Amended June 2, 2015 Iowa Supreme Court Attorney Disciplinary Board v. Michael J. Cross ( 2015 )

IN THE SUPREME COURT OF IOWA
No. 14–1607
Filed March 20, 2015
Amended June 2, 2015
IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD,
Complainant,
vs.
MICHAEL J. CROSS,
Respondent.
On review of the report of the Grievance Commission of the
Supreme Court of Iowa.
Grievance commission reports respondent committed numerous
violations of the rules of professional conduct and recommends
suspension. LICENSE SUSPENDED.
Charles L. Harrington, Des Moines, for complainant.
Michael J. Cross, Hampton, pro se.
2
ZAGER, Justice.
The Iowa Supreme Court Attorney Disciplinary Board (Board)
charged attorney Michael J. Cross with violations of several of our ethical
rules governing an attorney’s management of client trust accounts after
an audit revealed numerous trust account irregularities. The Board also
charged Cross with violations of several other ethical rules for failing to
file employee-payroll-withholding-tax declarations and pay these taxes
for years 2009 through 2011, for failing to file state and federal income
tax returns for years 2009 through 2011, and for failing to supply the
Board with requested documentation concerning these alleged tax
violations. Finally, the Board charged Cross with improperly practicing
under a trade name in violation of our ethical rules. After a hearing, a
division of the Grievance Commission of the Supreme Court of Iowa
found Cross violated a number of our ethical rules. The commission
recommended we suspend Cross’s license for one year. It also
recommended that we require Cross to demonstrate he has satisfied all
outstanding payroll and income tax liabilities due state and federal
taxing authorities as a condition of reinstatement. Upon our de novo
review, we concur in most of the findings of rule violations, and agree
with the commission that a one-year suspension is appropriate.
I. Factual Background.
Cross was admitted to practice law in Iowa in 1973. He currently
works in Hampton, Iowa, as a solo practitioner. This case turns on an
audit performed by the Client Security Commission on Cross’s client
trust account and accounting records in 2012. The audit showed
noncompliance with a number of our rules.
A. The 2012 Audit. On May 22, 2012, an auditor with the Client
Security Commission contacted Cross by phone. This call was made in
3
response to a report received by the Client Security Commission
expressing concern about Cross’s financial and physical health and the
potential risk to his clients. The auditor made an appointment to meet
with Cross at his office for May 30. During their conversation, Cross
informed the auditor that his records were not up to date but that he
would spend the weekend preparing them for review.
When the auditor arrived for the May 30 meeting, Cross informed
the auditor that he had not performed any trust account reconciliations
since November 2009. At that time, Cross had experienced difficulties
with his accounting software and simultaneously discovered a $99.60
difference between the bank balance and the total of the client
subaccounts, which he could not explain. Cross also informed the
auditor that he had failed to maintain contemporaneous client ledgers
since November 2009. While Cross had attempted to reconstruct the
client ledgers over the preceding weekend using bank statements, he had
been unsuccessful in completing the task. He was also unable to provide
the auditor with a check register. Over the course of the next several
months, Cross was able to reconstruct several client ledgers. However,
these reconstructed ledgers comprised only a sample of the ledgers that
should have been available, and Cross never provided a complete set of
client ledgers to the auditor.
In performing the audit, the auditor identified three bank accounts
relevant to Cross’s client-trust-account management practices: (1) the
client trust account; (2) the Cross Law Firm account; and (3) a bank
account in the name of MJC Services, Inc. (MJC). The Cross Law Firm
account was the primary business operations account for Cross’s
practice until 2010. However, when Cross opened the MJC account in
2010, it became the primary business operations account for the firm.
4
Cross used the MJC account to protect his assets from levies by
creditors.
Due to the complete lack of record keeping, the auditor was
required to reconstruct a journal for the trust account from bank
statements. The auditor then conducted an extensive audit by cross-
referencing the reconstructed journal with the few client ledgers provided
by Cross and bank statements from the other accounts. Based on the
audit, the auditor concluded “Cross completely lost control and
accountability for client funds deposited in his trust account” and
“generally treated all the funds in the accounts as his funds to do with as
he chose without regard to whether his fees had been earned or not and
without notifying clients of withdrawals.” The auditor further concluded,
“Cross . . . committed nearly every wrong possible in handling client
funds and managing an attorney’s trust account,” and enumerated the
following list of deficiencies:
(1) “Failed to perform monthly reconciliations”;
(2) “ ‘Borrowed’ from the trust account”;
(3) “Paid personal and business expenses from the trust
account”;
(4) “Overdrawn specific client subaccounts”;
(5) “Overdrawn the trust bank account”;
(6) “Withdrawn cash from the trust account”;
(7) “Failed to maintain client subaccounts”;
(8) “Failed to deposit client funds in [the] trust account
when required”;
(9) “Taken fees before they were earned”;
(10) “Commingled trust funds with non-trust funds”;
(11) “Withheld and failed to deposit a portion of cash
receipts”;
(12) “Failed to provide clients with written notification of
withdrawal of trust funds”; and
(13) “Failed to maintain trust account records for six years.”
5
Specifically, the audit revealed that as of November 2009, eight
client subaccounts had negative balances, totaling $11,736.80. One
subaccount, entitled “Cross Law Firm,” had a negative balance of
$11,132.64, and another subaccount, entitled “MJC Services,” had a
negative balance of $80.10. The subaccount names and negative
balances suggested that as early as November 2009, Cross had been
withdrawing unearned fees from the trust account. Also significant, on
February 23, 2011, Cross transferred $8500 by check from the MJC
account to the trust account so the trust account would balance.
The audit also revealed that on 102 separate occasions between
2009 and 2012, Cross used the trust account to pay personal credit card
bills by electronic transfer. On four separate occasions in 2010, these
payments resulted in the trust account being overdrawn. The audit
further established that at various times Cross used the trust account to
pay personal and business expenses, including heating bills, cell phone
bills, office telephone bills, office supply bills, and the corporate filing fee
for the incorporation of MJC in 2009.
The audit further revealed that after the MJC account was opened
in 2010, Cross stopped using the Cross Law Firm account almost
entirely. Additionally, he began using the MJC account for the receipt
and disbursement of client funds, without regard to whether he should
handle such funds through the trust account. With respect to eleven
identifiable clients, the audit demonstrated that Cross deposited advance
fee payments and prepaid expenses in the MJC account as opposed to
the trust account. For example, as it relates to K.A., whom Cross
represented in a dissolution of marriage action, the audit revealed that as
of November 12, 2010, Cross had earned sixty dollars in his
representation of her. However, on that same date, Cross deposited a
6
$600 fee payment from K.A. into the MJC account. Additionally, the
audit established that Cross systematically failed to provide clients with
contemporaneous written notifications and accountings of withdrawals
from the trust account, with the exception of several real estate closings
and probate matters.
B. Tax Matters. In the audit report, the auditor also noted that
Cross’s secretary reported that Cross had been making only net payrolls
for some time. That is, while withholding taxes from employee wages
were calculated and shown as withheld, Cross failed to file employee-
payroll-tax declarations, failed to segregate these funds, and failed to pay
these taxes to the appropriate taxing authorities. Cross admitted this
during the audit. Cross also admitted that he had not filed his federal or
state income tax returns for the years 2009 through 2011, and that his
combined payroll and income tax debt exceeded $100,000.
