BEFORE THE VIRGINIA STATE BAR DISCIPLINARY BOARD
IN THE MATTER OF
JOHN ASHTON WRAY, JR.
VSB DOCKET NO. 01-010-2860
ORDER OF PUBLIC REPRIMAND WITH TERMS
This matter came to be heard on February 19, 2004, upon an Agreed Disposition between the Virginia State Bar, the Respondent, John Ashton Wray, Jr. and his counsel, Timothy G. Clancy, Esquire.
A duly convened panel of the Virginia State Bar Disciplinary Board consisting of H. Taylor Williams IV, Esquire, Bruce T. Clark, Esquire, James L. Banks, Jr., Esquire, Thaddeus T. Crump, Lay Member, and Roscoe B. Stephenson, III, Esquire, Chair, considered the matter by telephone conference. The Respondent, John Aston Wray, Jr., Esquire, appeared with his counsel, Timothy G. Clancy, Esquire. Edward L. Davis, Assistant Bar Counsel, appeared on behalf of the Virginia State Bar.
Upon due deliberation, it is the unanimous decision of the board to accept the Agreed Disposition. The Stipulations of Fact, Disciplinary Rule Violations, and Disposition agreed to by the Virginia State Bar, the Respondent and his counsel are incorporated herein as follows:
1. During all times relevant hereto, the Respondent, John Ashton Wray, Jr. (hereinafter Respondent or Mr. Wray) was an attorney licensed to practice law in the Commonwealth of Virginia.
2. On May 21, 2001, in the United States District Court for the Eastern District of Virginia, Newport News Division, Mr. Wray pled guilty to a one-count criminal information charging him with Failure to Pay Income Tax, in violation of Title 26, United States Code, Section 7203, a misdemeanor. Mr. Wray's plea was pursuant to a plea agreement.
3. The criminal information charged that Mr. Wray received taxable income of $335,756 during tax year 1996, on which he owed $130,661 in federal income tax, but that he willfully failed to pay the tax
4. During Mr. Wray's guilty plea hearing, the United States Attorney advised the court that during the 1980's, Mr. Wray had been involved with several investors in some investment projects with Saudi Arabia, importing computer equipment, trying to contract to clean an airport there, and importing Caterpillar earth moving equipment. He also engaged several other investors for a clothing manufacture venture in Newport News, Virginia. The investment projects all failed. For several years, Mr. Wray wrote off the interest paid to the investors as a business income tax deduction.
5. The U. S. Attorney reported further that, in November 1993, the United States Tax Court ruled that Mr. Wray could not write off the interest payments as business expenses. This had the unfortunate effect of giving Mr. Wray a substantial tax liability for tax years 1980 to 1994 that, with interest and penalties, approached two million dollars. Further, Mr. Wrayís liability to his investors totaled millions of dollars, and many of them obtained judgments against him.
6. The U. S. Attorney also reported that Mr. Wray filed his income tax returns as required, but did not pay all of the taxes. From 1993 through 1997, based on an IRS analysis, Mr. Wray had a total taxable income of $1,952,000, and a personal income tax liability of more than $741,000. He paid more than $934,000 to the investors, but paid only $9,000 in withholding taxes.
7. For the 1996 tax year, in addition to the facts charged in the criminal Information, Mr. Wray paid $64,017 to the investors, leaving him with about $271,000 in funds available. Of those funds, the IRS determined that he spent approximately $36,000 in child support, $4,000 in health insurance, $16,000 in condominium rent, $6,000 in car payments, and approximately $11,600 in American Express payments. According to the U. S. Attorney's summary, this left Mr. Wray with approximately $197,939 unaccounted for, and the Government could not establish where this money went, but that he did not use it to satisfy the tax liability for that year. Similarly, in 1997, he had about $200,000 remaining after equivalent payments, but the IRS could not account for the remaining money, and none of it was paid toward his tax liability.
8. In his plea agreement with the Government, Mr. Wray stipulated that the relevant total tax loss was $909,249 for tax years 1993-1999.
9. Mr. Wray's attorney advised the court that what the U.S. Attorney told the court was a fair summary of what he would expect the evidence to show. He stipulated to the evidence that the Government presented to the court, with some additional comments. Specifically, he noted that there was no suggestion of fraud in the case, that it was not a situation where someone concealed income in an attempt to avoid tax liability, that the IRS found that Mr. Wray had properly filed his income tax returns, but that he did not pay the taxes owed. The United States Attorney advised the court that he had no disagreement with the representations made by Mr. Wray's counsel.
