IN THE MATTER OF
OLIVER STUART CHALIFOUX
VBS DOCKET NO. 03-033-3680
ORDER OF SUSPENSION AND OPINION
This matter came on to be heard on October 24, 2003, at 9:00 a.m., upon the Virginia State Bar's Notice of Noncompliance and Request for Interim Suspension, dated September 25, 2003, duly served on Oliver Stuart Chalifoux (the "Respondent") based on the alleged failure of the Respondent to comply with the Virginia State Bar's subpoena duces tecum served on the Respondent; upon the Respondent's timely Request for Hearing to withhold entry of a suspension order; and upon the Virginia State Bar's timely and proper Notice of Hearing duly served on the Respondent.
The hearing was held before a duly
convened panel of the Virginia State Bar Disciplinary Board, composed of Robert
L. Freed, Chair, Robert E. Eicher, Richard J. Colton, V. Max Beard, Lay Member,
and David R. Schultz.
The Respondent appeared pro se. Linda Mallory Berry, Assistant Bar Counsel, represented the Virginia State Bar. Donna Chandler of Chandler & Halasz, Registered Professional Reporters, Post Office Box 9349, Richmond, Virginia (804) 730-1222, after being duly sworn, transcribed the hearing.
The Chair inquired whether any member of the panel of the Disciplinary Board had a personal or financial interest or bias in the matter which would preclude their hearing the matter fairly and impartially, and each member (including the Chair) answered in the negative.
The Chair stated that the hearing was convened in compliance with the Respondent's request for a hearing, and that Respondent had the burden of proving good cause for his alleged non-compliance with the Virginia State Bar's subpoena duces tecum.
Virginia State Bar Exhibits 1 through 12 were admitted in evidence without objection. Respondent's Exhibits 1 through 6 (inclusive of Exhibits 4A, 4B, 4C, and 4D) were admitted in evidence without objection. Counsel for the Virginia State Bar and the Respondent presented argument.
Upon consideration whereof, the Disciplinary Board finds that a disciplinary complaint (VSB Docket No. 03-033-3680) has been filed against the Respondent; that at the instance of the Third District Committee Section III of the Virginia State Bar, the Virginia State Bar issued a subpoena duces tecum to the Respondent, which was personally served on him on September 9, 2003, returnable to the Virginia State Bar on September 22, 2003, by 3:00 p.m.; that on September 23, 2003, Assistant Bar Counsel received a telephone voicemail message from the Respondent requesting additional time to prepare the documents subpoenaed because he had suffered a power outage at his office; that Assistant Bar Counsel spoke with the Respondent by telephone on September 23, 2003, and granted the Respondent's request to extend the time for his response to the subpoena duces tecum to September 24, 2003, by 3:00 p.m.; that the Respondent has failed to produce, and continues to fail to produce, the documents described in the subpoena duces tecum; and that, by the Respondent's admission at the hearing, the tax returns described in the subpoena duces tecum were in a file in his possession at the hearing.
The Respondent argued that the subpoena duces tecum was issued to Oliver Stuart Chalifoux, Esquire (emphasis added), and that the documents described in the subpoena duces tecum (consisting of personal and business tax returns for Deborah and/or Roger Socha and their business, System Automation, Inc., respectively, and preparation documentation) were prepared by him in his non-lawyer capacity as a tax accountant on behalf of Chalifoux Tax Accounting, Inc. Hence, the Respondent claimed, the subpoena duces tecum was served on the wrong party, viz., Oliver Stuart Chalifoux, Esquire, instead of Oliver Stuart Chalifoux, Tax Accountant, or Chalifoux Tax Accounting, Inc. Indeed, the Respondent's Request for Hearing alleges that Oliver Stuart Chalifoux, Esquire, and his law firm, O. Stuart Chalifoux, P.C., "never exercised even the slightest measure of dominion and control over the materials that are the subject of the subpoena."
The Respondent's argument is disingenuous
and is utterly betrayed by his admission that he, i.e., Oliver Stuart Chalifoux,
Esquire, had the tax returns sought by the subpoena duces tecum in a
file he brought to the hearing. Moreover, the record shows that the Respondent
blurred the capacity in which he represented the Sochas and their business entity.
For example, he signed federal and Virginia applications for filing extensions
as O. Stuart Chalifoux, Esq. (VSB Exhibit 6) He signed an invoice from O. Stuart
Chalifoux, Tax Accountant, to the Sochas' business entity charging a fee of
$250 for stated services that included "Preparation of: 1. Articles of Incorporation."
(VSB Exhibit 7) Only a lawyer may prepare articles of incorporation. (UPL Opinion
No. 67) He sent 2001 estimated tax vouchers to Mr. Socha with a Fax Cover Sheet
of O. Stuart Chalifoux, P.C., Attorney at Law. (VSB Exhibit 9) In short, the
Respondent himself represented his capacity as the lawyer for the Sochas and
their business entity with respect to their tax matters. That he was also their
tax accountant does not displace his role as their lawyer.
Significantly, the Respondent admitted at the hearing that he is the president and sole officer and director of his law firm, O. Stuart Chalifoux, P.C., and the president and sole officer and director of Chalifoux Tax Accounting, Inc. Though the entities are separate, the Respondent is a link in common, is one and the same person, and is not permitted to play musical chairs in refusing to comply with the subpoena duces tecum. The Respondent, Oliver Stuart Chalifoux, Esquire, is in fact the principal in both Chalifoux Tax Accounting, Inc., and O. Stuart Chalifoux, P.C. His claim that the "wrong party" was served elevates form over substance and is rejected.