C. Client Security Commission Form. For the years 2009
through 2012, Cross completed and signed a “Combined Statement and
Questionnaire” for the Client Security Commission. Despite his lack of
record keeping and the audit findings to the contrary, Cross certified that
he kept all client funds and retainers in a separate account from his
own, he performed monthly reconciliations of the trust account with
bank statements and client ledgers, he preserved client-trust-account
records for six years, and he never overdrew the trust account. 1
II. Procedural History.
On September 25, 2013, the Board requested that Cross provide it
with documentation concerning his employment-payroll taxes and
1With respect to Cross’s alleged tax misconduct, the client security
questionnaires in the record do not contain Cross’s responses concerning whether he
had filed his state and federal income tax returns.
7
income taxes. On October 24, Cross responded to the Board indicating
that he needed more time to respond to its request. Cross never supplied
the Board with the requested documentation.
Based on the completed audit, the Board filed its complaint against
Cross on March 4, 2014. The complaint alleged numerous violations of
the Iowa Rules of Professional Conduct and the Iowa Court Rules. In his
original answer, Cross denied many of the allegations in the complaint
and maintained he had not violated any of our ethics rules. His original
answer, however, admitted several factual allegations forwarded by the
Board. Specifically, with respect to the Board’s charge that he
improperly commingled client funds with his own, Cross’s answer stated:
Respondent admits he did not use his trust account solely
for unearned fees or funds of clients, but did deposit earned
fees into said account to avoid creditor levy [and] paid office
expenses and personal expenses out of the trust account
....
The Board also filed and served Cross with a request for admissions.
Cross failed to respond to this request.
On March 17, the Board served Cross with requests for production
of documents and interrogatories. He did not respond to them. On May
16, the Board filed a motion to compel responses to the document
requests, interrogatories, and prior request for admissions. Cross did
not resist the motion, and the commission ordered him to serve
responses no later than June 16. The commission threatened to impose
sanctions if Cross failed to comply with the June 16 deadline.
Additionally, the commission deemed admitted the requests for
admissions Cross had failed to answer.
Cross failed to respond to the Board’s document requests or
interrogatories by the June 16 deadline. As a result, on July 14, the
8
commission imposed sanctions. Specifically, Cross was precluded at the
hearing from offering any witnesses or evidence other than his own
testimony, objecting to any of the Board’s exhibits, cross-examining any
witnesses presented by the Board, and testifying other than in
mitigation. In addition, several facts alleged in the Board’s complaint
were deemed established for the purposes of the action. Specifically, the
commission ruled as established: (1) Cross failed to deposit unearned
fees and prepaid expenses into the trust account with respect to eleven
separate clients; (2) Cross failed to maintain a check register for the trust
account since November 2009; (3) Cross failed to perform trust account
reconciliations since 2009; (4) several clients had negative balances in
their subaccounts at various times, indicating other client funds had
been used for their purposes; (5) the trust account was overdrawn on
four separate occasions in 2010; and (6) Cross’s client security
questionnaires for years 2009 through 2012 were not truthful.
In July, an evidentiary hearing was held before the commission. At
the hearing, Cross filed an amended and substituted answer in which he
admitted all but one of the factual allegations in the Board’s complaint,
and all but one of the alleged rule violations in the Board’s complaint.
Specifically, Cross denied that he had failed to deposit unearned fees into
the trust account and improperly taken fees before they were earned.
Consequently, Cross maintained he had not violated any of our ethical
rules prohibiting such conduct. However, as noted above, the
commission had already ruled this conduct as established for the
purposes of the action.
At the hearing before the commission, Cross did not testify.
Instead, he made a “professional statement” in which he noted he had
“admitted each and every violation except the violation concerning
9
depositing unearned fees.” Cross attempted to explain that it was his
general practice in dissolution cases to charge a flat fee of approximately
$500 after he met with a client for the second time but prior to the filing
of the petition. Prior to these second meetings, Cross generally prepared
documents including “the petition, original notice, confidential
information form[s], statistical report[s], and discovery documents.”
Cross asserted that during these second meetings, he would typically
review these documents with the client. Therefore, while the audit and
records demonstrated that he had deposited client funds in the MJC
account prior to filing the petition—possibly indicating he had failed to
deposit unearned fees into the trust account—those funds had in fact
been earned by the conclusion of the second meeting. Cross admitted,
however, that in each of the instances in which he charged a flat fee, he
“requested $185 towards the filing fee, which [he] never . . . deposit[ed] in
the trust account.”
The commission issued its written findings of fact, conclusions of
law, and recommended sanction on September 26. It concluded that in
2008 Cross developed financial difficulties around the same time his
secretary took leave due to an auto accident. These financial difficulties
were further aggravated when several creditors asserted a levy against
the Cross Law Firm account. The commission also found that around
this same time Cross experienced difficulties with his accounting
software. However, the commission did not consider Cross’s financial,
personnel, or technological excuses sufficient to justify his
mismanagement of the trust account. Specifically, it noted, “It is a
practitioner’s duty to maintain the records required regardless of the
specific media on which the records are kept.” The commission credited
Cross, however, noting that no clients had filed a complaint against him
10
and that “no client was cheated out of funds.” Ultimately, the
commission concluded that Cross violated all of the rules alleged by the
Board and recommended that we suspend his license for one year. It
also recommended that we require Cross to demonstrate he has satisfied
all outstanding payroll and income tax liabilities due state and federal
taxing authorities as a condition of reinstatement.
III. Standard of Review.
Our review of attorney disciplinary proceedings is de novo. Iowa
Supreme Ct. Att’y Disciplinary Bd. v. Conroy, 845 N.W.2d 59, 63 (Iowa
2014). The Board must prove attorney misconduct by a convincing
preponderance of the evidence, a burden greater than a preponderance of
the evidence but less than proof beyond a reasonable doubt. Iowa
Supreme Ct. Att’y Disciplinary Bd. v. Thomas, 844 N.W.2d 111, 113 (Iowa
2014). We give the commission’s findings and recommendations
respectful consideration, but we are not bound by them. Iowa Supreme
Ct. Att’y Disciplinary Bd. v. Ricklefs, 844 N.W.2d 689, 696 (Iowa 2014).
“Upon proof of misconduct, we may impose a greater or lesser sanction
than the sanction recommended by the commission.” Iowa Supreme Ct.
Att’y Disciplinary Bd. v. Templeton, 784 N.W.2d 761, 764 (Iowa 2010).
IV. Review of Alleged Ethical Violations.
The Board has alleged numerous violations of the Iowa Rules of
Professional Conduct and the Iowa Court Rules. In his amended and
substituted answer, Cross admitted each paragraph of the Board’s
complaint, except as it relates to factual allegations and rule violations
concerning the improper deposit and withdrawal of unearned fees.
“Factual matters admitted by an attorney in an answer are deemed
established, regardless of the evidence in the record.” Iowa Supreme Ct.
Att’y Disciplinary Bd. v. Nelson, 838 N.W.2d 528, 532 (Iowa 2013).
