NO. 92-465
IN THE SUPREME COURT OF THE STATE OF MONTANA
1993
IN RE THE PETITION OF
ROBERT G. STEELE
APPEAL FROM: ORIGINAL PROCEEDING
COUNSEL OF RECORD:
For Appellant:
Larry M. Elison, Attorney at Law, Missoula, Montana
For Respondent:
K. Paul Stahl, Attorney at Law, Helena, Montana
Submitted on Briefs: August 5, 1993
Decided: December 22, 1993
Filed:
Justice Fred J. Weber delivered the Cpinion of the Court.
Petitioner Robert G. Steele appeals from the final decision of
the State Bar of Montana Committee on Character and Fitness
(Committee) refusing to certify petitioner to this Court for
admission to the State Bar of Montana. We affirm the decision of
the Committee.
The sole issue presented is whether the Committee properly
concluded that Mr. Steele is unfit to practice law in the State of
Montana.
Robert G. Steele (Steele) submitted his application for
admission to the State Bar of Montana on November 15, 1990,
intending to take the February 1991 bar examination. On December
26, 1990, after a review of his Character and Fitness application,
the Committee sent a letter to Steele advising him that it had
"serious concerns" about his convictions for driving under the
influence (DUI) and tax liens and requested that Steele provide the
Committee with DUI records and dispositions, copies of Internal
Revenue Service (IRS) deficiency notices and copies of his
responses to the IRS.
The Committee also noted that Steele had applied to take the
February 1991 exam but would not be graduating from the University
of Montana School of Law until the spring of 1991. Steele was
asked to submit a written explanation of why he had applied to take
the February examination when he would not have fulfilled the
graduation requirement until June. Steele responded by telephone
that he had applied for a faculty waiver for a required one-credit
course which he had attempted to replace with an "independent
study" project. He stated that he would not know until February 4,
1991, whether the faculty would grant his request for a waiver.
After the faculty denied his request for waiver, Steele requested
that the State Bar allow him to take the examination without
meeting the graduation requirement and he was advised that this was
not possible without permission from this Court.
On February 13, 1991, the committee met to review Steele's
application and decided not to certify Steele for the bar
examination and admission due to the concerns previously noted.
The Committee advised Steele that he could appear in person for an
informal hearing regarding the decision. Steele accepted. The
Committee's position did not change following the informal hearing.
The Committee was particularly concerned with Steeleis
interaction with the IRS. Steele is a Certified Public Accountant
licensed to practice in Montana and is thus conversant with IRS
regulations and procedures. Steele did not file timely personal
income tax returns for tax years 1982 through 1986. With penalties
and interest added, Steele's personal tax liability to the IRS was
greater than $208,000 at the time of the informal hearing.
Steele provided an authorization for disclosure and waiver for
the Committee's use in obtaining relevant information fromthe IRS.
He also submitted numerous documents to the Committee demonstrating
his tax protest activities in the early 1980s. Most of these
documents consisted of correspondence to and from members of the
Montana Congressional delegation.
During the time between the request for the informal hearing
and May 1, 1991, the date of the hearing, Steele made offers in
compromise for his tax liability, offering slightly more than 1% in
compromise of his federal and state taxes owed. At the hearing,
Steele presented copies to the Committee of his written offers to
these agencies and discussed his difficulties with the IRS in more
detail:
I have an offer and compromise that I mailed off to
the federal government for all the back taxes. I don't
know if they will accept this offer and compromise, but
it's the first time that I have been able to offer
anything. I am only offering what I can afford to pay
here. I am in hopes that if they don't accept this
offer, another one can be worked out. And here is the
same thing with the state of Montana.
I have sat down and I have talked to these people.
I have met with the Internal Revenue agents. They
understand. They have no gripe with me. As a matter of
fact, they offered to -- They wanted me to go to work for
them, and I have agreed to do work for them. They told
me they will pay me for both my time and my expenses, and
I have agreed to do that. I have to assume from that
that they have a certain amount of trust in me as well.
Steele responded to additional questions from Committee
members pertaining to his tax liability and his tax protest
activities, including questions concerning his involvement with the
Golden Means Society, a group which advocated not filing tax
returns on the basis of constitutional rights and which no longer
exists. He testified as follows:
MS. BRANDBORG: In working with those people in the
Golden Means Society, when people would come to you as an
accountant and ask your advice, what type of advice were
you giving, and did it essentially follow the same
pattern that you followed in refusing to pay taxes?
