Idaho State Bar v. Smith

IN THE SUPREME COURT OF THE STATE OF IDAHO
Docket No. 49155
IDAHO STATE BAR, )
)
Petitioner-Respondent, )
)
v. ) Boise, June 2022 Term
)
VERNON K. SMITH, JR., ) Filed: July 15, 2022
)
Respondent-Appellant. ) Melanie Gagnepain, Clerk
____________________________________)
Appeal from the Professional Conduct Board Hearing Committee
of the Idaho State Bar, Ada County. Gary L. Cooper, Chair.
The Hearing Committee of the Professional Conduct Board of the Idaho
State Bar’s decision is affirmed as amended.
Vernon K. Smith, Jr., Attorney at Law, Boise, attorney for Appellant.
Bradley Andrews, Idaho State Bar, Boise, attorney for Respondent.
_________________________________
BEVAN, Chief Justice
This is an attorney discipline case. Vernon K. Smith, Jr., (“Smith”) appeals the Findings of
Fact, Conclusions of Law, and Recommendation of the Hearing Committee of the Professional
Conduct Board of the Idaho State Bar (“the Committee”). The Committee recommended
suspending Smith from the practice of law for two years and imposing a condition that Smith pass
the Multistate Professional Responsibility Exam (“MPRE”) before being reinstated. Smith argues
the Committee’s decisions are not supported by clear and convincing evidence and contends his
family history and other mitigating factors show the recommendation and sanctions are
inappropriate. Smith timely appealed to this Court. We affirm. However, we impose a sanction
over and above that recommended by the Committee.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. Course of Disciplinary Proceedings and Background
1
On September 2, 2020, the Idaho State Bar (“the Bar”) filed a complaint against Smith
alleging three counts of professional misconduct encompassing six Idaho Rules of Professional
Conduct and requested Smith’s suspension.
Count One alleged violations of multiple provisions of the Idaho Rules of Professional
Conduct (I.R.P.C.): Rule 1.7(a)(2), engaging in a conflict of interest; Rule 2.1, failing to exercise
independent professional judgment and render candid advice in representing a client; Rule 8.4(c),
engaging in conduct involving dishonesty, fraud, deceit or misrepresentation; and Rule 8.4(d),
engaging in conduct prejudicial to the administration of justice. Count Two alleged a violation of
Rule 5.4(a), sharing legal fees with a nonlawyer, and Rule 5.4(d), practicing with or in the form of
a professional corporation or association authorized to practice law for a profit where a nonlawyer
owns an interest in it. Count Three also alleged Smith violated Rule 8.4 (c) and (d) by engaging in
conduct involving dishonesty, fraud, deceit or misrepresentation, and by engaging in conduct
prejudicial to the administration of justice.
Smith filed his answer on September 22, 2020. In December 2020, he moved to dismiss
the complaint, which the Bar opposed. On January 15, 2021, the Committee held a hearing on
Smith’s motion and denied it. Following a series of dispositive motions from both parties, the case
proceeded to a disciplinary hearing before the Committee on June 28 and 29, 2021. A disciplinary
hearing was ultimately conducted by the Committee. The Committee made forty-nine findings of
fact relevant to the three counts alleged against Smith.
On August 13, 2021, the Committee issued its Findings of Fact, Conclusions of Law, and
Recommendation, recommending that Smith be suspended from the practice of law for two years.
The Committee concluded the Bar had proved all three counts alleged in the complaint by clear
and convincing evidence and recommended Smith be suspended from the practice of law for two
years, with no reinstatement until after Smith took the MPRE and passed with a minimum scaled
score of 85.
Smith moved to alter or amend the Committee’s Findings of Fact, Conclusions of Law,
and Recommendation, which the Committee denied. Smith timely filed his appeal to this Court.
1. Facts related to Count One of the Complaint.
Smith was the attorney for his mother, Victoria Smith. In 1976, Smith became the
“exclusive attorney providing legal advice” to Victoria. According to Smith, he represented
Victoria “as an attorney if and when she requested [his] assistance.” This representation was
2
because he could “uniquely provide for, not only the financial needs of Victoria, but also her legal
needs[.]” On February 14, 1990, about twenty-three years before she died, Victoria executed a
holographic will that bequeathed all her assets to Smith and disinherited her two other children,
Joseph Smith and Victoria (Vicky) Smith Converse. Smith was the only person with Victoria when
she executed the will, and he served as the sole witness. Between 1997 and 2013, Smith acted as
the attorney for Victoria in several legal matters.
The financial and legal relationship between Victoria and Smith was one of the matters
Joseph testified to during the disciplinary hearing against Smith. In that disciplinary hearing,
Joseph testified that he managed several pieces of Victoria’s real property when Victoria signed
the will in 1990. Joseph testified that when Victoria executed the will, he was not estranged from
her. He first learned about the will several days after her funeral in September 2013. Based on this
testimony, the Committee concluded there was “clear and convincing [evidence] that Joseph did
not know that Victoria had executed a will or that he had been disinherited until after Victoria’s
death.”
On July 15, 1999, nine years after she executed the holographic will, Victoria executed a
durable power of attorney (“first POA”). She was 85 years old. The document named Smith as
Victoria’s attorney-in-fact and stated it would “endure the event of disability and death” of
Victoria. Smith’s legal assistant, Carolyn Puckett, notarized the document. Smith testified he
prepared the first POA at Victoria’s request because she wanted him to “have a power of attorney
to do whatever [he] wanted to do with [her] properties.” Smith waited until October 6, 2014—
three days after Joseph commenced probate proceedings of Victoria’s estate, to record the first
POA.
On April 11, 2008, Victoria, then 94 years old, executed a second power of attorney
(“second POA”). The second POA also named Smith as Victoria’s attorney-in-fact, and it listed
his authority as “unconditional, unlimited and all inclusive” as to her affairs and legal rights,
including over her real property. John Gibson, Smith’s legal receptionist, notarized the second
POA. The second POA also provided:
This Durable Power of Attorney is irrevocable and shall remain in full force and
effect, having been coupled with adequate consideration, and shall not be affected,
altered or impaired by the event of my death or disability, and shall continue in
effect for all time, as it has been my long-standing intention and desire that my son,
Vernon K. Smith Jr., shall be the sole and exclusive heir of my entire estate, as I
3
have so declared openly in the past many years, because of his commitment,
dedication, and devotion to my best interests, welfare, and financial well being.
The next year, Smith married his second wife, Vicki. On May 1, 2009, Smith drafted and
executed a post-nuptial personal property ownership agreement. This agreement assigned and
transferred all Smith’s separate personal property interests to Vicki and relinquished his rights to
claim any community property interests obtained after April 19, 2009. When Smith executed the
agreement, he had several creditors; Vicki testified she had none.
Several years later, on July 3, 2012, Smith formed VHS Properties, LLC, and listed himself
and Victoria as members. When Smith formed VHS, Victoria was 99 years old. The next day,
Smith drafted and executed a document (“transfer document”) that transferred Victoria’s real and
personal property to VHS for $10 consideration and other “good and valuable lawful
consideration.” Smith executed the transfer document “pursuant to his exclusive Durable, and
Irrevocable Power of Attorney” purportedly on Victoria’s behalf. The document stated, in part:
WHEREAS: Victoria H. Smith had before executed her Last Will and Testament
on February 14, 1990, designating therein her son, Vernon, to her sole and exclusive
Heir, having done so through the formation of her Holographic Will, written by [sic]
her own stationary, in her own handwriting, signed and dated by her, being done
deliberately in that fashion to emphatically to [sic] convey her intentions, and to
avoid any appearance of any influence by anyone having chosen to do so in
accordance with the way in which her husband, Vernon K. Smith, Sr., a well-known
attorney in Boise, Idaho, had so executed his Last Will and Testament by such
holographic means, by which Victoria H. Smith acquired his entire inheritance to
the exclusion of anyone else; and,
WHEREAS: Vernon has always been the sole source of all management,
maintenance, financial means, operation and control of all assets of Victoria H.
Smith, beginning after his Father’s death, and especially since and after his
becoming an Attorney in 1971, having at all times thereafter dedicated his life to
the preservation of Victoria’s assets and providing for her living need[s] and
satisfaction of any obligation . . . .
Royal Von Puckett—Smith’s friend and client who secured a judgment against Smith’s ex-
wife and later assigned it to Smith—notarized the signatures on the transfer document, transferring
Victoria’s property. See Puckett v. Bergmann, 167 Idaho 403, 470 P.3d 1212 (2020). The transfer
document claimed Smith had always been the sole source of management for Victoria’s assets, but
during the disciplinary hearing, Joseph disagreed and testified that he was also involved in the
management of Victoria’s assets. The Committee concluded Smith “exaggerated his exclusive role
as manager of Victoria’s properties and business enterprises prior to 1992.”
