Thursday, May 21, 2015

Attorney Suspended from Tax Court Because of Flawed Strategy From Alleged Continuing Criminal Investigation (5/21/15)

Scott Schumacher guest authored this outstanding blog How Not to Get Out of a Tax Court Case (Procedurally Taxing 5/21/15), here.  The order (with attachments) giving rise to Scott's guest blog is here.

Highly summarized, an attorney represented taxpayers, husband and wife, before the Tax Court in a civil case involving some of the same years for which the taxpayer-husband had previously been under criminal investigation.  The case was set for trial.  Then, when the case was called on the date for the trial, the taxpayer-husband was present but his attorney was not.  Taxpayer-husband advised the court that his attorney was not going to appear because his nonappearance was a better strategy, which the taxpayer explained: "he felt like putting me on the stand as a witness would be bad for our case, because of the criminal investigation at the same time."  Of course, the criminal investigation had been terminated by that time, and IRS counsel so assured the Court.  The Court allowed the IRS to put on its case without calling the taxpayer-husband.  The taxpayer-husband then filed a series of motions prepared by the attorney, apparently in furtherance of the strategy.  When the case was called the next day, the attorney again failed to appear but another attorney, the taxpayer's attorney in the terminated criminal investigation, appeared and entered his appearance for the taxpayer.  I will refer to this second attorney as the criminal attorney, although he had entered an appearance in the Tax Court case.  After some consultation, the parties announced that they had reached the terms of a resolution of the case that needed to be documented.  The Court gave the parties 120 days to file the documents.  On or around the 120th day, after the criminal attorney failed to execute the documents, the IRS moved for entry of decision.  Apparently, the taxpayer-husband was not cooperating with the criminal attorney and had then instructed him to withdraw so as to permit the original attorney to handle the case.  The Court denied the motion to withdraw.  The original attorney then filed a motion to withdraw, claiming, inter alia, inability to represent the taxpayers because of the "ongoing criminal investigation for those and other tax years."  The taxpayers continued to claim that the original attorney represented them.  In addition, the taxpayers claimed that they were "prejudiced 'by being denied effective representation during critical cross-examination of Government witnesses and during settlement discussions [handled by the criminal attorney].'"

From all of this, the Tax Court issued a suspension order as follows:
ORDERED that the Court's Order to Show Cause, issued August 12,2014, is hereby made absolute in that under the provisions of Rule 202, Tax Court Rules of Practice and Procedure, Mr. Hammond is forthwith suspended from further practice before the United States Tax Court, until further order of the Court. A practitioner who has been suspended may apply for reinstatement. See Rule 202(1), Tax Court Rules of Practice and Procedure, for reinstatement procedures. It is further
ORDERED that Mr. Hammond's practitioner access to case files maintained·by the Court in electronic form, if any such access was given to him, is hereby revoked. It is further  
ORDERED that, until reinstated, Mr. Hammond is prohibited from holding himself out as a member of the Bar of the United States Tax Court. It is further  
ORDERED that the Court will file orders to withdraw Mr. Hammond as counsel in all pending cases in which he appears as counsel of record. It is further  
ORDERED that Mr. Hammond shall, within 20 days of service of this order upon him, surrender to this Court his certificate of admission to practice before this Court. 
As I said, this is a high level summary, which omits a lot of drama and nuance.  I refer readers to Scott's excellent blog and to the order.

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