MR. STEELE: . . .
We didn't refuse to pay taxes.
We refused to file a return with the information that was
on there. The answer to your question is, no, I didn't
get into a professional advisory capacity, unless it was
in the realm of my expertise in the tax law. And there
was a lot of that, an awful lot of that.
In fact, I primarily was preparing tax returns for
people who hadn't filed for a while. I was preparing
these returns through their records and getting them up
to date, currently.
I, myself, wanted to find out what basis there was
to a lot of the constitutional challenges; and I wrote
those letters and took those stances. "Example only,** I
wrote on the first return that I filed, requesting
assistance; and I got quite a few answers from different
senators that were encouraging our position at that time.
Steele testified that in 1987, after certain tax reform
legislation was enacted, he finally filed returns for the years
1982-1986. He stated that after numerous tax court appearances, he
was convinced that his tax protest methods were not going to work.
He also testified that he felt his efforts had been helpful in
changing the tax laws.
At the request of the Committee, Steele provided an
authorization to disclose information about his income tax and
"other matters" for tax years 1982 through 1990 and his permission
to discuss an "Agreement to Assist IRSt*
with Larry Huggins, an IRS
investigations officer from the M ~ S S O U ~ ~office.
IRS The District
Counsel for the IRS in Montana responded in writing to the
Committee's request for information, stating that the IRS opposed
Steele's admission to the State Bar of Montana. The letter also
stated that a memorandum had been circulated to IRS employees in
Montana asking for their input regarding the request and that
several memoranda were received in response from IRS employees who
had dealt with Steele and copies of such were attached to the
letter. The Committee also was informed that Steele had never been
employed by the IRS, but that he had agreed to work with the IRS in
a special capacity and that he had provided such services to the
IRS.
The letter noted the following about Steele's dealings with
the IRS: (1) that he had been a member of the Golden Means Society
which advocated violation of the tax laws; (2) that he failed to
timely file income tax returns for tax years 1982 through 1986 and
only filed them after entering law school: (3) that his tax
liability was in excess of $200,000 and that he had made no effort
to pay any of the taxes when he was earning a substantial salary as
a CPA; (4) that he encourages his clients to ignore the IRS
Examination Division during its audit procedures and to request
conferences with the Appeal's Division without a meaningful audit
and delays resolution of cases pending before the Tax Court until
the eve of trial, a tactic which he apparently believes will obtain
more favorable results for his clients; and (5) that his actions
indicate that he does not believe he is required to follow the
Internal Revenue laws of the United States.
One of the attachments to the letter stated that Steele had
been the subject of two IRS criminal investigations in the 1980s,
although each case resulted in a decision by the IRS not to
prosecute. This was the first knowledge the Committee obtained
about the criminal investigations. One of the criminal
investigations, in which Steele was designated a co-conspirator
because of his affiliation with the Golden Means Society, concerned
an alleged conspiracy to impede and impair the IRS in assessment
and collection of taxes. Steele testified that he did not timely
file the tax returns because a taxpayer under criminal investiga-
tion is not required to file returns until the investigation is
resolved. Steele refused to voluntarily file tax returns other
than "5th amendment constitutional" tax returns until his criminal
case was resolved. The IRS does not consider these to be actual
returns as they do not list income and deductions.
The second criminal investigation centered around Steeleis
failure to pay taxes due and owing for 1982 through 1986 after he
filed the actual returns in 1987. Although the IRS suspected that
Steele had transferred property and filed false financial
statements with the IRS to preclude paying taxes, the IRS later
determined that Steele had not falsified any documents or secreted
away funds in order to avoid paying the IRS and that Steele had
spent all his funds for personal reasons rather than making
estimated tax payments. The revenue officer handling Steeless
returns noted that she had "minimal cooperationw from Steele.
In a letter dated August 9, 1991, Steele responded to the
information disclosed by the IRS. On August 23, 1991, the
Committee provided formal notice to Steele by certified mail of its
denial of certification for admission to the State Bar of Montana.