4
Along with transferring Victoria’s real and personal property, Smith also drafted and
executed a document on Victoria’s behalf transferring and assigning Victoria’s interest in VHS to
himself on July 4, 2012, using the second POA. Von Puckett also notarized Smith’s signature on
that document. Later the same day, Smith prepared six quitclaim deeds reflecting his transfer of
Victoria’s real property to VHS. The deeds transferred property known as “the Chinden Property,”
“the Gowen Property,” “the Hamer Property,” a two-story office complex holding Smith’s law
office on Main Street, a property located at 1807 W. Idaho Street, and “the Raymond Property.”1
The transfer encompassed close to two thousand acres of property and was worth roughly 30 to 37
million dollars, although Smith disputed the estimated value of the properties in the proceedings
below. Following these transfers, Smith exercised sole ownership over all of Victoria’s assets
Smith testified the value of the properties was less than 2 million dollars when he
transferred the properties on July 4, 2012. Joseph introduced evidence in the probate case
advocating the property was worth 27 million dollars. The Committee concluded “many of the
transactions involving Victoria’s property and [Smith’s] law practice were performed to prevent
[Smith’s] ex-wife from satisfying a judgment she acquired against [him] in their divorce
proceedings.”
The magistrate judge in the probate case concluded the consideration Smith gave in
exchange for Victoria’s assets was “so disproportionate as to suggest fraud.” The magistrate court
also found that $10 in consideration for transferring assets worth between 1 and 27 million dollars
was “so inadequate as to shock the conscience” and a “sham” intended to disguise “a gift.” After
Smith appealed the magistrate’s decision to the district court and then this Court, we affirmed the
magistrate’s decision and concluded the magistrate court correctly invalidated the transfers. See
Matter of Est. of Smith, 164 Idaho 457, 463, 432 P.3d 6, 12 (2018).
During his disciplinary hearing, Smith testified he transferred Victoria’s interest to VHS
Properties, LLC, and then to himself to “preserve and protect” the properties. But he acknowledged
that at the time of the transfers, Victoria had no creditors—only he did. The transfers protected
Smith’s assets from his creditors, mainly his ex-wife.
1
Smith’s refusal to vacate the Raymond Property was at issue in Elsaesser v. Gibson, 168 Idaho 585, 484 P.3d 585(2021). The Gowen Property was also on appeal before this Court in Elsaesser v. Black Diamond, 2022 WL 2541729(2022), and the Chinden Property was at issue in Elsaesser v. Riverside Farms, Inc., 2022 WL 2444697 (2022).
5
Smith also acknowledged he did not recommend Victoria consult independent counsel for
her property transfers or any of the estate planning. He likewise never informed Victoria that when
she executed the transfers, all the property, including his membership interest in VHS Properties,
LLC, had been transferred to his new wife Vicki pursuant to a post-nuptial agreement. As for the
2012 transfers, Smith testified during the probate trial that Victoria wanted him to have her entire
estate and he “chose to take it by deed transfer as opposed to testamentary disposition.” The
Committee concluded that Victoria was competent to decide whether to transfer her assets to an
LLC but that she “was not offered the opportunity to execute the documents” transferring those
assets. The Committee also concluded that Smith did not discuss the transfers with Victoria and
instead used the second POA to transfer her assets to his control to “protect her assets.” According
to the Committee:
The only threats to Smith’s inheritance were to Smith from his ex-wife who had a
judgment against him and from his siblings who had been disinherited through the
efforts of Smith. Thus, Smith acted to protect himself and his financial interests
when he used the Second POA to transfer Victoria’s assets to VHS and Victoria’s
interest in VHS to himself. On April 30, 2015, Smith transferred his interest in VHS
to his wife, Victoria L. Smith, to obstruct efforts by Joseph to obtain a share of the
inheritance and to prevent his ex-wife from satisfying her judgment against Smith.
Victoria died on September 11, 2013. Joseph petitioned for formal adjudication of intestacy
and formal appointment of personal representative on October 3, 2014, alleging her holographic
will was the result of undue influence. Joseph asked the court to determine that the will was invalid
and find that Victoria died intestate. Three days later, Smith recorded the first and second POAs.
On October 6, 2014, Smith also recorded the July 6, 2012, deeds that transferred Victoria’s real
property to VHS.
On September 6, 2018, Smith filed for Chapter 11 bankruptcy. He testified that he filed for
bankruptcy because his ex-wife was trying to satisfy a judgment against him. The bankruptcy court
dismissed Smith’s bankruptcy petition in an oral ruling on September 11, 2019, explaining that
Smith had “displayed a steadfast dedication to protecting his own interests.” The bankruptcy court
also explained in that ruling:
I disagree with Vernon’s explanations that his conduct was appropriate in
protecting [Victoria’s] interests. These actions all seem to be most directly aimed
at promoting his own interests.
By virtue of that power of attorney and under that will, basically all of the family
assets were diverted from other members of the family to Vernon Smith. There is
6
no doubt that he . . . devoted a considerable amount of time and effort and resources
to the support and care of his elderly mother but when I look at the extent of the
assets involved and the amount of money implicated that he would end up being
the beneficial owner of all of the assets, all of -- all of those funds, that far outweighs
any consideration that he gave in return. The power of attorney and the will and his
conduct in connection with the transactions undertaken thereby are a real concern
to this judge.
...
Mr. Smith has also entered into other transactions which give the Court great cause
for concern. For example, he is a party along with his current wife to a so-called
post-nuptial agreement that to me strains credulity that it has any other purpose in
mind other than to strictly and solely hinder, delay and prevent his creditors from
getting access to any of his assets and property.
The post-nuptial agreement purports to transmute all of his current and future
community property holdings and arguably his separate property to his wife’s
ownership. Why? He says there are legitimate reasons for it. I simply disagree that
the proof demonstrates the legitimacy of those reasons. I think it was an asset
protection tool.
The agreement is vaguely written and over the years, Mr. Smith has invoked it to
protect his interests on a selective basis. In other words, when it’s convenient, he
owns and manages his assets. When it’s not convenient, the assets are owned and
managed by his spouse under this agreement and thereby allegedly immune from
seizure by his creditors.
From this, the Committee concluded Smith violated I.R.P.C. 1.7(a)(2)2, 2.13, 8.4(c)4, and
8.4(d)5.
2. Facts related to Count Two of the Complaint.
On January 8, 2016, Smith filed a certificate of organization for a limited liability company,
creating the “law office of Vernon K. Smith, LLC.” Smith identified himself and his wife, Vicki,
as the “governors” of the LLC. Smith and Vicki signed the certificate of organization as the
organizers of the LLC. Vicki signed and filed the annual reports for the LLC during the reporting
years 2017, 2018, and 2019, and identified herself as a member of the LLC.
Smith testified during the disciplinary hearing that he gave Vicki a 90 percent interest in
the law firm and he “retained ten percent to show a right to use” the office. Smith testified that
2
I.R.P.C. 1.7(a) (conflict of interest: current clients).
3
I.R.P.C. 2.1 (exercising independent professional judgment and candid advice).
4
I.R.P.C. 8.4 (c) (engaging in conduct involving dishonesty, fraud, deceit or misrepresentation).
5
I.R.P.C. 8.4 (d) (engaging in conduct prejudicial to the administration of justice).
7
from January 8, 2016, until March 11, 2019, Vicki received all the income from the LLC. Smith
also admitted Vicki received all the income from the law firm while under oath at a bankruptcy
proceeding (a 341 meeting of creditors). He also testified that his law firm’s LLC earnings were
earned from the practice of law and from client fees.
Around March 11, 2019, after questions arose in Smith’s bankruptcy case about his law
firm, Smith converted the firm from an LLC to a PC and became its sole member. Following this
maneuver, on September 11, 2019, the United States Bankruptcy Judge entered an oral ruling
dismissing Smith’s bankruptcy petition:
Respondent entered into an arrangement whereby he effectively agreed to practice
law for his wife as an employee. His wife is a non-lawyer. Fundamental first year
law school instruction would suggest that there are ethical problems with a lawyer
who agrees to be subject to the control of a non-lawyer in connection with the
practice of law.
