Disciplinary Counsel v. Jacobs

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as
Disciplinary Counsel v. Jacobs, Slip Opinion No. 2014-Ohio-2137.]
NOTICE
This slip opinion is subject to formal revision before it is published in
an advance sheet of the Ohio Official Reports. Readers are requested
to promptly notify the Reporter of Decisions, Supreme Court of Ohio,
65 South Front Street, Columbus, Ohio 43215, of any typographical or
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made before the opinion is published.
SLIP OPINION NO. 2014-OHIO-2137DISCIPLINARY COUNSEL v. JACOBS.
[Until this opinion appears in the Ohio Official Reports advance sheets,
it may be cited as Disciplinary Counsel v. Jacobs,
Slip Opinion No. 2014-Ohio-2137.]
Attorneys—Misconduct—Felony conviction for filing false tax return—Two-year
suspension with credit for time served under interim felony suspension.
(No. 2013-1230—Submitted October 9, 2013—Decided May 27, 2014.)
ON CERTIFIED REPORT by the Board of Commissioners on Grievances and
Discipline of the Supreme Court, No. 12-074.
____________________
Per Curiam.
{¶ 1} Respondent, Leslie William Jacobs of Gates Mills, Ohio, Attorney
Registration No. 0020387, was admitted to the practice of law in Ohio in 1968.
On April 3, 2012, we suspended his license to practice law on an interim basis
following his January 17, 2012 felony conviction for filing a false tax return. In
re Jacobs, 131 Ohio St.3d 1495, 2012-Ohio-1485, 964 N.E.2d 436.
SUPREME COURT OF OHIO
{¶ 2} On October 8, 2012, relator, disciplinary counsel, filed a complaint
charging Jacobs with violations of the Code of Professional Responsibility and
the Rules of Professional Conduct arising from the conduct that led to his felony
conviction.1 The parties submitted stipulations of fact and misconduct and a
recommendation that Jacobs be suspended from the practice of law for two years
with credit for time served under the interim suspension.
{¶ 3} A panel of the Board of Commissioners on Grievances and
Discipline conducted a hearing and adopted the parties’ stipulations of fact and
misconduct and agreed with the recommended sanction. The board adopted the
panel’s report in its entirety, and no objections have been filed.
{¶ 4} We adopt the board’s findings of fact and misconduct and
conclude that a two-year suspension from the practice of law with credit for time
served under the interim suspension is the appropriate sanction in this case.
Misconduct
{¶ 5} For the tax years 2004 through 2007, Jacobs, a senior partner with
a large law firm, prepared federal income tax returns for himself and his wife
without the assistance of a professional tax preparer. During 2004 and through
2007, he incurred substantial business expenses for which he received
reimbursement from his firm, including travel expenses on client matters, costs of
attending meetings and events for bar associations and other professional and
civic organizations, seminar costs, and business entertainment expenses. Under
his firm’s procedures, he submitted detailed expense-reimbursement vouchers,
supported by receipts, for items that he personally paid for, usually by charges to
his personal credit card. The firm then issued reimbursement checks payable to
Jacobs that he deposited into his personal bank account.
1
Relator charged Jacobs with misconduct under the applicable Disciplinary Rules for acts
occurring before February 1, 2007, the effective date of the Rules of Professional Conduct, which
superseded the Disciplinary Rules of the Code of Professional Responsibility.
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January Term, 2014
{¶ 6} Each year, Jacobs received an IRS Schedule K-1 from the law
firm, which reported his ordinary business income from the firm and other items.
On each of his income tax returns for 2004 through 2007, Jacobs included a
Schedule E on which he reported his partnership income. On that form he also
listed the amount of ordinary business income from his Schedule K-1 and
subtracted an amount that he claimed as deductions for business expenses,
resulting in a net amount of partnership income that he then reported on his tax
return. Each year in that period, Jacobs knew that the amount that he claimed as
business-expense deductions was inflated, which resulted in understating his
income, which in turn falsely reduced his tax obligation.
{¶ 7} He falsely inflated his business-expense deductions in a number of
ways. For the years 2004 through 2006, he inflated his deductions by reporting
business expenses for which he had received reimbursement from the law firm
and thus had no net out-of-pocket expense. He deducted such reimbursed
expenses both for travel on client matters, for which the firm sought
reimbursement from the clients, and for nonclient expenses borne by the law firm.
{¶ 8} Jacobs also claimed deductions for nondeductible dues for personal
memberships at private clubs and charges for personal meals and other personal
uses of the clubs. He deducted meal and entertainment expenses at 100 percent of
the cost, even though he knew that those expenses, even when properly deducted,
were deductible at only 50 percent of the cost.
{¶ 9} Jacobs leased one or two automobiles per year that he used to
commute to his office and to drive for both business and personal purposes. He
improperly deducted all those vehicle expenses even though he made personal
and nondeductible use of the cars and also received reimbursement from his firm
for the business miles he traveled.