The Committee stated the following as reasons for denial:
Unlawful conduct, as evidenced by your DUIs and your
failure to pay taxes;
Making of false statements including omissions as shown
7
by your failure to disclose the IRS's criminal
investigations of your activities;
Abuse of legal process as reported in IRS District
Counsel's letter of July 26, 1991;
Neglect of financial responsibilities as shown by your
tax liens; and
Neglect of professional responsibilities as evidenced by
your failure to adhere to the tax laws even though you
are fully aware of them in your capacity as a CPA.
Pursuant to the Rules of Procedure of the Committee on Character
and Fitness, Steele formally responded to each of the five reasons
given by the Committee for denial of certification and filed a
Request for Reconsideration and Hearing.
A reconsideration hearing was held on March 5, 1992, to ailow
Steele to present evidence to support his application for
admission. Prior to the hearing, Steele provided additional
information to the Committee, including letters and affidavits in
support of his application for admission and notice that his offer
of compromise had not been accepted by the IRS. Steele also had a
chemical dependency evaluation performed on September 19, 1991 and
had the evaluation results forwarded to the Committee.
After the hearing, Steele was allowed to depose two additional
IRS employees, submit additional interrogatories to one of the
witnesses at the hearing and to submit other additional materials.
On July 22, 1992, the Committee met to review Steele's application
and again denied his application. Formal findings and conclusions
were issued on August 24, 1992. Steele challenges several of the
Committee's findings and conclusions.
Further facts will be provided as necessary throughout this
8
opinion.
Did the Committee properly conclude that Mr. Steele is unfit
to practice law in the State of Montana?
The rules for admission to the State Bar of Montana provide
that the burden of proof is on the applicant to demonstrate good
moral character and general fitness to practice law in an appeal
from a decision of the Committee on Character and Fitness of the
State Bar of Montana:
Every Applicant for the Montana Bar examination shall be
of good moral character. The applicant shall have the
burden of proving by clear and convincing evidence that
he or she is possessed of good moral character. The
Committee shall certify the Applicant to the Clerk of the
Supreme Court unless prlor or present conduct of the
Applicant of which the Committee becomes aware would in
the opinion and discretion of the Committee cause a
reasonable person to believe that such Applicant would,
if admitted to practice law in Montana, be unable or
unwilling to act in accordance with the standards set
forth in the Montana Rules of Professional Conduct,
fairly, discreetly, honestly, reasonably, and with
unquestionable lntegrity in all matters in which he or
she acts as an attorney at law.
Rules of Procedure of the Committee on Character and Fitness
(1991), Section 3 (a) (as amended June 9, 1992) ; now Section 4 (a)
(amended March 25, 1993). The standard of review used by this
Court in reviewing Committee decisions to deny admission and
certification to take the Montana bar examination is as follows:
Upon reviewing a final decision of the Character and
Fitness Committee we will conduct an inde~endentreview
of the entire record to determine if the Committee erred.
When the facts are admitted and uncontested, as they are
in this case, we will give due consideration to the
inferences drawn by the Committee, including inferences
concerning rehabilitation and mitigation. Consideration
will be given to the recommendation of the Committee as
to whether the applicant is of the requisite good moral
character and fitness to be admitted to the Montana Bar.
The Committee will have heard testimonial evidence and
will have had the opportunity to observe the demeanor and
judge the credibility of the applicant or other
witnesses. However, inasmuch as we are designated by the
Montana Constitution to ultimately make this decision, we
will affirm the Committee's recommendation if we
determine it was correct, and we will reverse if we
determine the Committee erred. Our review will be in
accordance with the existing standards for admission,
takinq into consideration the whole record.
In re the Matter of Matt (1992), 252 Mont. 345, 348-49, 829 P.2d
625, 626 (emphasis in original) (quoting In re the Matter of
Pedersen (1991), 250 Mont. 325, 328-29, 820 P.2d 1288, 1290).
Although the Montana Constitution gives this Court exclusive
authority to regulate bar admissions in Montana, such authority is
subject to the limits imposed by the United States Constitution.
The United States Supreme Court has held that, in making
determinations of an applicant's character and fitness to practice
law, the applicant must be afforded adequate due process of law.
Willner v. Committee on Character and Fitness (1963), 373 U.S. 96,
83 S.Ct. 1175, 10 L.Ed.2d 224, The Court stated in Willner, 373
U.S. at 107, 83 S.Ct. at 1182, 10 L.Ed.2d at 232:
[I]n all cases in which admission to the bar is to be
denied on the basis of character, the applicant, at some
stage of the proceedings prior to such denial, must be
adequately informed of the nature of the evidence against
him and be accorded an adequate opportunity to rebut this
evidence.