That arrangement whereby he effectively draws a modest salary or draw from his
law practice as opposed to benefiting from the full income of that practice under
the terms of that agreement was, at best, poor judgment. At worst, unethical. And
it looks like he engaged in that practice for years. He has recently revised his
approach in terms of the formalities as to how he practices law and established a
new entity. I think it was a professional LLP to do that but he did so begrudgingly
and he did so only after the details of the prior arrangement have been aired and
[the Personal Representative of Victoria’s Estate] exhibited his interest in maybe
following up on pointing out the impropriety of all of that.
It was not until January 20, 2021, that Smith filed a statement of conversion with the Idaho
Secretary of State, converting the law office LLC to a Professional Services Corporation. The
Committee found Smith used his firm “to practice law with his non-lawyer wife who was a
member-owner and with whom he shared legal fees.” The Committee also concluded that Vicki
was a 90 percent owner of the LLC, despite not being a lawyer, with Smith owning only 10 percent.
As a result, the Committee determined Smith violated I.R.P.C. 5.4(a)6 and 5.4(d).7
3. Facts related to Count Three of the Complaint.
On October 12, 2018, Smith testified during a meeting of creditors noted above that he had
not filed his 2006 through 2018 tax returns. During his disciplinary hearing, Smith acknowledged
6
I.R.P.C. 5.4 (a) (sharing fees with a nonlawyer).
7
I.R.P.C. 5.4 (d) (practicing with or in the form of a professional corporation or association authorized to practice law
for a profit where a nonlawyer owns an interest in it).
8
that he had testified during a bankruptcy meeting of creditors to not filing the tax returns—but
Smith claimed he “was justified in what [he] did.”
The bankruptcy judge addressed Smith’s failure to file his tax returns in his oral ruling:
Respondent has displayed what I will suggest is at best a cavalier attitude, at worst,
a neglectful attitude about filing tax returns. First of all, until fairly recently, it looks
like he was less than prudent, less than diligent in filing his personal tax returns. To
the extent that’s been corrected, that’s been a fairly recent development. It’s not
been a matter of lack of funds or resources he’s not been able to do so. He’s had
other explanations for failure to be timely on his tax filings. I find those to be
unpersuasive.
In his disciplinary hearing, Smith testified it was his decision not to file his tax returns. He
testified that because of embezzlement in his office, “he held off filing the returns. Figuring no
harm, no foul.” Smith’s employee who embezzled the money was charged and convicted in
January 2009. The employee was ordered to pay restitution in July 2009. Despite that order, Smith
did not file his tax returns until November 2020—after the bar complaint was filed.
According to a letter Smith submitted to the Committee, his state and federal taxes for
2016, 2017, and 2018 were filed and he requested an extension for the 2019 tax year. The
Committee concluded Smith did not file any state or federal tax returns for the 2006-2015 tax years
until two months after the Bar filed its disciplinary complaint. The Committee found that Smith’s
“attempts to excuse his untimely filing of state and federal tax returns” based on an employee’s
embezzlement and farming operations losses were “not persuasive.” The Committee also
concluded that although a restitution order was entered in the embezzlement case in 2009, Smith
did not file his returns until 2020. The Committee noted that “losses due to farming operations are
not so unique that it would justify the significant delay in filing tax returns shown in this case.”
The Committee concluded Smith violated I.R.P.C. 8.4(c) and 8.4(d).
II. STANDARD OF REVIEW
When this Court reviews an attorney discipline action, it “independently examines the
record developed before the Professional Conduct Board to determine whether the evidence
supports the findings and recommendations of the Board’s hearing committee.” Idaho State Bar
v. Warrick, 137 Idaho 86, 90, 44 P.3d 1141, 1145 (2002). See also Idaho State Bar v. Souza, 142
Idaho 502, 505, 129 P.3d 1251, 1254 (2006). The Court examines the hearing committee’s decision
“to determine if it is clearly erroneous or arbitrary and capricious.” Warrick, 137 Idaho at 90, 44
P.3d at 1145. The hearing committee’s findings are entitled to great weight. Id. The professional
9
misconduct must be proven by clear and convincing evidence. Wilhelm v. Idaho State Bar, 140
Idaho 30, 34, 89 P.3d 870, 874 (2003). Yet the disciplined attorney bears the burden of showing
that the evidence does not support the hearing committee’s findings. Idaho State Bar v. Malmin,
139 Idaho 304, 307, 78 P.3d 371, 374 (2003).
III. ANALYSIS
While this Court independently examines the record to decide whether the evidence
supports the Committee’s recommendation, we note at the outset that Smith is barred under the
principles of issue preclusion from challenging the factual basis underlying most counts of the
complaint.
Five factors are required in order for issue preclusion to bar the relitigation of an
issue determined in a prior proceeding: (1) the party against whom the earlier
decision was asserted had a full and fair opportunity to litigate the issue decided in
the earlier case; (2) the issue decided in the prior litigation was identical to the issue
presented in the present action; (3) the issue sought to be precluded was actually
decided in the prior litigation; (4) there was a final judgment on the merits in the
prior litigation; and (5) the party against whom the issue is asserted was a party or
in privity with a party to the litigation.
Ticor Title Co. v. Stanion, 144 Idaho 119, 124, 157 P.3d 613, 618 (2007) (citing Rodriguez v. Dep’t
of Correction, 136 Idaho 90, 93, 29 P.3d 401, 404 (2001)).
Here, many of the facts that Smith contests have been the subject of past litigation and
appeals, all of which were decided against Smith. For example, the following facts have been
adjudicated and determined to be true: (1) Victoria’s holographic will resulted from undue
influence, (2) the first power of attorney did not authorize the transfer of real property; and (3)
second power of attorney terminated on Victoria’s death. These matters were all decided in prior
litigation before this Court. Smith was a party to those proceedings, and in some cases, has tried
to argue the merits before this Court repeatedly. But in each of these cases, he has had a full and
fair opportunity for the issues to be decided, and a final judgment on the merits was issued in those
cases. See Matter of Estate of Smith, 164 Idaho 457, 464, 432 P.3d 6, 13 (2018) (holding Victoria’s
power of attorney did not authorize transfer of real property, and the record contained sufficient
evidence to support finding that holographic will resulted from Smith’s undue influence); Smith
by & through Smith v. Treasure Valley Seed Co., LLC, 161 Idaho 107, 109, 383 P.3d 1277, 1279
(2016) (“Smith I”) (Vernon’s power of attorney terminated at Victoria’s death); Smith By &
Through Smith v. Treasure Valley Seed Co., LLC, 164 Idaho 654, 657, 434 P.3d 1260, 1263 (2019)
10
(“Smith II”) (“Of the three issues presented in his opening brief, all three involve at least a partial
attempt to relitigate the prior determination of this Court regarding “the irrevocable power of
attorney.”).
As a result, to the extent the complaint against Smith now on appeal involves a challenge
to these issues, Smith is bound by this Court’s prior holdings. Ticor Title Co., 144 Idaho at 124,
157 P.3d at 618.
A. The Committee’s conclusion that Smith violated I.R.P.C. 1.7(a)(2), 2.1, 8.4(c), and
8.4(d) was not clearly erroneous or arbitrary and capricious.
Count One of the complaint alleged Smith violated I.R.P.C. 1.7(a)(2), 2.1, 8.4(c) and
8.4(d). Smith first challenges this count by arguing no testimony was put forth at the hearing to
show he performed in a manner inconsistent with Victoria’s wishes, desires, or best interests.
I.R.P.C. 1.7(a)(2)
The Committee concluded there was clear and convincing evidence Smith’s involvement
with Victoria’s holographic will, the first and second POAs, and the 2012 property transfers
violated I.R.P.C. 1.7(a)(2). In reaching this conclusion, the Committee explained:
At no time between 1971 and Victoria’s death in 2013 did she give informed
consent, confirmed in writing, in connection with the legal advice and direction she
received from Smith, or in connection with her execution of the First POA and
Second POA prepared for her by Smith, or in connection with the self-dealing legal
transactions by which Smith transferred Victoria’s assets to VHS which Smith
performed using the Second POA.
Under I.R.P.C. 1.7(a)(2):
Except as provided in paragraph (b), a lawyer shall not represent a client if the
representation involves a concurrent conflict of interest. A concurrent conflict of
interest exists if:
...
(2) there is a significant risk that the representation of one or more clients will be
materially limited by the lawyer’s responsibilities to another client, a former client
or a third person or by the personal interests of the lawyer, including family and
domestic relationships.
I.R.P.C. 1.7(a)(2). The exception provided in paragraph (b) explains that an attorney may
undertake a representation despite a concurrent conflict of interest, including a conflict based on
the attorney’s personal interests, if the attorney complies with certain conditions, such as obtaining
informed consent. See I.R.P.C. 1.7(b).