{¶ 10} Jacobs testified that he engaged in this misconduct because of his
frustrations with the federal government for falsely advising that his father died in
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a plane crash in World War II and concealing the fact that he had been executed
in a Japanese prisoner-of-war camp. He also was angry at the IRS for its alleged
harassment of his mother—up to her death—about her failure to timely withdraw
funds from her retirement account.
{¶ 11} In February 2008, an IRS revenue agent notified Jacobs and his
wife that their 2005 income tax return was under audit. Jacobs met with the agent
and an IRS supervisor later that month, provided the requested records, and was
interviewed. Later in 2008, the revenue agent expanded the audit to include 2004.
In July 2008, Jacobs met with the agent and a supervisor and provided the
requested 2004 records and was interviewed about his 2005 taxes. Following that
meeting, Jacobs faxed a written statement to the agent, discussing some of the
issues addressed in that meeting. In July 2009, the IRS advised Jacobs that he
was under a criminal investigation for his 2004 through 2007 income taxes, and a
special agent and revenue agent interviewed him.
{¶ 12} During the two audit meetings, in the faxed letter, and during the
criminal-investigation interview, Jacobs made false statements regarding the
items for which he claimed inflated deductions. On November 2, 2011, Jacobs
pled guilty to a federal information charging him with one count of making and
subscribing false tax returns in violation of 26 U.S.C. 7206(1) for the years 2004
through 2007. In the false returns for those four years, Jacobs understated his
taxable income by $256,380 and overstated his expenses by $253,256, resulting in
unpaid taxes of $75,385. He paid this shortfall in full on January 17, 2012, the
day he was sentenced.
{¶ 13} Jacobs was sentenced to serve 12 months and one day of
incarceration and one year of supervised release, including four months minus one
day of home confinement, and to pay a fine and special assessment totaling
$10,100. He paid the special assessment of $100 on the day he was sentenced and
the $10,000 fine on February 19, 2012. Jacobs completed his term of
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January Term, 2014
imprisonment, less good-time credit, on January 17, 2013, his term of home
confinement on May 16, 2013, and his supervised release on January 17, 2014.
{¶ 14} The parties stipulated, and the panel and board found, that Jacobs’s
conduct violated DR 1-102(A)(3) (prohibiting a lawyer from engaging in illegal
conduct involving moral turpitude) and Prof.Cond.R. 8.4(b) (prohibiting a lawyer
from committing an illegal act that reflects adversely on the lawyer’s honesty or
trustworthiness); DR 1-102(A)(4) and Prof.Cond.R. 8.4(c) (both prohibiting a
lawyer from engaging in conduct involving dishonesty, fraud, deceit, or
misrepresentation); and DR 1-102(A)(6) and Prof.Cond.R. 8.4(h) (both
prohibiting a lawyer from engaging in conduct that adversely reflects on the
lawyer’s fitness to practice law).
Sanction
{¶ 15} When imposing sanctions for attorney misconduct, we consider
relevant factors, including the ethical duties that the lawyer violated and the
sanctions imposed in similar cases. Stark Cty. Bar Assn. v. Buttacavoli, 96 Ohio
St.3d 424, 2002-Ohio-4743, 775 N.E.2d 818, ¶ 16. In making a final
determination, we also weigh evidence of the aggravating and mitigating factors
listed in BCGD Proc.Reg. 10(B). Disciplinary Counsel v. Broeren, 115 Ohio
St.3d 473, 2007-Ohio-5251, 875 N.E.2d 935, ¶ 21.
{¶ 16} The parties stipulated that four of the mitigating factors set forth in
BCGD Proc.Reg. 10(B)(2) are present, namely, (a) the absence of a prior
disciplinary record, (d) a cooperative attitude toward the proceedings, (e) good
character and reputation, and (f) imposition of other sanctions and penalties.
They also stipulated that Jacobs’s misconduct was personal, that it was not
committed in his capacity as a lawyer, and that it caused no harm to his clients.
{¶ 17} The panel and board also concluded that Jacobs had made a good-
faith effort to provide restitution, BCGD Proc.Reg. 10(B)(2)(c), and that he had
acknowledged the wrongful nature of his conduct. The panel and board found
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two aggravating factors: a dishonest or selfish motive and a pattern of
misconduct. BCGD Proc.Reg. 10(B)(1)(b) and (c).
{¶ 18} The parties cited several cases to support their recommendation of
a two-year suspension retroactive to the date of Jacobs’s suspension on April 3,
2012. The panel and board found Disciplinary Counsel v. Pace, 103 Ohio St.3d
445, 2004-Ohio-5465, 816 N.E.2d 1046, most persuasive.