11
However, an attorney’s stipulation to a violation of our ethical rules is not
binding on us. Iowa Supreme Ct. Att’y Disciplinary Bd. v. Kelsen, 855
N.W.2d 175, 181 (Iowa 2014). We turn now to consider the individual
rule violations alleged by the Board.
A. Trust Account Violations. The Board alleges Cross violated
Iowa Rules of Professional Conduct 32:1.15(a), (c), and (f) and Iowa Court
Rules 45.1(1), 45.2(3), and 45.7(3) and (4) as a result of his management
of the trust account. 2 The Board also alleges Cross violated Iowa Rule of
Professional Conduct 32:8.4(c) by falsely certifying on his client security
questionnaire that he properly managed the trust account. We address
these alleged rule violations together because they all relate to Cross’s
trust account practices.
1. Trust account management. Rule 32:1.15(a) requires a lawyer
to “hold property of clients or third persons that is in a lawyer’s
possession in connection with a representation separate from the
lawyer’s own property.” Iowa R. Prof’l Conduct 32:1.15(a). Funds must
be kept in a separate account and “[c]omplete records of such account
funds . . . shall be kept by the lawyer and shall be preserved for a period
of six years after termination of the representation.” Id. A comment to
the rule states, “A lawyer should maintain on a current basis books and
records in accordance with generally accepted accounting practice and
comply with any recordkeeping rules established by law or court order.”
Id. cmt. 1.
Rule 32:1.15 also incorporates chapter 45 of the Iowa Court Rules,
which directs an attorney on how to properly maintain a client trust
2All references to the Iowa Rules of Professional Conduct and to the Iowa Court
Rules are to the current version, unless otherwise specified.
12
account. See id. r. 32:1.15(f); Iowa Ct. R. ch. 45. Similar to Iowa Rule of
Professional Conduct 32:1.15(a), rule 45.1 also prohibits attorneys from
commingling their own funds with client funds. See Iowa Ct. R. 45.1.
Specifically, rule 45.1 requires that an attorney maintain a clearly
designated trust account to hold funds received from clients or third
parties. Id. “No funds belonging to the lawyer or law firm may be
deposited in this account,” with the exception of “[f]unds reasonably
sufficient to pay or avoid imposition of fees and charges that are a
lawyer’s or law firm’s responsibility.” Id. r. 45.1(1).
Rule 32:1.15(c) governs a lawyer’s conduct with respect to advance
fee and expense payments. Iowa R. Prof’l Conduct 32:1.15(c). Pursuant
to this rule, “A lawyer shall deposit into a client trust account legal fees
and expenses that have been paid in advance, to be withdrawn by the
lawyer only as fees are earned or expenses incurred.” Id. Rule 45.7 also
governs a lawyer’s treatment of advance fee and expense payments. Iowa
Ct. R. 45.7. This rule defines advance fee payments as “payments for
contemplated services that are made to the lawyer prior to the lawyer’s
having earned the fee.” Id. r. 45.7(1). Advance expense payments are
defined as “payments for contemplated expenses in connection with the
lawyer’s services that are made to the lawyer prior to the incurrence of
the expense.” Id. r. 45.7(2). “A lawyer must deposit advance fee and
expense payments from a client into the trust account and may withdraw
such payments only as the fee is earned or the expense is incurred.” Id.
r. 45.7(3).
Rule 45.2(3)(a) dictates that financial records including ledger
records, bank statements, check registers, copies of monthly trial
balances, and monthly reconciliations of the client trust accounts, must
be maintained by an attorney for six years following the termination of
13
representation of a client. Id. r. 45.2(3)(a). Finally, rule 45.7(4) requires
an attorney to notify a client in writing and provide a contemporaneous
written accounting when withdrawing funds for fees or expenses from the
trust account. Id. r. 45.7(4).
Applying these rules to the facts of this case, we find Cross has
violated all of the rules alleged by the Board with respect to the
management of his trust account and his handling of client funds. First,
we find Cross violated rules 32:1.15(a) and (f) and rule 45.1 by
commingling personal and business funds with client funds. “We have
previously determined an attorney failed to hold his own property
separate from that of his clients when he ‘used the trust account to
deposit personal funds and to pay personal and business expenses.’ ”
Ricklefs, 844 N.W.2d at 697 (quoting Iowa Supreme Ct. Att’y Disciplinary
Bd. v. Hall, 728 N.W.2d 383, 387 (Iowa 2007)). Here, Cross admitted in
his original answer, in his substituted and amended answer, and during
his professional statement at the hearing before the commission that he
commingled personal and business funds with client funds and used the
trust account to pay personal and business expenses. See Nelson, 838
N.W.2d at 532.
Further, there is clear evidence in the record to support these
violations. The record clearly established that Cross failed to hold his
own property separate from his clients’ property and used the trust
account to pay personal and business expenses. The audit revealed that
Cross frequently used the trust account to pay personal credit card bills,
along with a number of other personal and business expenses. The audit
also showed that after Cross opened the MJC account in 2010, he began
regularly depositing client funds into that account, without regard to
whether he should handle such funds through the trust account. While
14
Cross has forwarded a number of excuses for his conduct, including
financial difficulties that began in 2008, we decline to deem Cross’s
asserted personnel, financial, and technological difficulties sufficient
excuses. See Ricklefs, 844 N.W.2d at 695, 698, 700 (finding rule
32:1.15(a) and rule 45.1 violations when attorney experienced “financial
problems related to unpaid medical bills” and commingled personal and
client funds to avoid creditors from levying his bank account, and
declining to deem attorney’s financial problems a legitimate excuse);
Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Sunleaf, 588 N.W.2d
126, 126–27 (Iowa 1999) (finding violation of Iowa Code of Professional
Responsibility for Lawyers DR 9–102(A), the forerunner to rule
32:1.15(a), when attorney used his trust account for the deposit of
earned fees and payment of both personal and business expenses to
“hide funds from the federal internal revenue service which had levied on
his business account for two unpaid payroll tax obligations,” and
declining to deem attorney’s “pressing financial problems” a legitimate
excuse). We find Cross violated rules 32:1.15(a) and (f) and rule 45.1(1).
Second, we find Cross violated rules 32:1.15(c) and (f) and rule
45.7(3) by failing to deposit advance legal fees and expenses into the
trust account and by withdrawing fees and expenses before they were
earned. 3 We begin by noting that as a result of Cross’s failure to respond
3Although we find Cross failed to deposit advance legal fees and expenses into
the trust account, and withdrew fees and expenses before they were earned, we do not
find this conduct amounts to misappropriation. As noted above, the Board’s complaint
alleges violations of various trust account rules, including rule 32:1.15. Complaints
filed by the Board with the commission must be “sufficiently clear and specific in their
charges to reasonably inform the attorney against whom the complaint is made of the
misconduct alleged to have been committed.” Iowa Ct. R. 35.5. “Because attorney
disciplinary actions are ‘quasi-criminal’ in nature, ‘the charge[s] must be known before
the proceedings commence.’ ” Kelsen, 855 N.W.2d at 183 n.3 (alteration in original)
(quoting In re Ruffalo, 390 U.S. 544, 551, 88 S. Ct. 1222, 1226, 20 L. Ed. 2d 117, 122
(1968)).
