Thursday, June 26, 2008

Imputed Misconduct Justifies License Denial

An accountant who had been convicted of wire fraud arranged to be a 49% shareholder of a public accounting firm while there was a pending proceeding to revoke his license. The Missouri Supreme Court held that the Board of Accountancy properly exercised its discretion not to grant a license to the firm. It was not error to impute the prior individual misconduct to the new entity:

...the Commission further held that because the relevant conduct occurred prior to IFS's formation as a corporate entity, the Board could not consider it. This reasoning is flawed because a new firm applying for an initial permit has no history and, so, to require the Board to issue the permit, regardless of the background and character of the corporate owners, would frustrate the intent of section 326.310. Reading the statutes together, the authority of the Board to deny a permit under section 326.310 by imputing the past misconduct of the owners to the new firm is at least implicit, if not express. Kossmeyer is a convicted felon who has been found unfit to practice accountancy in the state of Missouri, and his conduct reflects no less poorly on the fitness of IFS as a public accountancy firm simply because it occurred before the entity's formation.

(Mike Frisch)

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