11
The allegation that Smith violated this rule stems from three separate incidents: (1) his
involvement with Victoria when she drafted her holographic will in 1990; (2) his connection to
the execution of Victoria’s first and second powers of attorney; and (3) using the second power of
attorney to transfer Victoria’s assets to VHS, LLC in 2012. We will address each in turn.
a. The 1990 holographic will
Smith first argues there was no risk of a conflict of interest in advising Victoria on drafting
her will because she wanted him involved. Smith maintains he was a loyal son and contributed
legal services when Victoria requested. Smith asserts the Bar failed to show undue influence or a
conflict of interest related to the will.
As discussed above, we will not entertain an argument that the will was not the product of
undue influence. This issue was soundly decided against Smith in Matter of Est. of Smith, 164
Idaho at 463, 432 P.3d at 12. Thus, the only question is whether the record supports the
Committee’s findings that Smith failed to obtain informed consent, confirmed in writing prior to
undertaking representation of Victoria before he witnessed the execution of her will. We hold it
does.
The Committee concluded Smith had a concurrent conflict of interest “when he became
aware of the terms of Victoria’s 1990 holographic will and witnessed her execution of the same.”
The Committee also found that based “on the extent and size of Victoria’s estate, it was particularly
incumbent on [Smith] to obtain informed consent, confirmed in writing, before witnessing the
executing” of her will. The Committee determined there was no evidence to suggest Victoria gave
informed consent, confirmed in writing, about the legal advice she received from Smith in
connection with the execution of her 1990 holographic will. Even more, the Committee concluded:
Such informed consent would have required Smith to disclose his conflict of
interest and would have required Smith to communicate adequate information and
explanation about the material risks of and reasonably available alternatives to
Victoria’s proposed course of conduct to disinherit Smith’s two siblings and leave
the entirety of her considerable estate to Smith. This obligation was particularly
required in this case because Smith had actively engaged in conduct to isolate
Victoria from and alienate her affections from his siblings, particularly Joseph
Smith. Smith violated IRPC l.7(a)(2) when he helped facilitate his mother’s
preparation and/or execution of a holographic will which disinherited his siblings
and left all of his mother’s considerable estate to himself in 1990 without obtaining
informed consent, confirmed in writing.
12
Smith responds by challenging the concept that there could ever be a lack of informed
consent between a parent and a child, proposing that the fifty-year relationship between he and
Victoria was adequate informed consent. Smith’s efforts to recast his professional responsibility
to inform Victoria of her available options and the potential risks of her estate plan, in writing, as
an attempt to undermine the parent-child relationship shows his inability to appreciate the
seriousness of his actions.
I.R.P.C. 1.7, cmt. 20, explains why it is so important that a lawyer obtain informed consent,
confirmed in writing, when a conflict of interest is present:
Paragraph (b) requires the lawyer to obtain the informed consent of the client,
confirmed in writing. Such a writing may consist of a document executed by the
client or one that the lawyer promptly records and transmits to the client following
an oral consent. . . The requirement of a writing does not supplant the need in most
cases for the lawyer to talk with the client, to explain the risks and advantages, if
any, of representation burdened with a conflict of interest, as well as reasonably
available alternatives, and to afford the client a reasonable opportunity to consider
the risks and alternatives and to raise questions and concerns. Rather, the writing is
required in order to impress upon clients the seriousness of the decision the client
is being asked to make and to avoid disputes or ambiguities that might later occur
in the absence of a writing.
I.R.P.C. 1.7 cmt. 20 (emphasis added).
On appeal, Smith overlooks or misapprehends why his involvement in preparing Victoria’s
will without receiving her informed consent was troublesome. There is no indication from the
documents in the record that Smith ever advised Victoria to seek the advice of independent counsel
in drafting the document or that he provided her other alternatives for her estate. Indeed, the
Committee found clear and convincing evidence that Smith “had actively engaged in conduct to
isolate Victoria from and alienate her affections from his siblings, particularly Joseph Smith,” and
that he facilitated Victoria’s writing the holographic will that disinherited his siblings.
In the probate proceedings following Victoria’s death, Smith admitted to discussing the
contents of Victoria’s will with her before she executed it. The probate court determined that
“Victoria prepared her will with Vernon’s advice and . . . Victoria had long-standing trust in and
reliance upon Vernon.” Matter of Est. of Smith, 164 Idaho at 476, 423 P.3d at 25. The probate
court determined the holographic will was unnatural, unjust, irrational, and a result of Smith’s
undue influence. Id. at 478, 423 P.3d at 27. We have previously affirmed this conclusion. Id. It
should be obvious to even a non-lawyer that a lawyer assisting his mother in drafting a will that
13
bequeaths her estate to him and disinherits her other children is the epitome of a conflict of interest.
Smith’s behavior is precisely the action the Rules of Professional Conduct are meant to and do
expressly prohibit.
As a result, the record establishes by clear and convincing evidence, the Committee’s
conclusions that Smith violated I.R.P.C. 1.7(a)(2) on the holographic will.
b. The first and second POAs
Most of Smith’s references to the powers of attorney are in the statement of facts in his
brief; he makes only cursory reference to either document as part of his argument, and no reference
that includes a citation to the record. Much like the arguments put forth to support his mother’s
holographic will, Smith argues his involvement with the powers of attorney resulted in no conflict
of interest because the documents were what Victoria and her bank wanted and were to remain in
effect after her death.
Smith claims Victoria signed the first POA because she was scheduled for gall bladder
surgery, and she requested Smith prepare the POA with her, which she read, signed, and
acknowledged in front of a notary. Smith fails to mention the notary was Carolyn Puckett, his legal
secretary. Nine years later, Victoria signed the second POA following a fall in 2008. Smith claims
that because of the fall Victoria experienced, she was advised not to travel, and Victoria’s bank
told Smith it needed a current POA—prompting him to obtain the second POA. This POA was
notarized by John Gibson—Smith’s legal receptionist. Smith asserts his authority under the second
POA reconfirmed his initial authority and “expanded upon what the bank wanted, an irrevocable
power…with language Victoria wanted and the bank needed to allow the use of the account in the
manner intended and approved by the Bank, —for use posthumously.”
As with the will, Smith has repeatedly tried to relitigate his claim that the POA did not
terminate on Victoria’s death. See Smith I (“Vernon’s power of attorney, therefore, terminated at
Victoria’s death”); Smith II (“Of the three issues presented in his opening brief, all three involve
at least a partial attempt to relitigate the prior determination of this Court regarding ‘the irrevocable
power of attorney.’”). Consequently, as this Court has repeatedly explained, the holding that the
power of attorney terminated on Victoria’s death is “the law of the case.” Smith II, 164 Idaho at
658, 434 P.3d at 1264. See RESTATEMENT (THIRD) OF AGENCY § 3.07 (2006) (“The principal's
death terminates the actual authority of an agent whom the principal has appointed pursuant to a
durable power of attorney.”).
14
Inasmuch as we have held that the POA terminated on Victoria’s death, Smith is precluded
from arguing otherwise. So, we turn to whether Smith violated Rule 1.7(a) for failing to obtain
Victoria’s informed consent, confirmed in writing, when he aided her in executing the POA’s. The
Committee found Smith did not obtain Victoria’s informed consent, confirmed in writing, before
drafting either POA. The Committee concluded:
This obligation was particularly required in this case because of the broad and
extensive powers granted to Smith by the POA’s [sic]. Due to the size and extent
of Victoria’s estate, Smith was obligated to advise Victoria that the First and
Second POA’s [sic] empowered him to transfer Victoria’s entire estate to him
without notice to her and this disclosure should have been confirmed in writing to
comply with IRPC 1.7(a)(2). Smith violated IRPC 1.7(a)(2) when he prepared and
counseled Victoria to execute the First and Second Powers of Attorney naming
himself as his mother’s attorney-in-fact without obtaining informed consent,
confirmed in writing.
Smith puts forth no argument to challenge the Committee’s conclusion that he failed to
obtain Victoria’s informed consent, confirmed in writing. He merely asserts the content of both
POAs were what Victoria wanted. Thus, he failed to carry his burden of showing the evidence did
not support the Committee’s findings. See Idaho State Bar v. Malmin, 139 Idaho 304, 307, 78 P.3d
371, 374 (2003). As a result, we affirm the Committee’s conclusion.
c. VHS Properties, LLC, and the July 2012 transfers
The last incident giving rise to the charge Smith violated Rule 1.7(a) stems from
transferring Victoria’s real property to an entity Smith created—VHS Properties, LLC. The Bar
alleges Smith created VHS Properties, LLC, on behalf of Victoria, acting in his capacity as her
attorney. The next day, Smith used the second POA to transfer Victoria’s property to the LLC and
then to himself. The Bar claims Smith made these transfers to obtain Victoria’s assets as an
apparent “gift” during her lifetime to avoid a future probate challenge from Joseph after her death.