15
to the Board’s document requests and interrogatories, the commission
deemed as established that Cross failed to deposit unearned fees and
prepaid expenses into the trust account with respect to eleven separate
clients. See Iowa R. Civ. P. 1.517(2)(b)(1); Iowa Supreme Ct. Att’y
Disciplinary Bd. v. Netti, 797 N.W.2d 591, 595 (Iowa 2011) (noting this
sanction is similar to sanctions authorized by Iowa Rule of Civil
Procedure 1.517(2)(b)(1)); Iowa Supreme Ct. Att’y Disciplinary Bd. v.
Moonen, 706 N.W.2d 391, 396 (Iowa 2005) (same). Cross further
admitted during his professional statement at the hearing before the
commission that he frequently failed to deposit advance expenses into
the trust account.
Moreover, there is again clear evidence in the record to support
these violations. With respect to eleven separate clients, the audit
chronicled numerous instances in which Cross either failed to deposit
__________________________________
We recently revoked an attorney’s license for misappropriation of client funds for
personal use despite the Board’s failure to allege that specific misconduct in its
complaint. See id. at 183 n.3, 186. In that case, “the Board’s complaint did not
expressly allege [the attorney] had misappropriated client funds.” Id. at 183 n.3. It did,
however, “clearly cover [the attorney’s] handling and misuse of [a specific client’s]
$7500.” Id. There, the complaint alleged the attorney failed to deposit the client’s
$7500 check in his trust account, had spent the money before the client asked for it
back one week later, and violated rule 32:1.15. Id. In determining revocation was the
appropriate sanction, we concluded “[the Board’s] allegations were sufficient to put [the
attorney] on notice that the Board believed [he] had not safeguarded his client’s $7500
as required by rule 32:1.15.” Id. We further recognized that the attorney in that case
clearly “understood the centrality of the colorable claim question” because “[m]uch of
his testimony . . . was devoted to trying to establish a colorable claim defense.” Id.
In this case, unlike in Kelsen, Cross was never put on notice that he faced
sanctions for misappropriating any client funds. While the Board has alleged a
violation of rule 32:1.15, it has not alleged Cross has ever stolen client money or has
been unable to return any funds to clients upon request. In fact, the record established
that no clients are known to have filed a complaint against Cross. Further, the Board
did not suggest that Cross misappropriated any client funds at the hearing before the
commission. Finally, the commission has not suggested that revocation is the
appropriate sanction in this case, and it expressly noted, “no client was cheated out of
funds.” Consequently, we will not consider whether Cross misappropriated client
funds.
16
advance fees and expenses into the trust account, or withdrew fees and
expenses before they were earned. While Cross now attempts to justify
the deposit and withdrawal of these fees, claiming that in all instances
the fees were earned, he has provided no documentation supporting this
claim. See Iowa Supreme Ct. Att’y Disciplinary Bd. v. Baldwin, 857
N.W.2d 195, 210 (Iowa 2014) (“While Baldwin now attempts to justify
these fees, he has never accounted for them.”). Further, the audit
showed the following as of November 2009: eight client subaccounts had
negative balances, totaling $11,736.80; on four separate occasions in
2010, Cross overdrew the trust account; and after Cross opened the MJC
account in 2010, he began regularly depositing client funds into that
account, without regard to whether he should handle such funds
through the trust account. These facts support the conclusion that
Cross both failed to deposit advance legal fees and expenses into the
trust account, and withdrew fees and expenses before they were earned.
We find Cross violated rules 32:1.15(c) and (f) and rule 45.7(3).
Finally, we find Cross violated rules 45.2(3)(a) and 45.7(4) by
failing to maintain proper financial records and notify numerous clients
in writing and provide contemporaneous written accountings when
withdrawing funds for fees and expenses from the trust account. There
is no question Cross failed to maintain a check register or client ledgers,
and did not regularly perform reconciliations. Cross told the auditor at
the start of the audit he had failed to maintain client ledgers or perform
reconciliations since 2009. He was also unable to provide the auditor
with a check register. The commission deemed these facts as established
due to Cross’s failure to respond to the Board’s document requests and
interrogatories. Cross again admitted these deficiencies in his
substituted and amended answer. We find Cross violated rule 45.2(3)(a).
17
Cross also systematically failed to notify clients in writing and
provide contemporaneous written accountings when withdrawing client
funds for expenses and fees from the trust account. The record
established that during the audit the auditor was unable to uncover any
evidence that Cross provided clients with contemporaneous written
notifications and accountings of withdrawals from the trust account,
with the exception of several real estate closings and probate matters.
Cross admitted these deficiencies in his substituted and amended
answer. We find Cross violated rule 45.7(4).
2. Dishonesty. Rule 32:8.4(c) provides, “It is professional
misconduct for a lawyer to engage in conduct involving dishonesty,
fraud, deceit, or misrepresentation.” Iowa R. Prof’l Conduct 32:8.4(c). To
establish a rule 32:8.4(c) violation the Board must show “the attorney
acted with some level of scienter greater than negligence.” Iowa Supreme
Ct. Att’y Disciplinary Bd. v. Kersenbrock, 821 N.W.2d 415, 421 (Iowa
2012).
Here, we find Cross violated rule 32:8.4(c). The record established
that for each of the years 2009 through 2012, Cross submitted a client
security questionnaire certifying that for the preceding calendar year he
complied with all rules and accounting practices required of Iowa lawyers
in the handling of client funds and trust accounts. We find that Cross
intended these statements to mislead the Client Security Commission.
In fact, Cross has failed to maintain client ledgers, maintain a check
register, and perform reconciliations since 2009. The audit also
established, contrary to Cross’s certifications on his client security
questionnaires, that he repeatedly failed to keep all client funds and
retainers in an account separate from his own personal funds and that
the trust account was overdrawn on four separate occasions in 2010.
18
Ricklefs, 844 N.W.2d at 698–99 (finding rule 32:8.4(c) violation when
attorney falsely certified that he kept all client funds in a separate
account from his personal funds, performed monthly reconciliations, and
preserved client fund records for six years, but it was apparent he failed
to “keep client ledgers, retain copies of bank statements, or perform
monthly reconciliations” and he “later admitted he did not keep a check
register . . . and . . . regularly kept personal funds in [the] account”);
Iowa Supreme Ct. Att’y Disciplinary Bd. v. Clarity, 838 N.W.2d 648, 656–
57 (Iowa 2013) (finding rule 32:8.4(c) violation when attorney falsely
certified that all retainers had been deposited into the trust account);
Kersenbrock, 821 N.W.2d at 421 (finding rule 32:8.4(c) violation when
attorney falsely certified she kept client funds separate from her own and
performed monthly reconciliations, but the record showed she could not
have reconciled the accounts because of the inadequacy of her records).
We find Cross violated rule 32:8.4(c).
B. Tax Matters. The Board also alleges Cross violated Iowa Rules
of Professional Conduct 32:8.4(b), (c), and (d) as a result of his failure to
file employee-payroll-withholding-tax declarations and pay these taxes
for years 2009 through 2011 and his failure to file state and federal
income tax returns for tax years 2009 through 2011. Additionally, the
Board alleges Cross violated Iowa Rule of Professional Conduct 32:8.1(b)
for his failure to supply the Board with requested documentation
regarding these alleged tax violations. We address these alleged rule
violations together because they all apply to the handling of his tax
matters.
