Attorney Grievance Commission v. Giannetti

Greene, J. This attorney discipline case arises out of an attorney’s failure to file federal and state tax returns as well as his failure to satisfy federal and state tax obligations for a seven-year period. The Attorney Grievance Commission of Maryland (“Petitioner” or “Commission”), acting through Bar Counsel, charged Respondent, John Alexander Giannetti, Jr., with several violations relating to his failure to file and pay federal and state incomes taxes for the years 2008 through 2015. Specifically, the Commission charged Respondent with violating the Maryland Lawyers’ Rules of Professional Conduct (“MLRPC” or “Rule”) 8.4 (Misconduct), 1 and the Commission filed a Petition for Disciplinary or Remedial Action, pursuant to Maryland Rule 16-751(a). This Court referred the matter to Judge Glenn L. Klavans (the “hearing judge”), of the Circuit Court for Anne Arundel County, on November 4, 2016, to conduct an evidentiary hearing and make findings of fact and conclusions of law.

The hearing judge scheduled the case for a hearing on April 28, 2017. Petitioner served Respondent with discovery requests in the form of Interrogatories, Request for Production of Documents and/or Electronically Stored Information, and Requests for Admissions of Fact and Genuineness of Documents. Respondent failed to file any response. Upon Petitioner’s Motion for Sanctions Upon Failure to Provide Discovery, the hearing judge found that Respondent’s failure to respond was “without excuse or objection, was purposeful and willful, and that Respondent made no good faith effort to resolve the discovery dispute.” As a result, the hearing judge deemed admitted Petitioner’s Requests for Admissions of Fact and Genuineness of Documents, and prohibited Respondent from testifying or introducing evidence in opposition to Petitioner’s claims.

Respondent was also prohibited from offering mitigation -witnesses, other than his own personal testimony. On the eve of trial, Respondent filed a Request for Postponement to Prepare Defense based on New Information and Other Facts, along with a Motion to Shorten Time for Petitioner’s Response. The hearing judge heard the motion orally as a preliminary matter on the day of trial, April 28, 2017, and upon Respondent’s argument as well as Petitioner’s response, the hearing judge denied the motion. The Circuit Court heard evidence from Petitioner, and although Respondent was permitted to testify on his behalf as to any mitigation evidence, he did not offer any mitigation evidence.

After the hearing, Judge Klavans issued his Findings of Fact and Conclusions of Law, in which he concluded that Respondent had violated Rule 8.4(a), (b), (c) and (d). I. The Hearing Judge’s Findings The hearing judge made the following findings of fact by clear and convincing evidence. See Md. Rule 19-727(c) (noting that “Bar Counsel has the burden of proving the averments of the petition by clear and convincing evidence.”). Respondent was admitted to practice law in Maryland on April 6, 1995.

Beginning in January 2008 and continuing through December 2015, Respondent maintained an office for the practice of law in Anne Arundel County, Maryland, where he was self-employed and, therefore, was not working for an employer who withheld payroll taxes. The hearing judge found that Respondent knew he had an obligation to file tax returns and pay taxes to both the federal and state governments. With respect to the filing and payment of those federal and state tax obligations, the hearing judge found: 4. Beginning on or about April 15, 2008 and continuing through April 15, 2015, Respondent knowingly failed to timely file both federal and Maryland income tax returns.

Admission 5. 5. In some years, Respondent requested and received extensions for filing his tax returns. In the years Respondent requested and received extensions, Respondent did not file a return prior to the extended date. Admission 6-7. 6.

Respondent paid no Maryland State Income taxes for tax years 2008 through 2014. Admission 8. 7. On occasions when Respondent filed untimely federal and Maryland tax returns, he did not include payments for taxes owed. Admission 9. 8.

During the period 2008 through 2015, Respondent made one payment on his federal income tax liability. Payment was made in 2011 and was applied to Respondent’s 2007 tax liability. Admission 10-11. ⅜ ⅝ }⅜ ⅝ 11. Respondent did not keep accurate and complete financial records of his income during the years 2008 through 2015.

Admission 14. H* ⅝ ⅜ 16. The total amount owed by Respondent for federal income taxes, according to the records provided by Respondent, was $38,107.97, which included penalties and interest for failure to file and failure to pay as of February 26, 2016. 17. The exact amount of Respondent’s income tax obligation to the State of Maryland cannot be determined by this [Circuit] Court, since Respondent provided no information regarding his state tax liability to Bar Counsel.