The Bar also argues that Smith’s representation of Victoria related to the control and transfer of
her assets to himself. The scope of Smith’s representation was materially limited by his own
personal interest in placing the assets into VHS Properties, LLC, for his own benefit, including
making himself the sole beneficiary of Victoria’s estate and to avoid paying taxes as a beneficiary
under the will. Smith argues Victoria directed him to transfer properties to VHS. He claims that
Victoria’s interest in the properties—to protect, preserve, and improve their value—was also his
interest.
15
This claim involves six separate properties: (1) Chinden Property; (2) Gowen Property; (3)
Hamer Property; (4) Main Street office complex; (5) Idaho Street residential property; and (6) the
Raymond Street Property. The factual findings related to these transfers are particularly troubling
because they illustrate a concerted effort by Smith to transfer all of Victoria’s assets for his own
benefit, evade taxes, avoid probate, and circumvent legal proceedings with his ex-wife with little
regard for Victoria’s financial interest or his professional responsibilities as an attorney.
From the record below, the Committee concluded that Smith used the second POA to
transfer Victoria’s personal and real property to VHS on July 4, 2012, for $10.00 consideration.
The value of the transfer was estimated at twenty-seven million dollars. Despite executing the
deeds in 2012, Smith did not record the deeds until October 2014—after his brother started probate
proceedings. Smith claimed he forgot to record the deeds, but the Committee found, and we agree,
the more probable explanation of why he failed to record the deeds was that he “intended to hide
the transactions” from his ex-wife and siblings.8
The Committee concluded Smith did not discuss or explain the transfers to Victoria or her
interests in VHS. In reality, despite Smith’s contention he used the second POA to transfer her
assets to “protect her assets,” Victoria had no creditors when Smith executed the transfer. As for
the importance of obtaining Victoria’s informed consent as to the 2012 transfer, the Committee
concluded:
This obligation was particularly required in the circumstances of the 2012 transfers
of Victoria’s interests in her property because Victoria was competent and, by
Smith’s own admission, could have accomplished these transfers herself by
executing the transfer documents and deeds in her own name. However, Smith
chose to use the Second POA, and possibly the First POA, to accomplish these
transfers and did not record the evidence of the transfers until after Victoria’s death
for the purpose of preventing detection. The Hearing Committee concluded by clear
and convincing evidence that Smith did not discuss and explain the nature and
consequences of the July 2012 transactions with Victoria before executing the
documents on July 4, 2012. [Vernon] Smith violated IRPC 1.7(a)(2) when he
formed VHS with his mother using the Second POA, transferred all of her property
into VHS and then transferred her interest in VHS to himself the same day in 2012
without obtaining informed consent, confirmed in writing.
8
See Smith v. Smith, 136 Idaho 120, 122, 29 P.3d 956, 958 (Ct. App. 2001) (citing the district court’s discussion of
Smith’s longstanding efforts to “artfully dodge” judgments against him).
16
On appeal, Smith claims Victoria wanted “no involvement with attorneys beyond her son
who gave legal services she requested without cost.” Smith once again fails to appreciate why the
lack of informed consent is significant; instead, he suggests that the requirement for him to do so
“reflects ‘form’ over ‘substance’, and nothing different would be the result.” Whether Victoria
ultimately would have selected Smith to represent her is not the issue. Informed consent required
Smith to explain why representing Victoria posed a conflict of interest and facilitate a conversation
about the risks and alternatives available for her estate and financial choices. Smith never gave
Victoria these options, which is particularly unprincipled given the obvious benefits he obtained
by his violation of the Rules of Professional Conduct.
The basis of the allegation against Smith under Count One was his failure to obtain
Victoria’s informed consent. Because he does not challenge the Committee’s conclusion that he
did not obtain informed consent in violation of I.R.P.C. 1.7(a) when he assisted Victoria with the
holographic will, the first or second POA, or the transfers, we hold the Committee’s conclusions
were based on clear and convincing evidence and supported by unrebutted substantial and
competent evidence.
2. I.R.P.C. 2.1
Under Count One of the complaint the Bar also alleged Smith violated Rule 2.1. The
conduct underlying this allegation also stemmed from Smith’s actions with Victoria’s will, the
first and second POA, and the 2012 property transfers. Under I.R.P.C. 2.1:
In representing a client, a lawyer shall exercise independent professional judgment
and render candid advice. In rendering advice, a lawyer may refer not only to law
but to other considerations such as moral, economic, social and political factors,
that may be relevant to the client’s situation.
I.R.P.C. 2.1.
Despite setting out a violation of Rule 2.1 as one of the issues Smith intended to challenge
on appeal, he failed to reference the rule in his opening brief and put forth no argument on appeal
to challenge the Committee’s conclusion that he violated it. He filed no reply brief.
This Court will not consider an issue not “‘supported by argument and authority in the
opening brief.’” Bach v. Bagley, 148 Idaho 784, 790, 229 P.3d 1146, 1152 (2010) (quoting
Jorgensen v. Coppedge, 145 Idaho 524, 528, 181 P.3d 450, 454 (2008); see also I.A.R. 35(a)(6)
(“The argument shall contain the contentions of the appellant with respect to the issues presented
17
on appeal, the reasons therefor, with citations to the authorities, statutes and parts of the transcript
and record relied upon.”).
Thus, because Smith failed to support this issue with argument, we hold the Committee’s
conclusion that Smith violated I.R.P.C. 2.1 was based on clear and convincing evidence, and was
not clearly erroneous, or arbitrary and capricious.
3. I.R.P.C. 8.4(c) and 8.4(d)
Last, under Count One, the Bar alleges Smith’s attorney-client relationship with Victoria
and his actions with her will, first and second POA, and the 2012 transfers violated I.R.P.C. 8.4(c)
and 8.4(d). As with the allegation that Smith violated Rule 2.1, Smith puts forth no cogent legal
argument or authority to challenge the Committee’s conclusion that he violated Rules 8.4(c) and
(d). Instead, Smith merely challenges the Bar’s assertion and the Committee’s conclusion that he
violated 8.4(c) and 8.4(d) by claiming that the only act prejudicial to justice has been “Joseph’s
efforts to undermine and destroy the intentions of their [m]other, defaming and defying her
intentions, and once again—stealing from his brother.” Smith claims the Committee cannot show
his actions were prejudicial to the administration of justice without first establishing a conflict of
interest, which he denies. Smith also claims his sister Vicky’s emails “confirm no dishonest,
deceitful, fraudulent or wrongful act was ever undertaken to alter the long-held intentions of
Victoria[.]”
Once again, this Court will not consider an issue not “‘supported by argument and authority
in the opening brief.’” Bagley, 148 Idaho at 790, 229 P.3d at 1152 (quoting Jorgensen, 145 Idaho
at 528, 181 P.3d at 454); see also Idaho App. R. 35(a)(6) (“The argument shall contain the
contentions of the appellant with respect to the issues presented on appeal, the reasons therefor,
with citations to the authorities, statutes and parts of the transcript and record relied upon.”).
Under I.R.P.C. 8.4:
It is professional misconduct for a lawyer to:
…
(c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation;
(d) engage in conduct that is prejudicial to the administration of justice;
I.R.P.C. 8.4(c)–(d).
The record shows Smith abused his attorney-client relationship with Victoria by failing to
advise her of the consequences of the estate planning decisions she was making—decisions Smith
18
stood to directly benefit from. Smith failed to advise Victoria about why he wanted to form VHS
or explain that he was using the power of attorney he drafted to transfer her property to himself
through the LLC. Smith used his access to these assets to avoid his own creditors. He also misused
his role as Victoria’s attorney to avoid probate, estate taxes, and his own creditors. He did this
without the knowledge of other family members or anyone who might challenge the transfers or
object to his misdeeds during Victoria’s life. And while he likely did this without Victoria’s
knowledge, he certainly did it without her informed consent.