{¶ 19} In Pace, the attorney was convicted of failing to disclose on his tax
return that he had an interest in or authority over a financial account in a foreign
country. Pace was sentenced to a two-month term at a federal minimum-security
facility and one year of supervised release. Based upon his felony conviction,
pursuant to Gov.Bar R. V(5)(A), we suspended Pace’s license to practice law for
an interim period. In his subsequent disciplinary action, the board found in
mitigation that Pace had practiced law for more than 35 years, had no prior
disciplinary record, and cooperated completely in the disciplinary process. The
board did not find any aggravating factors. We held that he violated DR 1-
102(A)(4) and (6), and we imposed a two-year suspension with credit for time
served under his interim suspension.
{¶ 20} Another similar case is Disciplinary Counsel v. Blaszak, 104 Ohio
St.3d 330, 2004-Ohio-6593, 819 N.E.2d 689, in which the attorney had offered to
sell truthful testimony in a pending case in return for $500,000 and $5,000 a
month for his continuing legal services. The government charged him with
selling testimony after he accepted a $50,000 down payment. Upon his federal
felony conviction, the court sentenced him to three years of supervised probation,
fined him $5,000, and ordered him to complete 500 hours of community service.
We imposed an interim felony suspension pursuant to Gov.Bar R. V(5)(A)(3) and
subsequently found that his conduct violated DR 1-102(A)(4), (5) (prohibiting
conduct prejudicial to the administration of justice), and (6).
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January Term, 2014
{¶ 21} We imposed a lesser sanction than disbarment or indefinite
suspension, noting the “overwhelming evidence of mitigation that respondent has
presented here.” Id. at ¶ 24. We acknowledged the significant number of
reference letters that the attorney presented and emphasized “the extensive
gratitude and appreciation these authors express[ed] for respondent’s professional
assistance in their lives and his achievements in the courts and community.” Id.
Based on “[t]hese testimonials, together with respondent’s contrition, completion
of his sentence, cooperation, the over two years his license has already been
suspended, and his heretofore exemplary record of professional and community
service,” we determined that a two-year suspension from the practice of law, with
credit for time served under the interim suspension, to be the appropriate sanction.
{¶ 22} In this case, we agree with the findings of the panel and the board.
Jacob lacks a prior disciplinary record, cooperated in the proceedings, paid all
taxes, acknowledged the wrongful nature of his conduct, and suffered the
imposition of other sanctions and penalties, including a federal prison sentence,
home confinement, supervised probation, and a $10,000 fine. See BCGD
Proc.Reg. 10(B)(2)(a), (c), and (d).
{¶ 23} Further, throughout his legal career, Jacobs has demonstrated his
good character and reputation in both the legal community and the community at
large through a significant number of character letters that speak to his
professionalism and his contributions to the bar and to community organizations.
See BCGD Proc.Reg. 10(B)(2)(e). He has served the legal community in
capacities as the former president of the Ohio State Bar Association and as an
officer and committee chairman of the American Bar Association, and it is
apparent that he could further contribute if allowed to return to the practice of
law.
{¶ 24} Disciplinary Counsel v. Smith, 128 Ohio St.3d 390, 2011-Ohio-
957, 944 N.E.2d 1166, is distinguishable on its facts. There, Smith concealed
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approximately $250,000 in annual income from the IRS for several years, failing
to report $1,411,265 in income to the IRS. And in response to an audit, he
allowed his representative to present fraudulent documentation of expenses Smith
had not incurred and to falsely state that Smith had no source of income other
than that reported on his tax returns. A federal court convicted Smith of one
count of conspiring to defraud the IRS, four counts of making false tax returns,
and one count of corruptly endeavoring to obstruct and impede the ensuing IRS
investigation, and it sentenced him to one year and one day in federal prison and a
two-year period of supervised release. The court ordered restitution of $395,154
to the IRS; however, as of the panel hearing, Smith had only paid $2,000 in
restitution. Based on our holding that Smith’s conduct violated DR 1-102(A)(3),
(4), (5), and (6), we indefinitely suspended him from the practice of law in Ohio,
allowing him credit for time served under his interim suspension.
{¶ 25} In contrast to Smith, Jacobs has been convicted of one count of
making false tax returns and did not seek to obstruct the IRS investigation. And
unlike Smith, who still owed the IRS $393,154 in restitution as of the time of the
panel hearing, Jacobs had paid the $75,385 owed in delinquent taxes before
sentencing. Based on Jacob’s conduct, a sanction is warranted in accord with our
decisions in Pace and Blaszak.
{¶ 26} Accordingly, we accept the recommendation of the Board of
Commissioners on Grievances and Discipline and in this case suspend Jacobs
from the practice of law in Ohio for two years with credit for the time served
under the interim suspension that began on April 3, 2012. Costs are taxed to
Jacobs.
Judgment accordingly.
O’CONNOR, C.J., and PFEIFER, O’DONNELL, LANZINGER, KENNEDY,
FRENCH, and O’NEILL, JJ., concur.
____________________
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January Term, 2014
Scott J. Drexel, Disciplinary Counsel, and Donald M. Scheetz, Assistant
Disciplinary Counsel, for relator.
Schwartz, Downey & Co., L.P.A., Niki Z. Schwartz, and Brian P.
Downey, for respondent.
_________________________
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