Steele contends that he was not afforded due process because
he either did not receive notice of the Committee's bases for its
decision, or he received notice after the hearings. He also
contends that due process was not afforded him because supporting
documentation was either absent or based on constitutionally
protected activities which Steele had engaged in prior to attending
law school.
In support of his claim that he did not receive due process,
Steele contends that the Committee did not identify the evidence
against him; specifically, the Committee did not identify or allow
him to address omissions in his application and did not identify
any false statements, even in the final decision. He also claims
that the Committee did not follow consistent rules of evidence.
We first note that the Committee is not bound by formal rules
of evidence and
may, in its discretion, take evidence in other than
testimonial form, having the right to rely upon records
and other materials furnished to the Committee in
response to its request for assistance in its inquiries.
The Committee may, in its further discretion, determine
whether evidence to be taken in tesuimonial form shall be
taken in person at the hearing or upon deposition, but
all testimonial evidence shall in either event be taken
under oath. A complete stenographic record of the
hearing shall be kept, and a transcript may be ordered by
the Applicant at the Applicant's own expense.
Rules of Procedure of the Committee on Character and Fitness, Rule
5(i) (March 25, 1993).
Steelets objection here seems to center around the evidence
supplied by IRS employees as previously set forth in this opinion;
he states that their "inability to specify either because of
confidentiality or lack of memory leaves . . . Steele in an
informational and evidentiary wasteland." Therefore, Steele claims
that the Committee's findings should identify the portions of the
record which the Committee relied on to support each finding to
prove that it did not rely on improper evidence. Because of the
independent character of our review, such detailed fact-finding is
unnecessary. From our review of the entire record, we find
evidence to support the Committee's findings as set forth in the
following discussion.
One of the reasons for denying Steele's certification is that
Steele made false statements in his application. False statements
include omissions. Thus, Steele's argument that the Committee
failed to identify any actual false statements is not relevant. We
focus on the omissions in Steele's application.
The application form asks the applicant to list any civil
proceedings in which the applicant has been a party. In answering
this question, Steele disclosed that he had sued a client in 1978
for nonpayment of a fee for professional services, yet he did not
disclose a more recent civil suit against the IRS which had
proceeded to the Ninth Circuit Court of Appeals. More importantly,
Steele did not inform the Committee about two criminal
investigations that the IRS had initiated against him in the 1980s.
Moreover, despite providing the Committee with a two-inch sheaf of
paper after the Committee inquired into his dealings with the IRS,
Steele continued to withhold information about the criminal
investigations. The Committee found out about the criminal
investigations from the information disclosed by the IRS after the
informal hearing.
Steele contends that because the application for admission did
not specifically request him to list any known criminal
investigation, it cannot be an omission to fail to include that
which is not specifically requested. However, the application does
require an applicant to disclose any other information not already
given havina a bearina on character and fitness. Furthermore, this
request is conspicuously located above the applicant's signature
line, It would be impossible for the application to ask every
conceivable question which would cover the conduct of every
applicant. That is one of the reasons for the general query into
any other information having a bearing on character and fitness.
Steele also claims that since he identified the IRS
investigator, Larry Huqgins, as a person with whom he had been in
contact, the Committee could then easily find out about the
criminal investigations. Steele's reference to Huggins was
included in the following written response to a question on the
application asking if there are any unsatisfied judqments
outstanding against the applicant:
I am delinquent on income tax payments. I am current on
return filings but owe on past amounts due. This is
because I filed late for the years 1982-1986 in 1987. My
original returns for those years were protest returns.
This was because, in my practice as a CPA, I became aware
of severe problems with the income tax system. Some of
these problems, as to fairness, have been corrected by
Congress in the 1986 Reform Act. I believe that my
efforts contributed to the reasons for the mandate
President Reagan gave Congress to reform the Income Tax
System.
Nevertheless, I realize that the taxes are due, owing,
and should be paid. I am in contact with Mr. Larry
Huggins, IRS Missoula, (406) 329-3681. It is my
intention to begin to pay these taxes as I return to the
full-time work force after law school. I have provided
IRS with financial statements and Mr. Huggins seems to be
satisfied that this plan will work.