The Committee’s conclusion sums-up the issues in Count One, while intertwining the
allegations from the other two counts:
Smith engaged in a pattern of self-dealing conduct while engaged in the practice of
law beginning as early as 1976 and continuing to the present which involved
dishonesty, fraud, deceit or misrepresentation by acting in his own best interest
while ignoring the fiduciary duty he owed to his mother which has interfered with
the administration of justice. Such conduct involves the following: (1) exercised
undue influence over his mother to benefit himself financially; (2) engaged in effort
to isolate his mother and alienate her affections away from Smith’s siblings for the
purpose of benefiting himself financially; (3) ignored the Rules of Professional
Conduct in connection with advising, or failing to advise, his mother about the
probably [sic] future consequences of a holographic will which disinherited his
siblings and benefitted himself financially; (4) ignored the Rules of Professional
Conduct in connection with fully informing his mother about the consequences of
executing powers of attorney which he used to transfer all of her considerable assets
prior to her death to himself; (5) ignored the Rules of Professional Conduct by
failing to explain to explain [sic] the purpose of forming a business entity with his
mother; (6) ignored the Rules of Professional Conduct by failing to inform his
mother that he was transferring her assets to himself before her death; (7) created a
business entity with his nonlawyer wife for the purpose of practicing law and
sharing profits from the practice of law in violation of clear Rules of Professional
Conduct prohibiting such conduct; (8) acted in his own best interest in transactions,
rather than in the best interest of his mother, while acting as a fiduciary and lawyer
to his mother; and (9) engaged in expensive probate/estate litigation with his
brother over the validity of his actions which involved the invalid transfer of the
entirety of their mother’s estate to himself to the exclusion of his brother and his
sister. Much of the conduct cited above was perpetrated over a long period of time
and involved a continuous pattern of conduct over forty years of Smith’s practice
of law in Idaho as an Idaho licensed attorney the conduct involved the practice of
the law, including the improper organization of his office with a non-lawyer, the
willful failure to report his income by timely filing tax returns and the breach of
fiduciary obligations he owed to his mother who was his most important client.
Smith’s conduct amounts to professional misconduct prohibited by IRPC 8.4(c) and
(d).
19
As the Committee explained, Smith’s conduct has involved a long pattern of dishonesty,
fraud, deceit, and misrepresentation. Smith has failed to carry his burden on appeal to show the
evidence does not support the Committee’s findings. The record sufficiently establishes Smith’s
violations of I.R.P.C. 8.4(c) and (d), and the Committee’s conclusions were supported by clear and
convincing evidence, were not clearly erroneous, or arbitrary and capricious. We affirm the
Committee’s conclusions.
B. The Committee’s conclusion that Smith violated I.R.P.C. 5.4(a) and 5.4(d) was not
clearly erroneous or arbitrary and capricious.
Count Two of the complaint alleged Smith violated I.R.P.C. 5.4(a) by sharing legal fees
with his wife, Vicki. The complaint also alleged Smith violated I.R.P.C. 5.4(d) by permitting Vicki
to hold a 90 percent ownership interest in the law firm LLC.
Under I.R.P.C. 5.4(a), a lawyer is prohibited from sharing legal fees with a nonlawyer
except in certain cases. I.R.P.C. 5.4(d) also provides:
A lawyer shall not practice with or in the form of a professional corporation or
association authorized to practice law for a profit, if:
(1) a nonlawyer owns any interest therein, except that a fiduciary representative of
the estate of a lawyer may hold the stock or interest of the lawyer for a reasonable
time during administration;
(2) a nonlawyer is a corporate director or officer thereof or occupies the position of
similar responsibility in any form of association other than a corporation, except as
provided by Idaho Code § 30-1513(d); or
(3) a nonlawyer has the right to direct or control the professional judgment of a
lawyer.
I.R.P.C. 5.4 (d)(1)–(3).
On appeal, Smith argues once the income is earned, it belongs to him, subject to community
property laws, the rights of transmutation, or subsequent gifting or assignment. Under his view,
every non-lawyer spouse has an interest in the lawyer-spouse’s earned income absent a pre- or
post-nuptial agreement. He claims the Bar construed Rule 5.4 too narrowly and such interpretation
would regulate his earned income.
At best, Smith’s contention is disingenuous. As the bankruptcy court held in dismissing his
petition, “[t]hat arrangement whereby he effectively draws a modest salary or draw from his law
practice as opposed to benefiting from the full income of that practice under the terms of that
agreement was, at best, poor judgment. At worst, unethical.” While testifying under oath during
20
the meeting of creditors for his bankruptcy case in November 2018, Smith responded to questions
from Assistant U.S. Trustee David Newman:
NEWMAN: And I believe in the prior meeting of creditors you testified that you
do not receive any salary from the law practice?
SMITH: I don’t treat it as such. I don’t take any funds from the office as such. Vicki
would do that for living expenses, operational expenses as is needed. I don’t handle
the accounting affairs. She does.
NEWMAN: And do you consider that a salary, or a payment to you, or a draw in
anyway?
SMITH: I haven’t considered it to be a salary to me because I don’t take it and I
don’t take it as a draw. She takes what she takes and then we live off of that, plus
my 773, portions of which goes to A and B, so I don’t take a draw. There’s no check
ever written out of the office account to me.
Smith admitted under oath he was not taking income from the LLC. Rather, he was performing
legal services, effectively on behalf of Vicki who was “tak[ing] what she takes.” Smith’s efforts
to paint this as a community property issue is simply farcical. Had Smith disposed of his earned
income in part or in full outside the LLC after drawing a salary, Rule 5.4 would not have been
implicated. But the issue here arises when there is fee sharing. There is a significant risk that the
lawyer’s professional independence and judgment will be compromised in those cases. Smith
argues that the LLC was not formed with an intent to interfere with his professional judgment.
While that may have been Smith’s conceived purpose, his subjective intent is immaterial to what
the facts in the record establish. The Committee’s conclusion that Smith was fee sharing with a
nonlawyer in indisputable. Whether Smith violated the rationale behind the rule, he admits to
violating the rule.
The Certificate of Organization for the LLC filed with the Secretary of State lists Vicki as
a “governing officer” for the law firm. Smith also admitted to giving Vicki a 90 percent interest in
the law firm while testifying during his disciplinary hearing. While Smith contends he did not
share fees with Vicki because the LLC income was “subject to the community property laws” of
the marriage, his interpretation conflicts with the irrefutable prohibition in Rule 5.4(d). The rule
forbids a lawyer practicing with a professional corporation or association authorized to practice
law if a nonlawyer owns any interest or is a corporate director or officer. Despite his argument
that Vicki did not influence his legal judgment, an attorney’s obligations under the professional
rules apply no matter if the nonlawyer asserts influence over the lawyer’s judgment.
21
The Committee determined Smith practiced law under an LLC in which a non-lawyer
owned an interest, violating I.R.P.C. 5.4(d). The Committee also concluded Smith’s wife was a 90
percent owner of the firm from January 2016 to March 2019. Smith does not deny Vicki was a 90
percent owner of the LLC. Indeed, this arrangement remained in place until Smith “begrudgingly”
changed the structure of the firm during his bankruptcy proceedings, at which time, according to
the bankruptcy judge, “the details of the prior arrangement” were scrutinized by the bankruptcy
court.
For these reasons, we hold the record shows the Committee’s conclusions of law that Smith
violated I.R.P.C. 5.4 (a) and 5.4(d) were supported by clear and convincing evidence, were not
clearly erroneous, or arbitrary and capricious. We affirm the Committee’s conclusions.
C. The Committee’s conclusion that Smith violated I.R.P.C. 8.4(c) and 8.4(d) was not
clearly erroneous or arbitrary and capricious.
Under Count Three of the complaint against Smith, the Bar alleged Smith’s failure to
timely file his 2006–2015 state and federal tax returns was conduct prejudicial to the
administration of justice under I.R.P.C. 8.4(d). The Bar also argues that Smith engaged in conduct
involving dishonesty, fraud, deceit or misrepresentation in violation of I.R.P.C. 8.4(c).
The Bar points to a series of decisions before other state supreme courts to support the
Committee’s conclusion that a lawyer’s failure to file tax returns is prejudicial to the administration
of justice. See, e.g., Maryland Att’y Grievance Comm’n v. Gore, 845 A.2 1204, 1214 (Md. 2004)
(“willful failure to pay taxes constitutes conduct prejudicial to the administration of justice in
violation of Rule 8.4(d)”); In re Selmer, 749 N.W.2d 30, 40 (Minn. 2008) (failure to timely file
tax returns); Att’y Grievance Comm ’n v. O’Toole, 843 A.2d 50 (Md. 2004) (attorney’s failure to
file and pay federal and state income tax returns for three years violated Rule 8.4(d)). Along similar
lines, the comments to the Idaho Rules of Professional Conduct likewise identify the failure to pay
taxes as conduct prejudicial to the administration of justice. “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.” I.R.P.C. 8.4 cmt 2.
