August 20, 2009
No Reason To Squeal
The Washington Supreme Court affirmed findings of misconduct and imposed a six-month suspension of an attorney for a conflict of interest in representing both a mother and son (a high school friend) in a family dispute and (for the mother) estate planning services. The clients were involved in a dispute with a sibling of the son. The court found:
The hearing officer found conflict inherent in Ruth [the mother] and Jan's [the son's] various business arrangements. Ruth and Jan were lessor and lessee of the Magnolia real property, and Botimer assisted both of them in this venture. Botimer also assisted Ruth on estate planning matters, while advising Jan as a potential beneficiary of Ruth's estate. Also, when advising on a possible restructuring of ACC, a potential conflict arose in the context of Botimer's representation of Ruth and Jan. Substantial evidence exists on the record to support these findings and conclusions.
The court also concluded that the conduct of the lawyer in blowing the whistle to the IRS on tax returns he had prepared violated his duty of confidentiality:
Botimer offers up a defense to the charge of improper disclosure of client information to the IRS on the grounds that he was fulfilling a legal duty to disclose under federal law. His arguments are not availing. Applicable federal tax code does not create a duty to do more than advise a client of past mistakes... Moreover, the duty to preserve client confidences outweighs whatever marginal benefit gained by reporting past wrongdoings. The crime/fraud exception under former RPC 1.6(b)(1) does not apply to arguably fraudulent tax returns. Finally, Botimer misapprehended his risk of perjury under federal law. Botimer contends that the federal tax code creates a duty on the part of tax preparers to disclose prior false entries on personal tax returns of their clients. The hearing officer found no such duty, based largely on the testimony of a tax expert. The hearing officer was entitled to credit the expert's testimony. Further, construction of the applicable statutes, reviewed de novo, reveals that Botimer's position is untenable. Under 31 C.F.R. § 10.21, a tax preparer "must advise the client promptly of the fact of such noncompliance, error, or omission. The practitioner must advise the client of the consequences as provided under the Code and regulations of such noncompliance, error, or omission." Moreover, 31 C.F.R. § 10.51(a)(4) creates a sanctionable offense only when a practitioner knowingly provides false or misleading information but phrases the offense in the present tense and says nothing about a duty of later disclosure. In addition, the crime/fraud exception does not permit the revelation of prior unlawful conduct in the form of false information placed on a tax return.
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