A contributing factor to not being able to pay these
taxes is that I lost all my Capital in the Stock Market
about 1983. While this has diminished by ability to pay,
it has not helped the tax problems because Capital losses
are only allowed to offset ordinary income to the extent
of $3,000.00 per year. They are also not deductible for
self-employment tax purposes. I have learned however,
that IRS has a compromise procedure for situations like
this and I intend to utilize that procedure as soon as I
have something to offer. The total amount due, both to
State and Federal, currently approximates $150,000.00,
including penalty and interest. A large portion of this
would be currently dischargeable in bankruptcy. I do NOT
intend to resort to bankruptcy since the debt is a
legitimate result of a mistake I made.
The mistake, however, was instrumental in my decision to
enter Law School. I believe that I am now equipped with
an understanding of law and taxes to allow me to assist
clients in this area where few attorney's [sic] wish to
specialize. The IRS is no longer an enemy but rather an
agency in need of guidance from a Congress enlightened by
attorney's [sic] with knowledge and experience in this
realm. A system of taxation that meets the needs of our
government and yet inflicts the least intrusion into the
lives of those who pay it should be the goal of congress.
A populace with the expertise available to help them
function within this system is the foundation to make it
work. My goal is to help stabilize this foundation. In
this respect, I pledge to be a better example in the
future.
This statement is not a candid disclosure of the extent of Steele's
tax difficulties. Although it provides Huggins* number, it omits
any mention that Huggins investigated Steele for criminal conduct.
Further, it states that Steele lost his capital in "about 1983,"
but it does not explain why Steele did not attempt to preserve
funds after that time for future payment to the IRS.
Steele further argues that the following finding of fact was
not material:
11. The Applicant applied to take the February,
1991, exam, even though he was not eligible; to become
eligible he had to receive a waiver from the faculty.
Applicant made no mention of his conditional application
until the issue was raised by the Administrative
Assistant to the Committee.
The record contains a memorandum written by Jan Weber, the
Administrative Assistant to the Committee, on December 26, 1990,
after questioning Steele about his eligibility to take the exam.
It also contains other memoranda indicating that, after Steele
learned that he would not graduate until spring semester, he
inquired whether he could still take the exam and was advised that
this would require permission fromthis Court. While this omission
by itself may not be a serious omission under the particular
circumstances of this case, it is cumulative and, therefore, it
becomes material.
We conclude that Steele was adequately informed of the nature
of the evidence against him and was afforded an adequate
opportunity to rebut the evidence. He knew from the time of the
Committee's first letter, dated December 26, 1990, that the
Committee had concerns about his tax liens and DUIs. After further
communication with Ms. Weber and the Committee, Steele knew the
Committee was concerned about his ineligibility to take the
February examination, he knewthe Committee was concerned about his
problems with the IRS and he knew the Committee was concerned about
the civil case which he had not disclosed. After the Committee
inquired into the tax lien matter, other information from the IRS
was disclosed and Steele was questioned about this information. He
responded to all these concerns either informally or formally. He
had access to and reviewed the Committee's complete file. Steele
was given adequate opportunity to explain and rebut the evidence.
We conclude that the materiality of the omissions was
significant. Furthermore, Steele did not facilitate information
gathering about his dealings with the IRS either in his testimony
before the Committee or in other numerous communications with the
Committee. The Committee determined that Steele "was neither
candid in his application nor before the Committee." The record
fully supports this finding. The record also establishes that the
Committee gave Steele every opportunity to present evidence and
that it treated Steele fairly throughout the post-denial process.
Throughout this proceeding, however, Steele's conduct
demonstrates an attempt to make light of or to downplay the
significance of the facts relating to his tax protest activity, his
failure to pay taxes and his interaction with the IRS. In our
view, this is a significant basis for the Committee's finding that
Steele was neither candid in his application nor before the
Committee. The Committee also had the advantage of personal
observation of Steele and other witnesses to determine the candor
and credibility of each.