Smith claims he did not willfully fail to file tax returns, but when faced with accruing
losses, it was “preferred to avoid the expense of amended returns.” Smith argues the delay did not
result from a willful refusal to file or pay taxes and that whether he filed is a confidential matter
between himself and the taxing authority. The Bar responded that Smith made a calculated decision
22
not to file any state or federal tax returns from 2006 to 2015 and did not elect to do so until after
the disciplinary complaint was filed. The Committee agreed and concluded that this conduct, by a
lawyer, was prejudicial to the administration of justice under I.R.P.C. 8.4(d).
Willful failure to file a tax return is addressed under 26 U.S.C.A. Section 7203. To show a
violation requires proof: (1) the defendant had to file a return; (2) the defendant failed to file a
return; and (3) that the failure to file a return was willful. United States v. Buckley, 586 F.2d 498,
503–04 (5th Cir.1978). “Willful” under that statute “generally connotes a voluntary, intentional
violation of a known legal duty.” United States v. Pomponio, 429 U.S. 10, 12 (1976). It requires
“proof of a specific intent to do something which the law forbids; more than a showing of careless
disregard for the truth is required.” United States v. Hooks, 848 F.2d 785, 790 (7th Cir.1988).
This Court has examined the meaning of willful in other contexts before, explaining
“Black’s Law Dictionary defines willful as voluntary and intentional, but not necessarily
malicious.” Marek v. Hecla, Ltd., 161 Idaho 211, 216, 384 P.3d 975, 980 (2016) (internal
alterations omitted). In this case, Smith does not dispute his obligation to file taxes. Instead, he
contends it was preferrable for him to delay—for eleven straight filing periods. He voluntarily
chose to not file, despite acknowledging he had a duty to do so because it would have been costly
to amend. These actions, we conclude, were willful.
This conduct follows the same pattern of self-serving behavior in which Smith acts in his
own self-serving interest, choosing which rules to follow and which to disregard. Even if filing tax
returns and amending those returns would have been costly, the decision not to do so was still a
willful decision. The Committee concluded:
Smith engaged in a pattern of conduct beginning as early as 2006 and continuing
through 2020 which has interfered with the administration of justice by failing to
timely file federal and state tax returns for the years 2006 through 2015. This
conduct continued until the Idaho State Bar filed this Formal Charge proceeding in
September of 2020. Although Smith claimed it was impossible to properly report
his income due to a variety of excuses, within approximately two months of the
filing of this Formal Charge Smith late-filed his federal and state tax returns for the
years 2006 through 2015. Smith’s failure to timely file federal and state tax returns
for the years 2006 through 2015 establishes a pattern of repeated conduct which
indicates an indifference to Smith’s legal obligations which is prejudicial to the
administration of justice and is a violation of IRPC 8.4(d).
We agree with the Committee’s reasoning.
23
Attorneys are held to a high standard and are expected to follow the law. They occupy a
position of trust, which Smith has obviously violated. The record shows that Smith believes his
conduct is not subject to the same standards as his colleagues. In similar circumstances, the
rationale of North Dakota’s Supreme Court is apropos:
An attorney is trained at law, has taken an oath, assumes a position of public trust
and holds himself out to the public as being fit and capable of handling its funds
and problems. The attorney has assumed a position of responsibility to law itself
and any disregard for the law is more serious than a breach by a layman or non-
lawyer. He is an officer of the Court.
In Disciplinary Action Against Fosaaen, 234 N.W.2d 867 (N.D.1975) (emphasis added).
The Committee’s determination that Smith’s failure to file tax returns was prejudicial to
the administration of justice is supported by clear and convincing evidence, not clearly erroneous,
or arbitrary and capricious. We agree with the rationale of our sister states, as cited above, that
holds that an attorney’s willful failure to pay taxes constitutes conduct prejudicial to the
administration of justice in violation of Rule 8.4(d). Additionally, the Committee’s conclusion that
Smith engaged in conduct involving dishonesty, fraud, deceit or misrepresentation is also
supported by clear and convincing evidence. Despite claiming he delayed filing because of losses
from an embezzlement, Smith waited for eleven years after the restitution order was entered—and
$1,000.00 was recovered. That a taxpayer may intend to file his returns and pay his taxes in the
future does not negate his specific intent to violate the law. See United States v. Ettore, 387 F.
Supp. 582, 586 (E.D. Pa. 1975). Smith delayed filing until the Bar complaint was filed against
him, and then glibly testified he considered this as a “no harm, no foul” situation. His actions not
only harm the esteem to which all members of the Bar must be held, but they are also truly foul.
They exemplify the deceitful behavior Rule 8.4(c) seeks to prevent. For these reasons, we affirm
the Committee’s decision.
D. Sanctions.
“In reviewing the recommendations of the Committee with regard to sanctions, this Court
determines if the sanctions are clearly erroneous or arbitrary and capricious. Idaho State Bar v.
Clark, 153 Idaho 349, 359-60, 283 P.3d 96, 106-07 (2012). The Committee recommended a two-
year suspension and proposed Smith pass the Multistate Professional Responsibility Exam
(“MPRE”) with a scaled score of 85 or better before being readmitted to practice. However, as the
24
Bar points out, this Court has discretion over the length of any suspension or other sanction
imposed.
“Although the Court places great weight on the findings and recommendations of the
hearing committee regarding sanctions, ‘it is ultimately the responsibility of this Court to
determine the sanctions available’ to the ISB.” Idaho State Bar v. Frazier, 136 Idaho 22, 30, 28
P.3d 363, 371 (2001) (quoting Idaho State Bar v. Tway, 128 Idaho 794, 799, 919 P.2d 323, 328
(1996)). “This Court must consider the nature of the violations, mitigating and aggravating
circumstances, the need to protect the public, the courts and the legal profession, and the moral
fitness of the attorney.” Idaho State Bar v. Souza, 142 Idaho 502, 506, 129 P.3d 1251, 1255 (2006).
Additionally, “[t]here is some benefit in looking at what the Court has done in the past in assessing
the appropriate sanction in this case.” Frazier, 136 Idaho at 30, 28 P.3d at 371. In Idaho State Bar
v. Tway, 128 Idaho 794, 919 P.2d 323 (1996), Tway violated I.R.P.C. 1.4 (keeping a client
reasonably informed), I.R.P.C. 8.4(c) (conduct involving dishonesty, fraud, deceit or
misrepresentation) and I.R.P.C. 1.15(a) (safekeeping of client property). Tway had been
disciplined for similar conduct before and suspended from the practice of law. Tway, 128 Idaho at
799, 919 P.2d at 328. For his second violation, this Court imposed a five-year suspension.
In Idaho State Bar v. Clark, 153 Idaho 349, 355, 283 P.3d 96, 102 (2012), Clark violated
I.R.P.C. 1.2 (scope of representation), 1.3 (diligence), 1.5(b) (communicating fees), 1.16(d)
(declining or terminating service), and 8.4(d) (conduct prejudicial to administration of justice). Id.
at 355, 283 P.3d at 102. This Court accepted the Committee’s recommended sanction, and
suspended Clark for three years, with eighteen months withheld. Before being eligible for
reinstatement, this Court required Clark to receive approval under I.B.C.R. 304, 305, and 518(b),
and pass the MPRE. Id. at 360, 283 P.3d at 107. Among other conditions, before Clark could
transfer to active status, this Court ordered that he must first be placed on probation for three years.
Id. If at any time during his probation, he violated any rules of professional conduct, the withheld
suspension would be imposed. Id.
In this case, Smith has violated I.R.P.C. 1.7(a)(2), 2.1, 5.4(a), 5.4(d), 8.4(c), and 8.4(d).
The aggravating factors against Smith are plentiful. As the Committee identified in its Findings of
Fact, Conclusions of Law, and Recommendations, Smith has engaged in a “long-standing pattern
of conduct involving self-dealing to benefit himself financially[.]”. The Committee also found that
Smith’s conduct “involved dishonesty, fraud, deceit or misrepresentation by acting in his own best
25
interest while ignoring the fiduciary duty to his mother which has interfered with administration
of justice.” The violations committed by Smith are substantial and appalling. Even in his appeal
before this Court, Smith has shown no contrition or remorse and refuses to accept responsibility
for his actions. Instead, he seeks to recast blame, claiming “the only ‘prejudicial act’ to ‘justice’
has been Joseph’s efforts to undermine and destroy the intentions of [Victoria], defaming and
defying her intentions, and once again—stealing from [him].” We view this shocking lack of
personal accountability as a highly aggravating circumstance.
