ATTORNEY GRIEV. COMM'N OF MARYLAND v. Boyd

McAuliffe, judge. Robert K. Boyd is the subject of a Petition for Disciplinary Action filed by the Attorney Grievance Commission, which charges him with multiple violations of the Rules of Professional Conduct. The charges, based on complaints filed by one of respondent’s former secretaries and by Bar Counsel, relate generally to respondent’s alleged failure to comply with state and federal tax laws, misrepresentations he made as settlement agent in two related real estate transactions, and misrepresentations he made to an investigator for the Attorney Grievance Commission. Judge J. Frederick Price of the Second Judicial Circuit held a hearing on the petition, and subsequently issued findings of fact and conclusions of law.

Judge Price found that respondent had violated a number of the Rules and characterized respondent’s conduct as “a willful disregard for the law and the Rules of Professional Conduct.” Respondent filed exceptions, challenging the sufficiency of the evidence to support virtually all of the findings. In reviewing the multiple findings made by the hearing judge, we accept findings of fact made by the hearing judge if they are supported by clear and convincing evidence, and are not clearly erroneous. Attorney Griev. Comm’n v. Powell, 328 Md. 276, 287 , 614 A.2d 102 (1992); Attorney Griev.

Comm’n v. Bakas, 323 Md. 395, 402 , 593 A.2d 1087 (1991). COMPLAINT ORIGINATED BY SECRETARY Judge Price found the following facts to have been established by clear and convincing evidence. Respondent is a sole practitioner, maintaining an office at 140y¿ E. Main Street, ³⁰⁴ Elkton, Maryland, who was admitted to the bar in 1966. In June, 1988, he hired Sandra Yeadon to be his secretary.

At the time he hired her, Ms. Yeadon had no experience as a bookkeeper or legal secretary, although she did have some general secretarial experience. Ms. Yeadon was trained for two weeks by her predecessor, Saundra Carpenter. Ms. Yeadon’s duties as secretary included writing checks on the office account, including her own paycheck. Checks were then submitted to respondent for his signature.

Ms. Yeadon remained in his employment until February, 1990, but at no time did respondent have her keep a payroll ledger or withholding records, complete W-4 forms, or prepare any checks for the payment of taxes. Although he asked her to complete tax records for the business, she informed him that she was unable to do so. On February 8, 1990, respondent signed a paycheck in the amount of $230.04 made payable to Sandra Yeadon. That amount represented her wages for one week after withholding taxes.

The check was dishonored, however, because respondent’s bank account, at the People’s Bank of Elkton, was under a writ of attachment. The following week respondent issued another paycheck in the same amount, but that check was also dishonored. As a result, Ms. Yeadon resigned. She ultimately recovered the amount of her wages from the Division of Labor and Industry.

On October 10, 1990, Ms. Láveme Tome began work as respondent’s secretary. Like Ms. Yeadon, Ms. Tome had limited secretarial and bookkeeping experience. At no time in her employment did she receive any instruction from respondent regarding proper bookkeeping procedures or compliance with tax laws. At the end of her first week, per respondent’s instructions, Ms. Tome made out her own paycheck without withholding any taxes.

The bank dishonored the check for insufficient funds. The following week Ms. Tome, without any assistance from respondent, determined the amount to be withheld from her paycheck. She did so in part by referring to a payroll ledger ³⁰⁵ she found, unused, in her office. She made out her second paycheck to reflect the proper deductions, but again the check was dishonored when presented for payment.

After a confrontation with respondent Ms. Tome resigned, and later recovered her wages from the Division of Labor and Industry. Respondent employed Melissa Carter as his secretary from April 1, 1991 until May 16, 1991. Like her predecessors, she had taxes withheld from her paychecks. 1 Nevertheless, Judge Price found that respondent at no time paid any taxes, state or federal, in connection with Ms. Carter’s employment or that of her predecessors. The judge also found that respondent willfully: failed to keep a separate ledger account for employee withholding tax purposes; failed to file withholding tax returns for his employees; failed to keep taxes which were withheld from his employees’ pay checks in trust and instead used the funds for his personal and/or business purposes; failed to provide withholding information to his employees via W-2 forms; failed to obtain information to determine the amounts to be withheld from his employees’ pay checks via W-4 forms; and failed to keep accurate payroll records for his employees.