In addition to finding that Steele had made Valse statements
including omissions," the Committee made a number of additional
conclusions with regard to the filing of tax returns and payment of
taxes for the years 1982 through 1986. These findings showed that
Steele owed the IRS more than $209,000 and had made an offer of
compromise of $3,544; similarly, he owed the State of Montana
$20,824 and had made an offer of compromise of $381. The Committee
found that Steele had never denied the tax was due and owing, that
the money which he had for payment of the tax was spent otherwise
and that he acknowledged this was a violation of the law. The key
conclusion in paragraph seven was that the behavior showed lack of
reasonableness, neglect of financial responsibilities and neglect
of professional obligations as an accountant. Following are the
conclusions of the Committee on this aspect:
5. The Applicantfailed to pay taxes for years
1982, and 1 9 8 6 . Applicant presently
1983, 1984, 1985,
owes the [IRS] more than $209,000; he made an offer of
compromise to the IRS of $3,544, slightly more than one
percent of the amount owed. Applicant presently owes the
State of Montana Revenue Department more than $20,824; he
made an offer of compromise of $381, which is slightly
more than one percent of the amount owed. These offers
in compromise were made April 30, 1991, after the
Committee made inquiry. The Applicant never denied that
the tax was due and owing; money available to pay a
portion of the tax was spent otherwise. Applicant
further acknowledged this was a violation of the law . .
6. Applicant admitted that failure to pay the tax
and failure to file income tax returns were violations of
IRS regulations.
7. Money available for payment of taxes was spent
by the Applicant. Such behavior shows lack of
reasonableness, neglect of financial responsibilities and
neglect of professional obligations as an accountant.
Applicant was more than 3 5 years of age and had been
employed for more than 1 5 years as an accountant.
13. Applicant's actions in application, hearings,
and gathering evidence, show him to be a person of
questionable integrity. He shows neglect of financial
responsibilities, neglect of professional
responsibilities, and has made false statements including
omissions. Based on Applicant's omissions in the
application process and on the evidence adduced in the
hearings process, the Committee finds that the Applicant
lacks sufficient moral character and if admitted to the
practice of law would be unable or unwilling to act in
accordance with the standards set forth in the Montana
Rules of Professional Conduct, fairly, discretely,
honestly, reasonably, and with unquestionable integrity.
Steele contends that the Committee based these findings in
part on constitutionally protected activities which he had engaged
in prior to attending law school. He argues that the Committee
could not base any part of its decision on his exercise of free
speech for speaking out against the IRS and the income tax laws,
that it couid not base any part of its decision on his association
with the Golden Means Society because of his right of freedom of
association, and that it could not base any part of the decision on
his right of freedom of assembly for his presence in a group of
persons assembled to protest the foreclosure of a family store. We
find no evidence that the Committee considered any of these
activities in making its decision except to the extent that Steele
omitted information on his application or to the extent that he was
not candid in discussing them.
From our review of the record, we affirm the conclusions with
regard to the nonpayment of taxes, the offers in compromise, and
the other essential elements as above-quoted. From the record it
is somewhat difficult to determine if Steele acknowledged that his
conduct was a violation of the law. Unfortunately Steele did not
give straightforward answers to questions asked by the Committee.
Following is a portion of his testimony:
MR. SULLIVAN: Let me ask you: Did you actually sit
down and keep figures for your income, for deductions,
and compute what a tax would have been in 1982?
MR. STEELE: No, I did not do that.
MR. SULLIVAN: Why is that?
MR. STEELE: I believed that would never be
18
necessary. I believed it was all going to change. I
believed that the IRS was going to see the error of their
ways and we were going to have a new tax system.
MR. SULLIVAN: And you believed that the government
was not going to seek to collect what they felt was your
legitimate tax due and owing for 1982 on through those
years?
MR. STEELE: I believed that at some time there
would be a settlement. You know, at the time, I was
prepared to lose; and at that time, I had some money and
I was investing at that time, At that time, I always had
an open mind. If they could show me where we were wrong
and convince me that we were wrong, I was willing to file
the return; and I had the money at that time to pay it.
MR. SULLIVAN: Maybe my question isn't very clear.
I get the impression that back then you felt that it was
an invasion of privacy to provide all of this information
about your earnings and your deductions, but I am a
little unclear. Are you saying it was a violation of the
constitution to tax you?
MR. STEELE: Of course not.
MR. SULLIVAJ: So did you s-et.aside any. money..tg p.ay
tax. or is-jtyou_r..po-s-ition
.that you..owed no.ta-x?
