accepting the Respondent's plea of guilty to all three counts. The sentence included thirty-six months of probation, including forty-five days of weekend incarceration beginning October 10, 2014, and one hundred and eighty days of house arrest beginning the first Monday following his last weekend of incarceration.³ He was also required to use a GPS monitoring device during this period. During the one hundred and eighty day period, the Respondent was authorized to leave his residence for employment, among other things. In addition he was required to pay $209,673.00 in restitution and an assessment of $75.00. He was ordered to make monthly payments on the restitution equal to the lesser of $300.00 or 10% of his monthly income beginning thirty days after the end of incarceration.

¶ 3 The total agreed-to restitution amount was $320,000.00 and included interest, penalties and other “relevant conduct” which includes certain prior unpaid taxes. The Respondent was given credit for the amount he paid to the IRS ($110,327.00) prior to his plea agreement. This $110,327.00 included amounts owed for not only the three quarters for which he was charged but also included all the remaining quarters for calendar years 2006 and 2007. These additional quarters are also referred to as “relevant conduct.”

¶ 4 The Government's Sentencing Memorandum filed in the Respondent's criminal case shows he failed to pay employment taxes for various quarters in calendar years 1999 through 2001 and 2003 through 2007. This document also reflects his law firm had not filed corporate tax returns for 2000, 2001, and 2002 but eventually did so in 2003 after being contacted by the IRS. The Memorandum indicates the IRS had many contacts with the Respondent and his employees since 2002 to discuss the collection of these delinquent taxes. The IRS also sent notices and letters to the Respondent warning him about his taxes in the calendar years 2002 through 2005. The Memorandum shows that at least in calendar years 2006 and 2007 he had other funds to pay his taxes. It notes he paid a contractor in those years to remodel his residence as well as his office for an amount totaling $35,336.00. In addition, the Memorandum states for the calendar years of 2005 through 2007 his annual gross business receipts exceeded $400,000.00 in each year.

¶ 5 The parties to the criminal action agreed that the tax loss would only include those taxes unpaid in all quarters of calendar years 2006 and 2007, which totaled $110,327.00. Based on this amount, the federal sentencing guidelines formula recommended a sentence of twelve to eighteen months incarceration. The federal district court, however, chose a sentence below the advisory guideline range. In its Statement of Reasons, the court said:

These offenses are financial crimes with the IRS being the only victim. Defendant plead guilty to three (3) counts of failure to pay taxes and has made full restitution for the tax loss covered by the three count Criminal Information. Over the past 30 years Defendant has no criminal history, other than a 2009 misdemeanor conviction for which he received a probationary sentence. Defendant has served his community and volunteered his services in law related activities. Defendant submitted over 20 letters of support from local attorneys, law enforcement, and others attesting to his good character and value to the community.

The sentence imposed affords adequate deterrence to criminal conduct and serves to provide restitution to the victim of the offense. Defendant, if given any more than weekend incarceration, would likely lose his license to practice law, thereby dramatically reducing the ability of the victim to obtain full restitution. Defendant's sentence of 3 years probation and his continued employment will assure that regular restitution payments are made. If during the lengthy probationary sentence, Defendant fails to make these payments or otherwise violates the conditions of his probation then he faces the prospect of a lengthy imprisonment and the loss of his license to practice law.

¶ 6 On September 29, 2014, the General Counsel for the Oklahoma Bar Association (Complainant) forwarded certified copies of the federal criminal case to this Court pursuant to Rule 7.2, RGDP. On October 13, 2014, this Court ordered an immediate interim suspension of the Respondent from the practice of law. The Respondent chose not to challenge his interim suspension but did request a hearing to present mitigating evidence. An evidentiary hearing was held before the Professional Responsibility Tribunal (PRT) on December 18, 2014.

¶ 7 At the evidentiary hearing, the Respondent presented two main factors as mitigation to show why he had not paid the taxes. The first factor concerned the embezzlement of significant funds by his CPA. The second factor concerned his legal fees for representation in a 2008 federal indictment. In addition, the Respondent provided positive testimony from local judges, lawyers and other professionals concerning his legal abilities.

¶ 8 The Respondent's first main mitigating factor concerned his CPA. In 1988, Respondent hired a CPA, Judy Poltera. Poltera's duties included paying all the office bills and preparing as well as paying taxes including payroll taxes. She had the final decision making authority as to when and if employment taxes would be paid to the IRS. In 1998, Poltera was involved in a serious car accident which enhanced an existing medical condition. She began taking prescription pain killers and had many doctor appointments. She subsequently lost another job where she had health insurance and eventually lost that health insurance. She testified she embezzled money from the Respondent's operating account and even took out a mortgage on the Respondent's home without his knowledge to pay for her medical treatment and medication. Poltera was also authorized to accept correspondence and phone calls from the IRS and to meet with them as needed. She testified she told the Respondent she would take care of any problems and “it would be okay.” She also testified she did not believe the Respondent knew of the details of her meetings with the IRS. In 2005, when Poltera realized she could no longer hide her embezzlement she quickly left the law firm.

¶ 9 After Poltera left, the Respondent went to her office and discovered she had not paid all the federal and state taxes owed from 1998 to 2005 and she had not been paying office bills. The amount of unpaid office bills alone amounted to approximately $150,000.00. In addition, he discovered she had taken out a mortgage in excess of $100,000.00 on his residence, which he eventually lost in foreclosure.

¶ 10 The second mitigating factor concerns his legal fees in defense against a 2008 federal indictment. Prior to 2003, the Respondent had represented members of the Outlaw motorcycle club. The motorcycle club had been under investigation by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). After that investigation, the ATF conducted another investigation of the Respondent who was a gun enthusiast as well as a former gun dealer. The ATF discovered a World War II English Sten fully-automatic submachine gun the Respondent had legally purchased. The submachine gun had been shipped from England but apparently a wrong serial number had been recorded when it was shipped. In 2004, a search warrant was issued and the ATF searched the Respondent's house and office and confiscated the submachine gun. In 2007, the case against him “started gearing up” and in 2008, the Respondent was indicted for this recording error. He went to trial which resulted in a mistrial and afterwards the government tried to negotiate a plea. The Respondent testified the government discovered he had also failed to properly record a gun he legally purchased from a local gun dealer. Because the Respondent had been a gun dealer he was required to keep a separate log of guns he owned personally from the ones his business owned. He stated he failed to note the gun purchase on his individual registry. The government agreed to drop the felony charges concerning the submachine gun in exchange for a plea of guilty to a misdemeanor improper recordkeeping charge on the gun he purchased locally.⁴ The Respondent accepted and pled guilty in 2009. The Respondent testified he spent approximately $250,000.00 on legal representation and experts during the period between 2007 through 2009. In 2009, he also received a private reprimand from the Professional Responsibility Commission of the Oklahoma Bar Association for his plea of guilty to the misdemeanor charge.

¶ 11 Following the discovery of unpaid bills in 2005, the Respondent testified he had to make tough decisions on what could...