For the most part respondent admits that he did not comply with the law, but contends that his noncompliance was not willful. Instead, he blames his secretaries, asserting that “while the ultimate responsibility for the payment of any taxes due is -with the respondent, the responsibility and the job of the employee in a sole practitioner’s office for filling out said forms, keeping the books, billing, filing, etc. is with the secretary. Why else hire a girl? Just to answer the phone?” Judge Price rejected his contentions.

He found that respondent lacked credibility, but by contrast, Ms. Yeadon and Ms. Tome were fully credible. He also found that respondent was solely responsible for his failures to comply with the law. ³⁰⁶ A. Failure to Maintain Withholding Ledgers and a Withholding Account Despite respondent’s exceptions to the contrary, we agree with Judge Price that respondent failed to maintain ledgers for employee withholding purposes, in violation of § 10-906(c) of the Tax-General Article, Maryland Code (1988, 1989 Cum. Supp.). 2 Respondent admits that he did not maintain a separate bank account for withholding purposes, but argues that a ledger account sheet introduced as Exhibit 20 by Bar Counsel shows that he maintained withholding records. Contrary to respondent’s assertion, the testimony reveals that the ledger account sheet was one of many blank payroll ledgers found in a file cabinet by Ms. Tome.

With another employee’s assistance, she determined various amounts of withholding and she partially completed one of the payroll ledger pads. The ledger sheet with Ms. Tome’s entries was the only ledger sheet used by anyone in respondent’s office, and Ms. Tome’s handwritten entries were the only entries on the sheet. Although respondent argues that he constructively provided the ledger sheets by simply having them in the office, Ms. Tome testified that respondent was not aware that she used the payroll ledger book to record withholding amounts. Judge Price found the testimony of Ms. Tome, and not respondent, to be credible, and therefore rejected respondent’s assertion that he provided the ledger sheets.

The hearing judge ³⁰⁷ “may elect to pick and choose which evidence to rely upon[,]” Attorney Griev. Comm’n v. Nothstein, 300 Md. 667, 684 , 480 A.2d 807 (1984) (citations omitted), and he may base his findings on the testimony of a single witness. Attorney Griev. Comm’n v. Miller, 301 Md. 592, 602-03 , 483 A.2d 1281 (1984).

Thus, we accept Judge Price’s finding that respondent did not maintain a ledger for withholding purposes. B. Failure to Maintain Withholding Trust Account Judge Price also found that respondent willfully failed to keep his employees’ withholding taxes in trust, in violation of § 10-906(b) of the Tax-General Article, 3 and instead used the funds for business or personal reasons. Although respondent admits that he did not keep a separate withholding account, he argues that he did keep the funds in his general office account, and utilized them only for payroll and office expenses, not for personal or non-firm purposes. 4 Respondent misunderstands the nature of a trust account maintained for the deposit of employee withholding taxes. The language of § 10-906(b) of the Tax-General Article explicitly states that income taxes withheld from employees are held in trust for the State by the employer.

Moreover, those monies are not to be spent; they belong to the State. The fact that respondent used them to support his business, and not his personal endeavors, is of no consequence, and does not relieve him of responsibility for his failure to hold the funds in trust for the proper authority. Thus, we accept Judge Price’s finding that respondent violated § 10-906 by failing to maintain a withholding trust account, and by failing to save withheld taxes in trust for the government. ³⁰⁸ C. Failure to File Withholding Returns and Pay Withholding Taxes Next respondent objects to Judge Price’s findings that he willfully failed to file withholding tax returns, in violation of 26 U.S.C. § 7203 5 and § 10-804 of the Tax-General Article, 6 and failed to pay withholding taxes for his employees, in violation of 26 U.S.C. § 7203 and § 10-906(a) of the Tax-General Article. 7 Respondent’s contention that he did not “willfully” violate federal and state tax provisions is the same argument made by the petitioner in Johnson v. State, 294 Md. 515 , 451 A.2d 330 (1982), and rejected by this Court. Johnson, also a Maryland attorney, was found guilty of willful failure to file Maryland income tax returns in violation of then Maryland Code (1957, 1980 Repl.Vol.) Art. 81, § 320, which is now §§ 13-1001 and 13-1022 of the Tax-General Article. 8 Johnson argued that because there was no evidence to show that his failure to file the state returns was willful, the trial judge was wrong in not granting his motion for judgment of acquittal on the income tax offense.