-.
HR. STEELE: NO, no, no. we were wantinq a better
form of taxation; not no taxes. I mean, that's
ridiculous. A flat tax, like it's been proposed, a
national sales tax, something like that, that wouldn't be
an intrusion into privacy. [Emphasis supplied.]
I had the money. I didn't put it in a trust fund
and keep it aside for the IRS, and I eventually ended up
losing most of that money in my investments. At that
time, it was not a problem with me that I was going to
have to pay these taxes, pay some taxes of some kind.
While the record is not as clear as it might be as to Steele's
acknowledgement that this conduct was a violation of the law, we
conclude there is sufficient evidence to support that conclusion
and the further conclusion that Steele admitted that the failure to
file tax returns was a violation of IRS regulations.
The emphasis in the above quote illustrates the difficulty of
19
obtaining a direct answer from Steele. In addition, from the above
testimony it appears that Steele did not intend to pay the tax owed
but intended to settle or "compromise" with the IRS at some future
point.
When the first criminal investigation was resolved, Steele
filed tax returns for the years 1982 through 1984. Because Steele
did not keep records of income and deductions for tax purposes, his
tax liability is based only on estimated income for those years.
The second criminal investigation related to the IRS1s
suspicion that Steele had transferred or hidden assets in an
attempt to avoid paying the tax due after he finally filed the
returns. The IRS did not prosecute this either because it could
not determine that Steele had acted improperly.
The record demonstrates that Steele neglected both his
financial and professional responsibilities. The record also
demonstrates that at the time he was refusing to pay taxes, Steele
did intend to effect some sort of a compromise for the years in
question. The record does not disclose any willingness on the part
of Steele to pay the full amount of taxes owed for the years 1982
through 1986. As a CPA, Steele was and is aware of the tax laws
and the procedures required in connection with the filing of
returns and payment of taxes. We affirm the findings and
conclusions of the Committee as above set forth indicating a
neglect on the part of Steele of both financial and professional
responsibilities.
We have reviewed the entire record according to the standards
set forth in Pedersen and in &&&. We conclude that the record
supports the decision of the Committee. We further conclude that
Steele was afforded due process. We hold that Steele is unfit to
practice law in Montana.
Affirmed.
Justices
Justice Terry N. Trieweiler dissenting.
I dissent from the majority opinion. After a r of the
entire record provided by the Committee for Character and Fitness,
I conclude that the Committee erred when it denied Robert Steele's
application to take the State Bar Examination.
Specifically, I conclude that those findings of fact relied on
by the Committee to support its denial of Mr. Steele's application
either lacked sufficient specificity so that they can be reviewed,
or are unsupported by substantial evidence.
The Committee's Finding No. 5 to the effect that Steele
acknowledged violating the law is incorrect. While it is true that
one member of the panel examined him at length for the purpose of
establishing that he knowingly violated the law, it is clear from
that examination that the panel member did not understand Steele's
responses. In sum, Steele testified that he did not file tax
returns during the early 1980s because he was under criminal
investigation, He had money with which to pay his taxes during
those times, but based on his interpretation of the law, concluded
that he would not owe any taxes. When the investigation was
concluded, he filed a tax return. However, by then, the money with
which to pay the taxes owed had been lost due to poor investments.
Steele never stated that his failure to pay the taxes was a
violation of the law. The whole point of his testimony was that he
did not believe the amount was due, and that the law did not
require that he file tax returns because he was under criminal
investigation by the Internal Revenue Service.
Steele admitted that failure to pay taxes if a taxpayer
acknowledged that they were due, and failure to file income tax
returns if a taxpayer had no legal excuse for not doing so, would
be violations of the law. But he vigorously denied that either
circumstance pertained to him during the times that he failed to
pay taxes or file returns. Therefore, the Committee's Finding
No. 6 is taken out of context, distorts the essence of his
testimony, and is also clearly erroneous.
In Finding No. 7, the Committee stated that because Steele no
longer has the money available with which to pay his taxes, he was
financially and professionally irresponsible. Unsuccessful
investments are not the equivalent of financial irresponsibility,
and it is peculiar that members of this profession would find him
professionally negligent as an accountant when he has never had a
similar complaint filed against him, nor has he ever been
disciplined as an accountant.