Aside from his lack of contrition, Smith has failed to support most of his brief with cogent
legal argument and authority—a dereliction for which he has repeatedly faced admonition and
sanction from this Court. See, e.g., Elsaesser v. Riverside Farms, Inc., 2022 WL 2444697 (2022);
Elsaesser v. Black Diamond, 2022 WL 2541729 (2022); Alpha Mortgage Fund II v. Drinkard, 169
Idaho 446, 497 P.3d 200, 208 (2021) (awarding Rule 11.2 sanctions against Smith personally for
“flout[ing] Idaho Appellate Rules and the standard for good faith appeals”); Sprinkler Irrigation
Co., Inc. v. John Deere Ins. Co., Inc., 139 Idaho 691, 698, 85 P.3d 667, 674 (2004) (holding
sanctions were proper when Smith’s brief was “virtually void of any citation to the transcript and
record relied upon” and thus “failed to conduct a reasonable inquiry that the appeal be well
grounded in fact and warranted by existing law as required” by the appellate rules). Smith has also
been cautioned about restating failed arguments and arguing against established law. See, e.g.,
Smith By and Through Smith v. Treasure Valley Seed Co., LLC, 164 Idaho 654, 658, 434 P.3d
1260, 1264 (2019) (concluding “Smith’s claims are merely a regurgitation of what was argued and
ruled upon by this Court previously. His attempts to relitigate this issue are therefore precluded by
the ‘law of the case’ doctrine.”); Smith II, 164 Idaho at 53, 423 P.3d at 1005 (explaining Smith
“has failed to show that the district court incorrectly applied well-established law” and failed to
provide any “cogent argument as to why his claims . . . are not clearly barred by res judicata.”).
As noted, these admonitions and warnings go back to 2004, and have been occurring more and
more, most recently. See Elsaesser at WL 2444697; Elsaesser at WL 2541729.
We must weigh these aggravating factors against the mitigating factors present in the
record. First, Smith’s violation of I.R.P.C. 1.7 occurred in the context of advising his mother.
According to Smith, the relationship between him and his mother was a trusting and loving one.
The Committee did not challenge Smith on the nature of the relationship between Victoria and
Smith. Second, the Bar concedes that Smith’s violation of I.R.P.C. 5.4 did not result from
26
interference by his non-lawyer wife, and there was no evidence Vicki interfered with Smith’s
professional judgment. Finally, Smith’s failure to timely file tax returns in violation of I.R.P.C. 8.4
has not resulted in criminal charges against him.
Nevertheless, the fact that Smith’s blatant violation of these rules did not result in any
worse outcome or bring about the full consequences the rules are intended to protect against is of
little benefit to Smith. Nor does it make his misconduct any less concerning to this Court. Smith’s
continued refusal to acknowledge he violated any rules or accept any responsibility for his actions,
and his steadfast adherence to the narrative that he was merely acting consistent with Victoria’s
wishes while he shifted her assets for his own benefit, shows he lacks the moral fitness to serve as
an attorney in the state of Idaho. Further, Smith’s actions in transferring Victoria’s property to
entities solely under his control without her informed consent, sharing legal fees with his non-
lawyer wife, and his willful failure to timely file tax returns for eleven filing periods raise grave
concerns over whether he should be permitted to return to the practice of law. Smith has failed to
carry his burden to establish the evidence put forth by the Bar does not, at a minimum, support the
sanction of suspension of his license to practice law. Our concern, however, is whether the length
of that suspension is sufficient given the extent of Smith’s misconduct.
Based on our case law, as well as the serious and continuous nature of the ethical violations
discussed above, and the recommendation from the Committee, we conclude and will order that
Smith be suspended from the practice of law in Idaho for a period of five years. I.B.C.R. 506(c).
Two years of his suspension is withheld upon Smith being granted permission to transfer his
license from affiliate to active status under the applicable Idaho Bar Commission Rules after three
years. Before Smith is eligible for transfer or reinstatement to active practice in Idaho, he must
receive approval pursuant to I.B.C.R. 304, 305, and 518(b). Prior to transfer to active status or
reinstatement, Smith must also show that he fully complied with the requirements of I.B.C.R. 516
and 517 and that, during the time between the issuance of this Opinion and Smith’s reinstatement,
he passed the MPRE with a scaled score of at least 85, or its equivalent should there be any changes
to the test or its scoring regimen. Smith is also required to reimburse the Bar for the costs associated
with this appeal and the underlying proceedings.
Once this opinion is issued, Smith must disengage from the practice of law and
representation of any clients. That disengagement must be complete as of the day the remittitur
issues. If Smith is currently representing clients, involved in any active litigation, or listed as the
27
attorney of record on any pending case, he must notify the client and the court of his suspension
so that the parties can make arrangements to find new counsel. Failure to comply with this notice
requirement and disengage with representation, as well as commencing any new legal proceeding
as an attorney after the date of remittitur, until reinstated, will result in the imposition of the full
five-year suspension. The unauthorized practice of law is prohibited by statute in Idaho, and any
person who is not duly admitted and licensed to practice may face a fine of $500 or jail for up to
six months. I.C. § 3-420. We strongly caution Smith to adhere to the restrictions imposed in this
opinion so as not to face criminal repercussions in addition to the civil sanctions and consequences
already imposed.
Upon reinstatement to active status, Smith will be placed on probation for two years upon
these terms and conditions: (1) If Smith is found to have violated any Idaho Rule of Professional
Conduct for which a sanction is imposed for any conduct that occurred between the date of Smith’s
suspension through the period of his probation, then the withheld suspension will be immediately
imposed; (2) Smith must also make arrangements for a supervising attorney, approved by the Bar,
to supervise Smith during his probation. This attorney will not assume personal responsibility for
handling Smith’s cases, but Smith must meet with this supervising attorney monthly during the
duration of his probation to ensure Smith is complying with all rules of professional conduct,
including conducting conflict checks on any client he represents and, if necessary, obtaining a
signed writing from clients he represents with their informed consent of potential conflicts of
interest.
Finally, while the Bar did not request attorney fees on appeal, we nonetheless conclude the
Bar prevailed in this appeal and is entitled to reasonable attorney fees. “[T]his Court may consider,
sua sponte, whether a party has brought an appeal for any improper purpose, and if so, award
reasonable attorney fees to the other party.” Jim & Maryann Plane Family Tr. v. Skinner, 157
Idaho 927, 342 P.3d 639, 648 (2015) (quoting Bettwieser v. New York Irrigation Dist., 154 Idaho
317, 330, 297 P.3d 1134, 1147 (2013). Idaho Appellate Rule 11.2, in part, explains:
The signature of an attorney or party constitutes a certificate that the attorney or
party has read the notice of appeal, petition, motion, brief or other document; that
to the best of the signer's knowledge, information, and belief after reasonable
inquiry it is well-grounded in fact and is warranted by existing law or a good faith
argument for the extension, modification, or reversal of existing law, and that it is
not interposed for any improper purpose, such as to harass or to cause unnecessary
delay or needless increase in the cost of litigation. If the notice of appeal, petition,
28
motion, brief, or other document is signed in violation of this rule, the court, upon
motion or upon its own initiative, shall impose upon the person who signed it, a
represented party, or both, an appropriate sanction, which may include an order to
pay to the other party or parties the amount of the reasonable expenses incurred
because of the filing of the notice of appeal, petition, motion, brief or other
document including a reasonable attorney's fee.
“[A]ttorney fees can be awarded as sanctions when a party or attorney violates either (a) the
frivolous filings clause, or (b) the improper purpose clause.” Sims v. Jacobson, 157 Idaho 980,
___, 342 P.3d 907, 914 (2015). We find that the Smith advanced arguments that were both
frivolous and lacked a proper purpose. Therefore, we award the Bar attorney fees on appeal
pursuant to I.A.R. 11.2.
VI. CONCLUSION
The Committee’s decisions regarding I.R.P.C. 1.7(a)(2), 2.1, 5.4(a), 5.4(d), 8.4(c), and
8.4(d) are supported by clear and convincing evidence, and are not clearly erroneous, or arbitrary
and capricious. This Court affirms the Committee’s Findings of Fact, and Conclusions of Law.
The Court modifies the Bar’s Recommendations as to the appropriate sanction as set forth above.
Costs and attorney fees are awarded to the Bar.
Justices BRODY, STEGNER, MOELLER, and ZAHN CONCUR.
29