We ³⁰⁹ rejected his contention because proof of an intent to defraud the government is not required to establish a violation of the statute; willfulness may be established merely by proving a voluntary, intentional violation of a known legal duty. Johnson, supra, 294 Md. at 518-19 , 451 A.2d 330 . See also Attorney Grievance Comm’n v. Walman, 280 Md. 453, 460 , 374 A.2d 354 (1977) (willfulness is established by proof of a voluntary, intentional violation , of a known legal duty). We have reached the same conclusion on other occasions where an attorney’s failure to pay taxes or file income tax returns was at issue.

See Attorney Griev. Comm’n v. Baldwin, 308 Md. 397, 404 , 519 A.2d 1291 (1987). In this case, the testimony shows that respondent knew the quarterly tax forms were mailed to his office and had to be filed, and knew that his secretary could not complete them. Respondent admitted that the withholding taxes were never remitted to the Internal Revenue Service or the Maryland Comptroller of the Treasury, and that unemployment taxes for Sandra Yeadon were not paid until she filed for unemployment benefits and was denied.

Because the duty of an employer to file withholding returns and pay withheld taxes is a known legal duty, these facts and Johnson support the hearing judge’s conclusion that respondent’s failures were willful. 9 The fact that respondent filed the appropriate forms and paid the taxes when Bar Counsel notified him of the bookkeeping and payroll withholding problems does not re ³¹⁰ lieve him of responsibility for his failures to do so on time. The evidence indicates that he had knowledge of the payroll problems before Bar Counsel notified him of them. He admitted that he knew as of April 1990 that Sandra Yeadon’s unemployment taxes had not been paid, and stated that he was aware in May 1990 that a paycheck to another employee, Jean Mitzel, had bounced that same month. Respondent’s subsequent curative action does not mitigate his offense, particularly when it was Bar Counsel’s investigation that prompted respondent to file and pay.

Baldwin, supra, 308 Md. at 404-05 , 519 A.2d 1291 (finding of misconduct upheld where attorney knew he had a responsibility to fill out employee tax forms at regular intervals and remit the taxes withheld, and failed to do either until pressed by the state Comptroller). See also Louisiana State Bar Ass’n v. Hopkins, 447 So.2d 464, 466 (La.1984) (no mitigating factor found where respondent knew that client had not been paid settlement money and failed to rectify the situation until contacted by the state professional responsibility committee); Grievance Adm’r v. Nickels, 422 Mich. 254 , 373 N.W.2d 528, 531 (1985) (fact that, at the conclusion of a disciplinary hearing, respondent reimbursed employee, who received default judgment against him for taxes he purportedly withheld from her income but failed to remit to the proper authorities, is of little or no significance). Thus, we accept Judge Price’s finding that respondent -willfully failed to file withholding returns or pay withholding taxes. D. Failure to Maintain Payroll Records Respondent also objects to Judge Price’s finding that he willfully failed to keep accurate payroll records for his employees. 26 U.S.C. § 7203 .

He contends that there was no proof that he failed to keep such records, that any records kept were inaccurate, or that any failures in that regard were willful. Nevertheless, respondent was asked by a commission investigator to produce his employee payroll records. He was unable to do so. Although he had the opportunity during the evidentiary hearing to present witnesses on his behalf and ³¹¹ appropriate records from his law practice, see Md.Rule BV10, the record is completely devoid of any evidence of employee or tax record keeping on the part of respondent.

Thus, Judge Price properly concluded that employment records for respondent’s employees were neither prepared nor maintained. E. Failure to Have Employees Complete W-J Forms In support of his objection to the finding that he failed to provide W-4 forms for his employees to complete, 26 U.S.C. § 3402 , 10 respondent argues that there was no evidence or testimony that the proper information, ie., I.R.S. Circular E and Maryland Withholding Tables, was not available in his office at all times. We note that respondent introduced no evidence to support this contention. Moreover, the basis of his objection is misplaced.

Whether or not these and other materials were in respondent’s office at all times is irrelevant. As an employer, he had an obligation to provide them to his employees, and obtain social security numbers and other relevant withholding information so that he could make proper deductions from their wages. He did not present any evidence to the hearing judge to indicate that he obtained that information, nor did he explain his failure to do so. Thus, the finding is supported by clear and convincing evidence, and we accept it.