1. Payroll tax and income tax violations. Rule 32:8.4(b) prohibits
the commission of “a criminal act that reflects adversely on the lawyer’s
honesty, trustworthiness, or fitness as a lawyer in other respects.” Iowa
19
R. Prof’l Conduct 32:8.4(b). A lawyer need not be charged or convicted of
a crime in order to be found in violation of this rule. Iowa Supreme Ct.
Att’y Disciplinary Bd. v. Lustgraaf, 792 N.W.2d 295, 299 (Iowa 2010).
As discussed above, rule 32:8.4(c) prohibits an attorney from
“engag[ing] in conduct involving dishonesty, fraud, deceit, or
misrepresentation.” Iowa R. Prof’l Conduct 32:8.4(c). “[A] lawyer makes
a misrepresentation in violation of our ethical rules when his income
exceeds the sums requiring the filing of a tax return and he fails to file a
return.” Lustgraaf, 792 N.W.2d at 299. However, as we have previously
explained, “In the cases in which we have found the existence of a
misrepresentation, the respondent had willfully failed to file returns, had
committed a fraudulent practice, or had made a false statement.” Id. at
300 (collecting cases). This is consistent with the general rule that
“ ‘misrepresentation requires intent to deceive to support an ethical
violation.’ ” Id. (quoting Iowa Supreme Ct. Att’y Disciplinary Bd. v. Sobel,
779 N.W.2d 782, 787 (Iowa 2010)).
Rule 32:8.4(d) prohibits an attorney from engaging in “conduct
that is prejudicial to the administration of justice.” Iowa R. Prof’l
Conduct 32:8.4(d). “There is no typical form of conduct that prejudices
the administration of justice.” Iowa Supreme Ct. Att’y Disciplinary Bd. v.
Parrish, 801 N.W.2d 580, 587 (Iowa 2011). Acts that we have generally
considered prejudicial to the administration of justice have “hampered
the efficient and proper operation of the courts or of ancillary systems
upon which the courts rely.” Iowa Supreme Ct. Att’y Disciplinary Bd. v.
Wright, 758 N.W.2d 227, 230 (Iowa 2008) (internal quotation marks
omitted).
Examples of conduct prejudicial to the administration of
justice include paying an adverse expert witness for
information regarding an opponent’s case preparation,
20
demanding a release in a civil action as a condition of
dismissing criminal charges, and knowingly making false or
reckless charges against a judicial officer.
Templeton, 784 N.W.2d at 768. “The mere commission of a criminal act
will not constitute a violation of rule 32:8.4(d) unless that conduct
somehow impedes the operation of the justice system.” Lustgraaf, 792
N.W.2d at 300.
Applying these rules to the facts of this case, we find Cross violated
rule 32:8.4(b), but not rules 32:8.4(c) and (d). First, we find Cross
violated rule 32:8.4(b) by failing to file employee-payroll-withholding-tax
declarations and pay the required taxes for years 2009 through 2011 and
by failing to timely file his state and federal income tax returns for years
2009 through 2011. Cross clearly failed to file quarterly withholding-tax
declarations with respect to employee payroll taxes and failed to make
appropriate deposits. He admitted these facts in his amended and
substituted answer. He further admitted that he had failed to file state
and federal income tax returns from 2009 through 2011 in violation of
26 U.S.C. § 6012 (2006). This conduct reflects adversely on his fitness
as a lawyer. See Lustgraaf, 792 N.W.2d at 299; Iowa Supreme Ct. Att’y
Disciplinary Bd. v. Fields, 790 N.W.2d 791, 797 (Iowa 2010). We find
Cross violated rule 32:8.4(b).
However, we do not find this same conduct violated rule 32:8.4(c).
Here, the Board has not alleged or presented any evidence that Cross’s
improper tax practices were willful, done with an intent to defraud, or
otherwise deceitful. Nor did the Board allege or present evidence that
Cross made any false statements in connection with this conduct.4
4Again, with respect to Cross’s alleged tax misconduct, the client security
questionnaires in the record do not contain Cross’s responses concerning whether he
had filed his state and federal income taxes.
21
Thus, on this record, we cannot conclude Cross engaged in
misrepresentation in connection with his tax practices. See Lustgraaf,
792 N.W.2d at 300 (finding no rule 32:8.4(c) violation when Board failed
to allege or present any evidence that attorney’s “failure to file the
returns was willful, done with an intent to defraud, or otherwise
deceitful,” or that the attorney made any false statements in connection
with asserted failures). Thus, the Board failed to prove Cross violated
rule 32:8.4(c).
Similarly, we do not find this same conduct violated rule 32:8.4(d).
Here, there is no evidence in the record that Cross’s actions affected any
particular court proceeding or any ancillary system supportive of any
court proceeding. Cross’s behavior, even if criminal, is not the sort of
conduct that prejudices the administration of justice within the meaning
of rule 32:8.4(d). Id. (finding no rule 32:8.4(d) violation when attorney
failed to file tax returns and there was no showing the failure affected
any court proceeding or an ancillary system supportive of any court
proceeding). Thus, the Board failed to prove Cross violated rule
32:8.4(d).
2. Failure to respond to the disciplinary authority. Rule 32:8.1(b)
provides that a lawyer may not “knowingly fail to respond to a lawful
demand for information from . . . [a] disciplinary authority.” Iowa R.
Prof’l Conduct 32:8.1(b). “Knowingly” is defined as “actual knowledge of
the fact in question” and “may be inferred from circumstances.” Id. r.
32:1.0(f); accord Iowa Supreme Ct. Att’y Disciplinary Bd. v. Dunahoo, 799
N.W.2d 524, 534 (Iowa 2011).
Here, we find Cross violated rule 32:8.1(b). On September 25,
2013, the Board requested that Cross provide it with information
concerning his employee payroll taxes and his income tax filings. On
22
October 24, Cross responded to the Board, indicating he was aware of
the request but that he needed more time to formulate a response. Cross
never supplied the Board with the requested information. We find Cross
knowingly failed to respond to a lawful demand for information from a
disciplinary authority in violation of rule 32:8.1(b). See Dunahoo, 799
N.W.2d at 534 (finding rule 32:8.1(b) violation when attorney was aware
of the Board’s request and failed to comply).
C. Practicing Under a Trade Name. Rule 32:7.5(e) in relevant
part provides:
A lawyer in private practice shall not practice under a trade
name, a name that is misleading as to the identity of the
lawyer or lawyers practicing under such name, or a firm
name containing names other than those of one or more of
the lawyers in the firm.
Iowa R. Prof’l Conduct 32:7.5(e) (July 2009). 5
A trade name (or tradename) is a “name, style, or symbol used to
distinguish a company, partnership, or business (as opposed to a
5This rule prohibiting the use of trade names is no longer in force in Iowa.
Compare Iowa R. Prof’l Conduct 32:7.5(e) (July 2009), with Iowa R. Prof’l Conduct
32:7.5(a). In 2012, we adopted a new version of rule 32:7.5. See Iowa Supreme Court
Order, In the Matter of Amendments to the Iowa Court Rules Governing Lawyer
Advertising (Aug. 29, 2012), available at http://www.iowacourts.gov
/wfdata/frame5862-1235/File83.pdf. Effective January 1, 2013, the new rule provides,
in relevant part:
A trade name . . . may be used by a lawyer in private practice if it does
not imply a connection with a government agency or with a public or
charitable legal services organization and is not otherwise in violation of
rule 32:7.1.