The State, however, has a tax lien in excess of $112,000.00 against Respondent. Judge Klavans noted that Respondent “chose not to testify as to the presence of any physical and/or mental health problem and/or other mitigating factors related to his failure to file timely tax returns and pay his tax obligations.” The hearing judge found that Petitioner’s investigator, and sole witness at trial, did not suspect Respondent of having a substance abuse problem. Finally, the hearing judge found that although the Petitioner’s witness did not understand all of the information on the Internal Revenue Service (“IRS”) reports, “it was clear from the records that for each tax year 2008 through 2014, the IRS had imposed penalties for not paying income taxes in a timely manner and for every tax year 2008 through 2014, the IRS imposed penalties for not filing a return in a timely manner.” II. The Hearing Judge’s Conclusions of Law Judge Klavans concluded by clear and convincing evidence that Respondent violated MLRPC 8.4(a), (b), (c) and (d).

As he explained: The following conclusions of law were supported by clear and convincing evidence: The Petition alleged that Respondent violated Maryland Lawyers’ Rule of Professional Conduct 8.4(a)-(d) (as enumerated at the time of the misconduct), which provides, in relevant part: Rule 8.4 Misconduct It is professional misconduct for a lawyer to: (a) violate or attempt to violate the Maryland Lawyers’ Rules of Professional Conduct, knowingly assist or induce another to do so, or do so through the acts of another; (b) commit a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects; (c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation; (d) engage in conduct that is prejudicial to the administration of justice; The Court of Appeals has long recognized that willful failure to file tax returns and/or pay taxes is professional misconduct, even in the absence of fraud and/or dishonest intent. See Attorney Grievance Commission [of] Maryland v. Walman, 280 Md. 453, 459, 463 , 374 A.2d 354, 358-59, 360 (1977). An intentional and voluntary violation of a known legal duty, such as willful failure to file income tax returns, is sufficient to constitute a violation of the Maryland Lawyers’ Rules of Professional Conduct. Attorney Grievance Commission v. Katz, 429 Md. 308, 317-18 , 55 A.3d 909 (2012).

For the reasons discussed below, this Court finds clear and convincing evidence that Respondent violated MLRPC 8.4(a) through (d). See Attorney Grievance Commission v. Atkinson, 357 Md. 646, 655-56 , 745 A.2d 1086, 1091 (2000) (An attorney’s failure to file returns and pay taxes for a period of ten years violated MLRPC (b), (c) and (d).). With regard to finding a violation of MLRPC 8.4(b), a two-part test must be applied. The Court must first find that the lawyer’s conduct violated a criminal statute.

Prosecution and conviction are not necessary. The Court only needs to find clear and convincing evidence that the conduct was in violation of the law. See, e.g., Attorney Grievance Commission v. Proctor, 309 Md. 412, 418 , 524 A.2d 773, 776 (1987). That part of the test has been met.

Willful failure to file returns and/or to pay personal income taxes is a crime under both federal and Maryland Law. See Attorney Grievance Commission v. Tayback, 378 Md. 578, 587 , 837 A.2d 158, 164 (2003). In this case, there were conclusive findings that Respondent knowingly, intentionally and voluntarily failed to file both state and federal tax returns in a timely manner for a period of at least seven years, 2008 through 2015. Owing [taxes for] those seven years, he knowingly failed to pay Maryland State taxes and made only one late payment on his federal income tax obligation.

The fact that Respondent’s failures were knowing was established by the admissions. The facts that Respondent’s failure began after he became self-employed and no longer subject to withholding taxes, that he filed requests for extensions of the time in which to file his federal Income Tax Returns in some years but then failed to file and/or pay within the extended period, and his statements to [Bar Counsel’s investigator] provided additional clear and convincing evidence that Respondent was well aware of the requirements of the law and that his failure to meet this known obligation was, therefore, willful and intentional. Respondent offered no mitigation evidence to the contrary. With regard to the second part of the test, the Court of Appeals has previously determined that criminal conduct involving failure to file returns and pay taxes adversely reflects on the lawyers’ honesty, trustworthiness and/or fitness as a lawyer in other respects. “Many kinds of illegal conduct reflect adversely on fitness to practice law, such as offenses involving fraud and the offense of willful failure to file an income tax return....