F. Failure to Provide Employees with W-2 Forms As for Judge Price’s finding that respondent willfully failed to provide withholding information to his employees via W-2 forms, as required by 26 U.S.C. §§ 6051 and 7204, and § 10-911 of the Tax-General Article, respondent states that (1) his secretary’s testimony shows that she was instructed to contact respondent’s accountant, Allen Anderson, regarding taxes and there was no evidence that she did so and (2) there ³¹² was no evidence that respondent willfully denied Ms. Yeadon a W-2 form. Respondent’s recollection of Ms. Yeadon’s testimony and the other evidence is not completely accurate. According to Ms. Yeadon, she asked respondent for a 1989 W-2 form in January 1990 and he told her to ask Mr. Anderson about it. She did so, and Mr. Anderson said he would send the form, but he did not.

She also asked respondent for a 1990 W-2 form in early 1991, but he failed to provide her with one. 11 Moreover, as discussed above, respondent’s failures to comply with known legal obligations are properly characterized as willful. The evidence shows clearly and convincingly that respondent knew his employees were not receiving W-2 forms, but did nothing to correct the problem. Thus, we accept Judge Price’s finding that respondent failed to ensure that his employees received W-2 forms. G. Responsibility for Failure to Comply with the Law Despite respondent’s protestations that the ultimate responsibility for maintaining proper records and fulfilling tax obligations rested with his employees 12 because “[a]ll that was necessary was for the respective secretary to write the checks and fill out the file forms[,]” Judge Price properly concluded that the day-to-day affairs of respondent’s practice were respondent’s responsibility.

See Attorney Griev. Comm’n v. Dacy, 313 Md. 1, 5 , 542 A.2d 841 (1988) (“[H]ad the respondent exercised a reasonable degree of supervision over [his employee], he might have detected her error before any ethical proscriptions had been violated.”); Attorney Griev. ³¹³ Comm’n v. Goldberg, 292 Md. 650, 655-56 , 441 A.2d 338 (1982) (“An attorney may not escape responsibility to his clients by blithely saying that any shortcomings are solely the fault of his employee. He has a duty to supervise the conduct of his office.”). See also Matter of Wines, 135 Ariz. 203 , 660 P.2d 454, 457 (1983) (attorney’s placing blame on poor office procedures and inefficient secretarial staff for his failure to remit income taxes was misplaced).

Respondent may not assign his legal obligations as an employer to his employees. Thus, although respondent may have properly asked his employees to complete the necessary tasks, it was ultimately his responsibility to see that his obligations under the law were met. This he failed to do. Judge Price properly concluded that respondent is responsible for the shortcomings.

H. Personal Taxes In addition to the above failures in the conduct of his business, Judge Price found that respondent willfully failed to file personal income tax returns for the calendar years 1988, 1989, and 1990 in a timely fashion as required by law. Although respondent contended that he did not believe he was earning any income after expenses, Judge Price found that he lacked credibility, and rejected his contentions. 13 He also found that respondent alone was responsible for his failure to file his tax returns. Bar Counsel admitted into evidence copies of respondent’s 1989 and 1990 tax returns which were prepared and signed by respondent’s accountant on 20 February 1992. Although respondent argues that he was granted extensions, rendering his filings and payments timely, he failed to provide any documentary evidence showing he requested or received extensions. ³¹⁴ He did not offer any documentary evidence that he filed any return for 1988.

Moreover, respondent failed to produce any evidence that the taxes owed have in fact been paid. Although he testified that there were no taxes due for the years in question, hé was unable to explain why the copies of the 1989 and 1990 returns indicate amounts owing of $338.00 and $149.00, respectively. We accept Judge Price’s finding that respondent failed to file his tax returns in a timely fashion. The above facts, combined with respondent’s lack of credibility, constitute clear and convincing evidence in support of the hearing judge’s finding.

The remaining issue is whether respondent’s failure to file and. pay his personal taxes was willful. Using the standards for willfulness already articulated, we find that Judge Price’s determination is supported by clear and convincing evidence. The need to file annual tax returns is a known legal duty, and respondent has not shown that his failure to uphold it was the result of accident, mistake, or other innocent cause. Johnson, supra, 294 Md. at 518-19 , 451 A.2d 330 .

Given the fact that respondent was aware of his duty to file, and that he failed to do so until prompted by this investigation, Judge Price’s finding that his failure to file was willful is sustained. COMPLAINT BY BAR COUNSEL A. Misrepresentation to the Commission Investigator In the course of this investigation, respondent was interviewed by Joseph Lawrence, an investigator for the Commission. Mr. Lawrence asked for employment records of Ms. Tome, but respondent said that none existed because of the short duration of her employment. He was similarly unable to produce employment