The Respondent also claimed that requiring him to produce the documents will cause an unspecified harm to his case-in-chief. Presumably, his case in chief consists of the disciplinary complaint filed against him. What the Respondent overlooks is that his refusal to produce the documents will thwart the investigative authority of the Virginia State Bar and correspondingly, thwart a full and fair consideration of the disciplinary complaint against him. Essentially, the Respondent seeks immunity from a disciplinary investigation. His claim is rejected.
Finally, the Respondent claimed,
and emphasized, that compliance with the subpoena duces tecum will permit
the Sochas to obtain their tax returns even though they have not paid Chalifoux
Tax Accounting, Inc., for the preparation. The Respondent was insistent that
he would not produce the returns until the Sochas paid the balance of less than
$1500 owed for the preparation. The Respondent conceded, however, that he was
not aware of any retaining lien conferred on accountants to withhold clients'
files until the clients paid their bill. There is no such lien. See Right
of Accountant to Lien upon Client's Books and Records in possession of Accountant,
76 A.L.R. 2d 1322 (1971).
Moreover, the Sochas' tax returns were in a file that the Respondent brought to the hearing. Unquestionably, Rule 1.16 of the Virginia Rules of Professional Conduct does not permit a lawyer to withhold a client's files until the client's bill has been paid the lawyer, let alone withholding the files until the client's bill has been paid to another creditor.
The Respondent's claim of "irreparable harm" to Chalifoux Tax Accounting, Inc., if he produces the tax returns before the Sochas pay their bill is simply hyperbole. There is an adequate remedy at law a civil warrant alleging an indebtedness. The Respondent's claim of no pay- no production essentially invites this Board to leverage the Sochas for payment. This Board declines the invitation and rejects the Respondent's claim.
It is noted that paragraph 3 of the Respondent's Request for Hearing accuses counsel for the Virginia State Bar and its investigator of being "personally complicit," along with the Sochas, in a "scheme" to assist the Sochas in evading payment for their tax returns. The Respondent offered no factual justification for his allegation, and this Board finds the allegation to be unprincipled. The fact is that counsel for the Virginia State Bar and its investigator have merely discharged the investigative responsibilities cast by Part 6, § IV, para. 13 of the Rules of the Supreme Court of Virginia.
This Board notes with dismay the Respondent's statement that, because their bill was not paid, he had not delivered the Sochas' 2001 tax returns, which had been completed in June of 2002, and that he permitted their extension of time for filing their 2001 tax returns to expire without delivering the tax returns or applying for another extension. The Sochas' tax returns are thus delinquent and subject to penalty. Even if the Respondent acted as the accountant, as he claimed, it would not excuse his prejudice of the Sochas' interest. This Board observes that if a lawyer acting in a fiduciary capacity violates his duty in a manner that would justify disciplinary action had the relationship been that of attorney-client, the lawyer is subject to discipline under the Virginia Rules of Professional Conduct. LEO #1617 (1995).
The Board also notes that in LEO #1634 (1995), a lawyer-accountant, who represented a husband and wife solely as an accountant in preparing tax returns, could not thereafter represent only the husband as an accountant in an IRS challenge affecting those tax returns, unless the wife consented to such representation. The LEO cites DR 5-105(D) as the basis of its holding. DR 5-105(D) is carried forward as Rule 1.9(a) in the Virginia Rules of Professional Conduct. Thus, even if the Respondent could prevail on his claim that he acted only as an accountant (which he can not), he cannot avoid the production of documents sought by the subpoena duces tecum, since he is a lawyer subject to the Rules of Professional Conduct even though he acted, arguendo, only in his capacity as an accountant.
This Board also notes that it has
concerns about possible unauthorized practice of law by Chalifoux Tax Accounting,
Inc., and about the truthfulness of the Respondent's answers to questions regarding
the reasons for a prior suspension of his license to practice law in the Commonwealth
Upon consideration of the foregoing, this Board finds that the Respondent has failed to prove good cause for his failure to comply with the Virginia State Bar's subpoena duces tecum served on him. Accordingly, it is ORDERED, as follows:
(1) That pursuant to paragraph 13.B.5.b.(3),
the Respondent's license to practice law in the Commonwealth of Virginia be
and hereby is SUSPENDED effective immediately until such time as he fully complies
with the subpoena duces tecum from the Virginia State Bar on behalf of
the Third District Committee Section III, served on the Respondent on
September 9, 2003;
(2) That counsel for the Virginia State Bar obtain a transcript of this hearing and examine it to determine whether grounds exist for charges of misconduct against the Respondent;
(3) That, as directed in this Board's Summary Order on October 24, 2003, a copy of which was served on the Respondent by certified mail, the Respondent shall comply with the requirements of Part 6, Section IV, paragraph 13M of the Rules of the Supreme Count of Virginia, with all issues concerning the adequacy of the notice and arrangements required by the Summary Order to be determined by this Board; and
(4) That the Clerk of the Disciplinary System shall forward a copy of this Order of Suspension and Opinion by certified mail, return receipt requested, to the Respondent, Oliver Stuart Chalifoux, at his address of record with the Virginia State Bar, Lexington Commons Office Park, 10132 West Broad Street, Glen Allen, Virginia 23060, and by hand delivery to Linda Mallory Berry, Assistant Bar Counsel, Virginia State Bar, 707 East Main Street, Suite 1500, Richmond, Virginia 23219-2800.
ENTERED this 17th day of November, 2003.
VIRGINIA STATE BAR DISCIPLINARY
By: /s/ Robert L. Freed, 2nd Vice Chair