The Committee's Finding No, 8 states that Steele was neither
candid in his application nor before the Committee. I find no
indication in the record that Steele lacked candor during his
testimony before the Committee. Furthermore, since the Committee's
finding lacks any specificity and provides no example of Steelels
lack of candor, I conclude that it is insufficient as a basis for
denying his application to take the bar exam or be admitted to a
profession for which he has studied for over three years.
The Committee's Finding No. 9 states that Steele failed to
disclose his suit against the United States on his application for
certification. While that may be true, it is hardly a material
basis for denying his application. Steele filed the suit and
prevailed in the suit, and it had absolutely no adverse bearing on
his moral character or general fitness to practice law.
Furthermore, all materials relating to the suit were fully provided
to the Committee at their request prior to the time any decision
was rendered. This finding does not support the Committee's
conclusion that Steele was unfit to practice law.
In its Finding No. 10, the Committee stated that in spite of
its requirement that Steele disclose information bearing on his
character and fitness, he failed to identify two criminal
investigations conducted by the IRS. However, neither criminal
investigation resulted in any charge that Steele violated any law
or federal regulation. Neither did any investigation lead to any
complaint that Steele violated any professional rules established
for certified public accountants. How then did either criminal
investigation have any bearing on Steeless fitness or character?
Have we established a new presumption in our law that because
someone is investigated, that investigation provides evidence of
unfitness or poor character? If so, then this opinion reflects a
major change in the traditional principles of justice to which our
courts have previously subscribed.
In its Finding No. 11, the Committee stated that Steele
applied to take the February 1991 exam, even though he was not
eligible. However, the record indicates that when Steele made
application to take the February bar exam he thought he would be
eligible. When he filed the application, he indicated that he was
still attending law school. All applicants for the bar exam
anticipate their graduation date. Developments subsequent to
Steelek application required that he take one additional course,
which he did. This unforeseen series of events has no hearing on
his fitness to practice law.
Other than these findings, there is no factual basis in the
Committee's decision for denying Steelels application to practice
law, Since I conclude that these findings are either unsupported
by the evidence, or are inadequate bases for denying his
application, I dissent from the majority opinion and would reverse
the Committee's denial of Steele's application to take the bar exam
and, if successful, subsequently practice law in the State of
Montana.
Steele has been a certified public accountant for 20 years.
During that time, he represented many clients to their
satisfaction. Because of his political and legal beliefs, he has
been investigated by the IRS on two separate occasions, and has
been involved in civil litigation with the IRS on one occasion. In
spite of those investigations, he has never been charged with a
crime, nor even accused of a crime. He has never been found to
have committed any ethical violation nor charged with any ethical
violation. In the only civil litigation in which he was involved,
he prevailed, and it was determined that the government owed him
money.
It is true t:hat because of his poor investment history and
misjudgment about his legal obligations, he now owes a substantial
debt to the federal and state governments, However, that debt
continues to be his obligation and will presumably be enforced by
the government to its satisfaction. It does not disqualify him
morally or render him unfit to take the bar examination. Steele is
being denied the opportunity to practice the profession for which
he has prepared for over three years because of unconventional
political ideas and incorrect legal conclusions drawn prior to his
admission to law school. To forever deny him the opportunity to
practice a profession for which he is otherwise qualified based on
these past mistakes is a substantial injustice.
Justice Karla M. Gray joins in the foregoing dissent.
December 22, 1993
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the following
named:
Robert G. Steele
P.O. Box 7981
Missoula, MT 59807
L r y M. Elison
ar
Attorney at Law
1101 W. Greenough Drive
Missoula, MT 59802
Annie M. Bartos, Chair
Character & Fitness Committee
P.O. Box 1051
Helena, MT 59624
Barbara Bell
Character & Fitness Committee
9 Third St. No. #201
Great Falls, MT 59401
Betsy Brandborg
Character & Fitness Committee
6582 Canyon Ferry Road
Helena. MT 59601
Robert J. Sullivan
Character & Fitness Committee
P.O. Box 9199
Missoula, MT 59807
Michael Tolstedt
Character & Fitness Committee
P.O. Box 849
Billings, MT 59103
K. Paul Stahl
Character & Fitness Committee
415 Hayes
Helena, MT 59601
ED SMITH
CLERK OF THE SUPFFME COURT
STATE OF&fOM'AN!t