Iowa R. Prof’l Conduct 32:7.5(a).
As the comment to the rule explains,
A firm may be designated . . . by a trade name such as the “ABC Legal
Clinic.” . . . Use of trade names in law practice is acceptable so long as it
is not misleading. . . . The use of such names to designate law firms has
proven a useful means of identification.
Id. r. 32:7.5 cmt. 1.
23
product or service).” Black’s Law Dictionary 1633 (9th ed. 1990). As the
comment to the rule explains,
The use of a trade name or an assumed name could mislead
laypersons concerning the identity, responsibility, and status
of those practicing under a trade name or an assumed name;
therefore, such a practice is not permitted by this rule.
Iowa R. Prof’l Conduct 32:7.5 cmt. 1 (July 2009).
Here, we do not find the Board presented sufficient evidence to
prove Cross practiced under a trade name in violation of rule 32:7.5(e).
It is undisputed that Cross incorporated MJC in 2009 and began
depositing client funds into the MJC account in 2010. However, the
Board presented no evidence showing that Cross ever held himself out to
the public or any clients as “practicing” under this name. There is no
evidence in the record that Cross ever used the name MJC in connection
with his law practice. The rule does not require that the Board make an
affirmative showing that an assumed trade name is misleading to sustain
a violation. However, the rule still requires that the allegedly offending
trade name actually be used as a trade name. The stated purpose of the
rule, which is to protect the public from being misled, requires that there
be at least some nexus between the attorney’s use of the allegedly
offending name and the public. Here, there is no such nexus.6
6We are unable to find a single case in which a court has found a violation of a
comparable rule without some evidence an attorney held himself out to clients or the
public under the allegedly offending trade name. See, e.g., In re Loomis, 905 N.E.2d
406, 407 (Ind. 2009) (finding violation of rule prohibiting use of trade names when
name was used in “professional documents, communications, signage, telephone
directory listings, numerous advertisements, and an internet website”); In re Oldtowne
Legal Clinic, P.A., 400 A.2d 1111, 1115 & n.4 (Md. 1979) (refusing to approve proposed
trade name as in violation of rule prohibiting use of trade names when firm intended to
use the name “so that . . . clients would not know that there was any connection
between it” and another law office); Cincinnati Bar Ass’n v. Kathman, 748 N.E.2d 1091,
1094 (Ohio 2001) (finding violation of rule prohibiting use of trade names when name
was used on letterhead); Garcia v. Comm’n for Lawyer Discipline, No. 03-05-00413-CV,
2007 WL 2141246, at *5–6 (Tex. Ct. App. July 26, 2007) (finding violation of rule
24
Consequently, we do not find Cross violated Iowa Rule of Professional
Conduct 32:7.5(e) (July 2009).
V. Consideration of Appropriate Sanction.
Having found the foregoing rule violations, we now consider the
appropriate sanction. The commission recommended we suspend
Cross’s license for one year and require that Cross demonstrate he has
satisfied all outstanding payroll and income tax liabilities due state and
federal taxing authorities as a condition of reinstatement. We give
respectful consideration to the commission’s recommendation. Ricklefs,
844 N.W.2d at 699. However, the issue of appropriate sanction is
exclusively within this court’s authority. Id.
“There is no standard sanction for a particular type of misconduct,
and though prior cases can be instructive, we ultimately determine an
appropriate sanction based on the particular circumstances of each
case.” Iowa Supreme Ct. Att’y Disciplinary Bd. v. Earley, 774 N.W.2d
301, 308 (Iowa 2009). As we have previously stated,
In considering an appropriate sanction, this court considers
all the facts and circumstances, including the nature of the
violations, the attorney’s fitness to practice law, deterrence,
the protection of society, the need to uphold public
confidence in the justice system, and the need to maintain
the reputation of the bar.
Iowa Supreme Ct. Att’y Disciplinary Bd. v. McGinness, 844 N.W.2d 456,
463 (Iowa 2014). “Where there are multiple violations of our disciplinary
rules, enhanced sanctions may be imposed.” Iowa Supreme Ct. Bd. of
__________________________________
prohibiting use of trade names when name was used on letters, letterhead, business
cards, email address, and signage); Rodgers v. Comm’n for Lawyer Discipline, 151
S.W.3d 602, 611 (Tex. Ct. App. 2004) (finding violation of rule prohibiting use of trade
names when attorney used name in telephone books, obtained a copyright on the name,
and registered a service mark for a phone hotline associated with the name and
received more than fifty percent of his business from the hotline).
25
Prof’l Ethics & Conduct v. Alexander, 574 N.W.2d 322, 327 (Iowa 1998).
Further, we “consider mitigating and aggravating circumstances,
including companion violations, repeated neglect, and the attorney’s
disciplinary history.” Conroy, 845 N.W.2d at 66.
In this case, Cross violated a number of our ethical rules relating
to the management of his trust account. He also made
misrepresentations on his client security questionnaires. Finally, he
engaged in numerous tax violations and knowingly failed to cooperate
with the Board in supplying it with requested information related to his
tax misconduct. We turn now to address the specific sanction warranted
by Cross’s conduct.
Sanctions for trust account and accounting violations span from “a
public reprimand when the attorney, in an isolated instance, failed to
deposit funds into his trust account because he believed the fees to be
earned” to “suspensions of several months where the violations were
compounded by severe neglect, misrepresentation, or failure to
cooperate.” Iowa Supreme Ct. Att’y Disciplinary Bd. v. Boles, 808 N.W.2d
431, 442 (Iowa 2012) (collecting cases). In cases warranting more
serious discipline, additional violations or aggravating circumstances
were present. See id.
We draw guidance from the following attorney discipline cases
involving trust account violations. In Iowa Supreme Court Attorney
Disciplinary Board v. Morris, we suspended an attorney’s license for six
months. 847 N.W.2d 428, 437 (Iowa 2014). In Morris, the attorney’s
trust account mismanagement was “severe and . . . persisted over a long
period of time even after the Client Security Commission intervened with
an audit and provided information that should have facilitated
compliance with the applicable rules.” Id. at 436. We did not find the
26
attorney failed to deposit advance fees and expenses into the trust
account or withdrew fees and expenses before they were earned. Id. at
434. However, the attorney in that case did engage in dishonesty by
representing that he regularly reconciled his trust account on his client
security questionnaire. Id. at 435. Further, several aggravating factors
led us to conclude the attorney’s misconduct warranted sanctions at the
long end of the spectrum. Id. at 436–37. Specifically, we considered the
pervasiveness of the trust account violations, the attorney’s twenty-five
years of experience, and the attorney’s three prior suspensions. Id.
In Ricklefs, we suspended an attorney’s license for three months.