10. Likewise, Mr. Wray himself addressed the court and said that the summary presented by the United States Attorney was a fair summary of the evidence he would have expected the Government to present, and that with the inclusions made by his attorney, it was a fair representation of what happened.
11. On August 23, 2001, in accordance with mandatory sentencing guidelines, the court sentenced Mr. Wray to twelve months in prison, supervised release for a period of one year, restitution in the amount of $250,000 to the Internal Revenue Service, and a $25 assessment. The court recommended that he spend all or a substantial amount of his sentence in a halfway house, and stated further that it did not oppose his being allowed to practice his profession during regular business hours.
12. At sentencing, the court announced that there was no evidence to suggest that Mr. Wray ever attempted to defraud the United States with regard to what his obligation was, that he simply did not pay the amount, and that he tried to pay the creditors from whom he borrowed money. On the record, the court said, "You're a great lawyer, but you're a lousy businessman."
II. DISCIPLINARY RULE VIOLATIONS
The parties agree that the foregoing facts give rise to violations of the following Disciplinary Rules and Rules of Professional Conduct:
DR 1‑102. Misconduct.
(A) A lawyer shall not:
(3) Commit a crime or other deliberately wrongful act that reflects adversely on the lawyer's fitness to practice law.
In accordance with the Agreed Disposition, it is the decision of the Disciplinary Board to Issue a Public Reprimand, and the Respondent, John Ashton Wray, Jr., is hereby reprimanded effective upon entry of this order and subject to the following terms and conditions:
1. The Respondent, John Ashton Wray, Jr., is hereby placed on disciplinary probation for a period of two (2) years, said period to begin the date that this order is entered. Mr. Wray will engage in no professional misconduct as defined by the Virginia Rules of Professional Conduct during such two-year probationary period. Any final determination of misconduct determined by any District Committee of the Virginia State Bar, the Disciplinary Board, or a three-judge court to have occurred during such period will be deemed a violation of the terms and conditions of this Agreed Disposition and will result in the imposition of the alternate sanction, a suspension of the Respondent's license to practice law in the Commonwealth of Virginia for a period of six (6) months. The alternate sanction will not be imposed while Mr. Wray is appealing any adverse decision which might result in a probation violation.
2. The Respondent will continue to comply with the existing Order of Restitution as specified in the sentencing order imposed by the United States District Court.
Failure to comply with any of the foregoing terms and conditions will result in the imposition of the alternate sanction, the Suspension of the Respondentís license to practice law in the Commonwealth of Virginia for a period of six (6) months. The imposition of the alternate sanction will not require a hearing before the Three-Judge Court or the Virginia State Bar Disciplinary Board on the underlying charges of misconduct stipulated to in this Agreed Disposition if the Virginia State Bar discovers that the Respondent has violated any of the foregoing terms and conditions. Instead, the Virginia State Bar shall issue and serve upon the Respondent a Notice of Hearing to Show Cause why the alternate sanction should not be imposed. The sole factual issue will be whether the Respondent has violated the terms of this Agreed Disposition without legal justification or excuse. The imposition of the alternate sanction shall be in addition to any other sanctions imposed for misconduct during the probationary period. All issues concerning the Respondent's compliance with the terms of this Agreed Disposition shall be determined by the Virginia State Bar Disciplinary Board, unless the Respondent makes a timely request for hearing before a three-judge court.
The court reporter who transcribed these proceedings is Teresa L. McLean, Shorthand Reporter, of Chandler & Halasz, Registered Professional Reporters, Post Office Box 9349, Richmond, Virginia 23227. (804) 730-1222.
Pursuant to Part 6, Sec. IV, Para. 13.B.8(c) of the Rules, the Clerk of the Disciplinary System shall assess costs.
A copy teste of this ORDER shall be shall be served by the Clerk of the Disciplinary System upon the Respondent, John Ashton Wray, Jr., by certified mail, return receipt requested, at 10-B West Queen's Way, Hampton, Virginia 23669, and to Respondent's counsel, Timothy G. Clancy, Tower Box 78, 2101 Executive Drive, Hampton, Virginia 23666, and hand delivered to Edward L. Davis, Assistant Bar Counsel, Virginia State Bar, 707 East Main Street, Suite 1500, Richmond, Virginia 23219.
ENTERED THIS _________ DAY OF ___________, 2004
THE VIRGINIA STATE BAR DISCIPLINARY BOARD
Roscoe B. Stephenson, III, Chair