A pattern of repeated offenses, even ones of minor significance when considered separately, can indicate indifference to legal obligation.” MLRPC 8.4 Comment [2]. In Attorney Grievance Commission v. Atkinson, 357 Md. 646, 656 , 745 A.2d 1086, 1091 (2000), the Court of Appeals found that an attorney’s failure to file returns and/or pay taxes for a ten year period violated MLRPC 8.4(b). In Atkinson, the Court of Appeals found that the lawyer had purposefully avoided almost all contact with both the state and federal income taxing authorities and at no point exhibited, over a period of eleven years, any real intention to fulfill her duties of filing the required returns and paying the taxes due, until the authorities discovered her delinquency and contacted her. In this case, Respondent demonstrated a similar purposeful avoidance.

Except for the filing of a 2007 return in March 2011 and a single credit of payment in August 2014, (Petitioner’s exhibit 2, pages 1-2), Respondent failed to exhibit any efforts to correct the ongoing delinquency until after he admitted his conduct while testifying in the family law matter in August 2014, that he had not filed returns for a number of years, and even then he did not promptly act to correct the problems. As of March 2016, Respondent had not yet entered into a payment plan with the IRS and/or the State of Maryland. As of the hearing date, April 28, 2017, there was no evidence of any efforts by Respondent to correct the situation. Atkinson, 357 Md. at 653-55 , 745 A.2d at 1090 .

See also Tayback, 378 Md. at 587-90 , 837 A.2d at 164-65 . Based on the foregoing, there was clear and convincing evidence that Respondent violated MLRPC 8.4(b). Respondent’s continued failure to file timely returns and pay taxes due and/or overdue also constituted conduct involving dishonesty, in violation of MLRPC 8.4(c). In Atkinson, the Court of Appeals overruled an exception to the hearing judge’s finding that the lawyer’s failure to contact an IRS agent to remedy the situation after failing to file returns for a number of years was, “at best, dishonest.” The Court explained that the hearing court correctly characterized Atkinson’s particular misconduct as dishonest, “... if only because of the substantial duration in time over which she failed to pay both state and federal income taxes.

The repeated failure to file tax returns—particularly when it spans an uninterrupted period of over ten years—is not a minor criminal offense, [it] is a dishonest act ...” (emphasis in original) 357 Md. at 655 , 745 A.2d at 1091 . Although in this case the evidence of Respondent’s failure to file timely returns and pay taxes extends a few years less than that in Atkinson, the misconduct went on for a substantial duration of time and may be ongoing. For the foregoing reasons, there was clear and convincing evidence that Respondent violated MLRPC 8.4(c). The Court of Appeals has also previously determined that an attorney’s willful failure to file tax returns and pay taxes constituted conduct prejudicial to the administration of justice.

The conduct described above provided clear and convincing evidence that Respondent engaged in conduct likely to erode the public’s confidence in the legal profession and that this conduct was prejudicial to the administration of justice, in violation of MLRPC 8.4(d). See Tayback, 378 Md. at 592 , 837 A.2d at 166 ; Walman, 280 Md. at 463 , 374 A.2d at 360 . With regard to MLRPC 8.4(a), the violations of the other subsections of this Rule provided clear and convincing evidence that Respondent violated the MLRPC, thereby violating MLRPC 8.4(a).

III

Neither party has taken exception to the hearing judge’s findings of fact or conclusions of law. Where no exceptions to the hearing judge’s findings of fact are filed, this Court “may treat the findings of fact as established for the purpose of determining appropriate sanctions.” Attorney Grievance Comm’n v. Gray, 444 Md. 227, 250 , 118 A.3d 995, 1008 (2015). We, therefore, deem Judge Klavans’ findings of fact as established by clear and convincing evidence. See Rule 19—727(c); see also Gray, 444 Md. at 250 , 118 A.3d at 1008 .

We review the hearing judge’s conclusions of law de novo. Attorney Grievance Comm’n v. Storch, 445 Md. 82, 89 , 124 A.3d 204, 208 (2015). Judge Klavans determined that Respondent violated MLRPC 8.4(a), (b), (c) and (d). Based upon our independent review of the record, we are satisfied that the facts support the hearing judge’s conclusions of law.

Discussion Rule 8.4 provides, in pertinent part, that: It is professional misconduct for a lawyer to: (a) violate or attempt to violate the Maryland Lawyers’ Rules of Professional Conduct, knowingly assist or induce another to do so, or do so through the acts of another; (b) commit a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects; (c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation; (d) engage in conduct that is