844 N.W.2d at 702. The attorney in that case “improperly handled his
trust account, commingled client funds with his own, failed to maintain
proper records, and also knowingly misrepresented that he was engaged
in appropriate trust account practices.” Id. at 700. The Board had not
alleged, and in turn we did not find, the attorney failed to deposit
advance fees and expenses into the trust account or withdrew fees and
expenses before they were earned. See id. at 697–98. We considered as
aggravating factors the fact the attorney failed to cooperate with the
Board in its investigation, had received two prior public reprimands, and
failed to shore up his trust account deficiencies despite an earlier audit
bringing the noncompliance to his attention. Id. at 700. We considered
the fact that there were no indications any clients suffered harm and that
the attorney took responsibility for his actions before the commission
and admitted his violations as mitigating factors. Id.
In Iowa Supreme Court Attorney Disciplinary Board v. Powell, we
suspended an attorney’s license for three months. 830 N.W.2d 355, 360
(Iowa 2013). In that case, the attorney “basically ignored the rules and
procedures for maintaining a trust account over a prolonged period of
27
time.” Id. at 357. He deposited client funds into his operating account,
frequently paid funds to himself when he needed money before the fees
were actually earned, and failed to adequately manage the bookkeeping
practices of the firm. Id. While no client funds were ultimately lost,
there were “years of utter disregard . . . for the trust [account] rules and
practices.” Id. at 357, 359. Due to a $43,000 trust account shortage, we
had previously temporarily suspended the attorney and appointed a
trustee to take control of the trust account. Id. at 356. In crafting the
proper discipline, we considered the prior seven-month interim
suspension and the attorney’s other prior unethical conduct. Id. at 359.
In Parrish, we considered a sixty-day suspension the appropriate
sanction when an attorney “withdrew funds from his trust account before
they were earned, failed to promptly notify his clients of the withdrawals,
did not earn the amounts withdrawn, and did not return the remainder
of funds upon request.” 801 N.W.2d at 583. The attorney had
previously received six private admonitions, all of which related to a
“failure to provide an itemization of services provided,” and at least two of
which involved withdrawal of funds in excess of the fees earned. Id. at
589. We concluded the attorney’s conduct over a period of ten years had
“developed into a pattern of violating the Iowa Rules of Professional
Conduct and the rules of this court relating to the administration of trust
accounts.” Id. We considered the attorney’s refusal or inability to return
client funds as an aggravating factor, but we considered as mitigating
factors the attorney’s taking responsibility for his actions, taking steps to
correct the accounting issues, community involvement, and pro bono
work. Id.
In Kersenbrock, we encountered a pattern of pervasive trust
account violations. 821 N.W.2d at 422. We approved a thirty-day
28
suspension. Id. The attorney in that case failed to deposit client
retainers into a trust account, kept inadequate trust account records,
prematurely withdrew fees in a probate case, and misrepresented her
trust account practices on her client security questionnaire. Id. at 419–
21. We considered as mitigating factors that no clients were harmed, the
attorney had no disciplinary history, and the attorney acknowledged the
inadequacies in her accounting practices and had taken steps to correct
the problems. Id. at 422. However, due to her systematic failure to
maintain any records, we concluded a suspension was the appropriate
sanction. Id.
In Boles, we found an attorney’s “flagrant, multiyear disregard for
the billing and accounting requirements of our profession” warranted a
thirty-day suspension. 808 N.W.2d at 441, 443. The attorney in that
case “withdrew unearned fees, delayed responding to client requests for
accurate billings, and failed to promptly refund unearned fees.” Id. at
441. The situation was compounded by neglect of a client matter. Id.
We considered as an important mitigating factor evidence the attorney
had “corrected his practices to avoid reoccurrence,” and noted that the
attorney had no trust account problems in the approximately four years
leading up to his hearing. Id. at 442. Additional mitigating factors
included the attorney’s full cooperation with the Board’s investigation,
his extensive pro bono practice, and the fact that no clients were
harmed, “apart from the delayed refunds.” Id.
In Sunleaf, an attorney used his trust account as a repository for
personal funds to avoid creditor claims against his personal assets. 588
N.W.2d at 126. The attorney also falsified responses on his client
security questionnaire. Id. at 127. There was no evidence of
misappropriation of client funds, and the misconduct was “an
29
aberration, wholly out of plumb with [his] many years of practice which
. . . [had] been honorable.” Id. We approved a public reprimand, while
indicating the case was a close call between a reprimand and a
suspension. Id. at 126–27.
We believe this case requires a stiffer sanction than we imposed in
Kersenbrock, Boles, or Sunleaf. In Kersenbrock, Boles, and Sunleaf,
many mitigating factors were present that are not present here. See
Kersenbrock, 821 N.W.2d at 422; Boles, 808 N.W.2d at 442; Sunleaf, 588
N.W.2d at 127. Morris, Ricklefs, Powell, and Parrish are closer parallels.
As in this case, each of the attorneys in those cases engaged in
numerous trust account violations that persisted over a prolonged
period. See Morris, 847 N.W.2d at 436; Ricklefs, 844 N.W.2d at 700;
Powell, 830 N.W.2d at 357; Parrish, 801 N.W.2d at 589. Here, Cross
mismanaged the trust account, commingled client funds with his own,
failed to deposit unearned fees and expenses into the trust account,
withdrew fees and expenses before they were earned, failed to maintain
proper records, and failed to provide clients with contemporaneous
written notifications and accountings of withdrawals from the trust
account. These violations persisted for over four years. As the auditor
aptly put it in the audit report, “Cross completely lost control and
accountability for client funds deposited in his trust account” and
“committed nearly every wrong possible in handling client funds and
managing an attorney’s trust account.”
As in Powell and Parrish, Cross failed to deposit advance fees and
expenses in the trust account and withdrew fees before they were earned.
See Powell, 830 N.W.2d at 357–58; Parrish, 801 N.W.2d at 586–87. This
also warrants the imposition of sanctions on the higher end of the
spectrum. See Ricklefs, 844 N.W.2d at 702 (noting that the withdrawal
30
of funds before they are earned is “an arguably more serious matter than
running personal funds through a trust account”). Additionally, as in
Morris and Ricklefs, Cross engaged in dishonesty in his representations
on his client security questionnaire. See Morris, 847 N.W.2d at 435;
Ricklefs, 844 N.W.2d at 698–99, 702 (noting that trust account related
misrepresentations “potentially justify a more severe sanction”).
Additionally, here we also have a number of rule violations relating
to payroll taxes and federal and state income taxes. As we recently
explained with respect to tax-related misconduct,
In prior reported disciplinary cases involving failure to
file tax returns, we have imposed suspensions ranging from
sixty days to three years. In our prior cases imposing a
suspension for failing to file tax returns, the attorney
engaged in a willful failure to file, a fraudulent practice, or
other more serious misconduct involving issues of
dishonesty.
Lustgraaf, 792 N.W.2d at 301 (citations omitted) (collecting cases).
We draw guidance from the following attorney discipline cases
involving tax violations. In Iowa Supreme Court Attorney Disciplinary
Board v. Iverson, we suspended an attorney’s license for one year. 723
N.W.2d 806, 812 (Iowa 2006). There, the attorney had “pled guilty to the
crimes of fraudulent practice in the second degree (a class ‘D’ felony) and
fraudulent practice in the third degree (an aggravated misdemeanor) in
connection with his failure to pay his taxes and file his returns.” Id. at
809. The attorney in that case failed to file his federal or state income
tax returns for a period of almost ten years and had a total outstanding
tax liability of close to $400,000. Id. at 809–10. We found this conduct
violated Iowa Code of Professional Responsibility DR 1–102(A)(3)
prohibiting illegal conduct involving moral turpitude; DR 1–102(A)(4)
prohibiting conduct involving dishonesty, fraud, deceit, or
31
misrepresentation; DR 1–102(A)(5) prohibiting conduct that is prejudicial
to the administration of justice; and DR 1–102(A)(6) prohibiting conduct
that adversely reflects on the fitness to practice law. Id. at 810. We
considered as an aggravating factor the attorney’s almost ten-year failure
to file the required tax returns, which we characterized as “a pattern of
conduct justifying an increased sanction.” Id. We considered as
mitigating factors that the attorney had no prior ethical violations, was
well respected within the legal community, and was devoted to the
profession. Id. at 811. The attorney in that case also fully cooperated
with the Board and the commission in their investigations of the matter.
Id.
In Iowa Supreme Court Board of Professional Ethics & Conduct v.
O’Brien, an attorney failed to file required Iowa income tax returns for a
period of two years. 690 N.W.2d 57, 57 (Iowa 2004). The attorney’s
conduct resulted in a criminal conviction for fraudulent practices in the
third degree, an aggravated misdemeanor. Id. We found the attorney
violated Iowa Code of Professional Responsibility for Lawyers DR 1–
102(A) and concluded that a six-month suspension was the appropriate
sanction. Id. at 57, 59.
In Lustgraaf, we issued a public reprimand. 792 N.W.2d at 302.
There, the attorney failed to file tax returns for a period of four years,
despite having sufficient income to trigger the filing requirement. Id. at
298–99. We found the lawyer’s conduct violated rule 32:8.4(b)
prohibiting the “commission of a criminal act that reflects adversely on
the lawyer’s honesty, trustworthiness, or fitness as a lawyer.” Id. at 299.
However, the attorney had not pled guilty to or been convicted of any
crimes in connection with his failure to file his tax returns, and the
Board failed to otherwise show he had engaged in any
32
misrepresentations with respect to his tax misconduct. Id. at 299–300.
As a result, we found the Board failed to show the attorney acted
dishonestly in failing to file his tax returns, and instead found that the
attorney’s conduct only amounted to negligence. Id. at 300. Further, we
did not find the attorney’s conduct was prejudicial to the administration
of justice. Id. In considering the appropriate sanction, we considered
the attorney’s less-culpable state of mind a significant distinguishing fact
from our prior cases, which had imposed substantially harsher penalties
for similar violations. Id. at 301. We also considered the attorney’s good
reputation in the legal community, pro bono work, and lack of a prior
disciplinary record as mitigating factors. Id.
In this case, Cross engaged in numerous tax violations. He failed
to file employee-payroll-withholding-tax declarations and pay the
required taxes for a period of three years. He also failed to timely file
state and federal income tax returns for a period of three years. These
violations reflect adversely on Cross’s fitness to practice law. Unlike in
Iverson and O’Brien, Cross has not pled guilty to or been convicted of any
crimes in connection with his failure to file these tax returns, and the
Board has not shown that he made any false statements in connection
with this conduct. See Iverson, 723 N.W.2d at 807; O’Brien, 690 N.W.2d
at 57. Thus, as in Lustgraaf, his less-culpable state of mind is certainly
one factor we consider in crafting the appropriate sanction. See 792
N.W.2d at 301. Notwithstanding, many of the mitigating factors that led
us to conclude a less severe sanction was appropriate in Lustgraaf are
not present here. See id. at 301–02. In addition, Cross knowingly failed
to cooperate with the Board in supplying it with requested information
related to his tax misconduct. See Iowa Supreme Ct. Att’y Disciplinary
Bd. v. Rickabaugh, 728 N.W.2d 375, 381 (Iowa 2007) (“We expect and
33
demand attorneys to cooperate with disciplinary investigations.”).
Consequently, coupled with his trust account misconduct, we find that
enhanced sanctions are warranted in this case. See Alexander, 574
N.W.2d at 327.
Finally, in crafting the proper punishment we must consider
aggravating and mitigating factors. Conroy, 845 N.W.2d at 66. Here,
several aggravating factors, and the absence of mitigating factors,
counsel in favor of imposing a stiffer sanction. First, Cross’s past
disciplinary history could be considered an aggravating factor. See
Ricklefs, 844 N.W.2d at 700 (considering, in disciplinary matter involving
trust account violations, attorney’s prior public reprimands for neglect
and lack of diligence in representing a client as an aggravating factor). In
1981, we publicly reprimanded Cross for neglect of client matters in
repeatedly failing to meet appellate deadlines. However, because of the
age of this prior discipline, we do not consider this an aggravating factor.
Second, the fact that there are multiple violations of our ethics rules is
an aggravating factor. See Alexander, 574 N.W.2d at 327; Parrish, 801
N.W.2d at 588 (noting that the presence of multiple violations is an
aggravating factor). Third, Cross’s over forty years of practice experience
is an aggravating factor. See Morris, 847 N.W.2d at 436 (considering
attorney’s over twenty-five years of experience an aggravating factor).
Finally, Cross’s failure to cooperate with the Board in its investigation is
another aggravating factor we consider in crafting the appropriate
sanction. See Ricklefs, 844 N.W.2d at 700 (considering failure to
cooperate with Board as an aggravating factor).
As to mitigating factors, Cross presented no evidence of any
mitigating factors. However, the record here does not suggest that any
clients suffered harm. We consider this a mitigating factor. See id.
34
(considering lack of client harm as a mitigating factor); Kersenbrock, 821
N.W.2d at 422 (same). Additionally, Cross ultimately took responsibility
for his actions before the commission and admitted his violations. This
is also a mitigating factor. Ricklefs, 844 N.W.2d at 700 (considering
attorney’s taking responsibility for his actions as a mitigating factor);
Kersenbrock, 821 N.W.2d at 422 (same).
The commission recommended we suspend Cross’s license for one
year. Having considered the particular circumstances in this case, and
after our de novo review of the record, we agree with the commission that
a one-year suspension is appropriate. Additionally, the record
established that Cross currently has outstanding payroll and income tax
liabilities. On this record, we are unable to ascertain the exact amount
of this current tax liability. Accordingly, as a condition of any
reinstatement, Cross shall satisfy this court that he has entered into a
repayment plan with the appropriate taxing authorities and that he is
current with his repayment plans at the time of any application for
reinstatement.
VI. Conclusion.
We suspend Cross’s license to practice law with no possibility of
reinstatement for one year from the date of the filing of this opinion.
Upon application for reinstatement, Cross shall have the burden to show
he has not practiced law during the period of suspension and that he
meets the requirements of Iowa Court Rule 35.14. Cross must notify all
clients pursuant to Iowa Court Rule 35.23.
Additionally, as a condition to any reinstatement, Cross shall
satisfy this court that he has entered into a repayment plan with the
appropriate taxing authorities and that he is current with his payment
plans at the time of any application for reinstatement.
35
Costs are taxed to Cross pursuant to Iowa Court Rule 35.27.
LICENSE SUSPENDED.