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Lawrence Legel, Cpa v. United States Department of the Treasury Internal Revenue Service

November 28, 2011

LAWRENCE LEGEL, CPA, APPELLANT,
v.
UNITED STATES DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE OFFICE OF PROFESSIONAL RESPONSIBILITY, KAREN L. HAWKINS, DIRECTOR, APPELLEES.



ORDER DENYING APPELLANT'S MOTION FOR SUMMARY JUDGMENT AND GRANTING APPELLEES' MOTION FOR SUMMARY JUDGMENT

THIS CAUSE is before the Court on Appellant Lawrence Legel, CPA's Motion for Summary Judgment [DE 35] ("Legel's Motion") and Appellees United States Department of the Treasury and Internal Revenue Service, Office of Professional Responsibility, Karen L. Hawkins, Director's Motion for Summary Judgment [DE 36] ("Appellees' Motion"). The Court has considered both motions, Mr. Legel's Revised Brief [DE 37] ("Legel's Brief"), Appellees' Response [DE 38], Mr. Legel's Response [DE 39]*fn1 , the Administrative Record [DE 32] and other related submissions, and is otherwise advised in the premises.

I. BACKGROUND

Mr. Legel is a certified public accountant who specializes in taxation. Complaint [DE 1] ¶ 1. He filed this action to seek judicial review of an administrative decision suspending him from representing clients in proceedings before the Internal Revenue Service ("IRS") until January 13, 2012. See id.

The suspension stemmed from Mr. Legel's guilty plea, on August 4, 2008, to a charge that he "did knowingly and willfully aid and assist one Earl Wolfe in the failure to pay personal income taxes for the year 2004." Administrative Record [DE 32] at US-000497, US-000501-000532. United States District Court Judge William Zloch entered judgment against Mr. Legel on September 29, 2008, adjudicating him guilty of aiding and abetting in the failure to pay income tax, in violation of 26 U.S.C. § 7203. Id. at US-000491.

Under Treasury Department No. Circular 230 ("Circular 230"), 31 C.F.R. § 10 et seq., "[t]he Secretary of the Treasury, or delegate, after notice and an opportunity for a proceeding, may censure, suspend, or disbar any practitioner from practice before the Internal Revenue Service if the practitioner is shown to be incompetent or disreputable." Circular 230 § 10.50(a). Incompetence and disreputable conduct includes "[c]onviction of any criminal offense under the Federal tax laws." Id. § 10.51(a)(1). Thus, on the basis of Mr. Legel's conviction, the Director of the Office of Professional Responsibility ("OPR") within the IRS, pursuant to its authority under Circular 230 § 10.1(a)(1) and § 10.1(b), instituted an expedited suspension proceeding against Mr. Legel. See Admin. Rec. at US-001675-001682. After Mr. Legel filed an answer and requested a conference, id. at US-001667-001668, a designee of the OPR Director held a telephone conference with Mr. Legel on January 13, 2009, id. at US-001733 ¶ 7, US-001720 ¶ 7. Thereafter, the OPR Director issued a decision in the expedited proceeding, suspending Mr. Legel from practicing before the IRS indefinitely, effective January 13, 2009. Id. at US-001669.

In February 2009, pursuant to Circular 230 § 10.82(g), Mr. Legel requested the issuance of a complaint under Circular 230 § 10.60 to challenge his suspension before an administrative law judge. Admin. Rec. at US-001655-001666. On March 20, 2009, the OPR Director issued the complaint, seeking to suspend Mr. Legel from practicing before the IRS indefinitely. Id. at US-001728-001734. After the parties had fully briefed the issues and the OPR Director had moved for summary judgment, the administrative law judge granted the motion for summary judgment regarding the request to find that Mr. Legel had engaged in disreputable conduct within the meaning of Circular 230 § 10.51, but denied the motion with respect to the issue of the appropriate sanction, reserving that issue for hearing. Admin. Rec. at US-000057-000080. The hearing was held on October 27, 2009, after which both parties submitted additional briefs. Id. at US-000721-001096, US-001683-001710, US-001463-001649. On April 15, 2010, the administrative law judge issued her Initial Decision and Order, ruling that a suspension of two years from the date that Mr. Legel's probation went into effect in his criminal case was appropriate. Id. at US-001106-001144. The suspension was therefore set to be lifted on September 29, 2010 as long as Mr. Legel's probation had not been revoked. Id. at US-001143-001144.

On May 14, 2010, the OPR Director appealed the administrative law judge's decision. Id. at US-000379-000396, US-000425, US-000215 ¶ 2. In an appeal from an administrative law judge's decision, Circular 230 § 10.78(a) provides that "the Secretary of the Treasury, or delegate, will make the agency decision." In Mr. Legel's case, the "appellate authority" served as the Secretary of the Treasury's delegate. See Admin. Rec. at US-001097, US-001103. Thus, after the parties had fully briefed the issues in the appeal, the appellate authority issued his Decision on Appeal on March 31, 2011. Admin. Rec. at US-001097-001104.

The standard of review on appeal requires a review of the administrative law judge's decision under a clearly erroneous standard, and a review of the legal issues de novo. Circular 230 § 10.78(b). In his Decision on Appeal, the appellate authority found that the administrative law judge's findings of fact were not clearly erroneous, but "that a mistake ha[d] been committed both in setting the commencement date for the suspension as well as in determining its length." Id. at US-001100. As for the date that the suspension commenced, the appellate authority found that the suspension should actually be calculated from January 13, 2009, the date on which Mr. Legel's suspension actually commenced, and not from September 29, 2008, the date on which his criminal probation commenced. Id. The appellate authority also agreed with the administrative law judge that a "three year-baseline [wa]s the minimum baseline or departure point from which to consider the appropriate period of suspension for conviction of this crime before consideration of aggravating or mitigating factors," id., but he found that the mitigating factors that the administrative law judge considered were "at the least, completely offset by two very seriously aggravating factors, Mr. Legel's false and misleading statements during the disciplinary process and his lack of remorse and attitude towards his crime and conviction," id. Consequently, the appellate authority modified Mr. Legel's suspension from practice before the IRS to run for a three-year period commencing on January 13, 2009. Id. at US-001103. The appellate authority's Decision on Appeal constitutes the final agency action in this matter. See id.

On April 28, 2011, Mr. Legel filed the instant action for judicial review of the Decision on Appeal. See Compl.In accordance with the deadlines set in this Court's Scheduling Order [DE 30], Appellees filed the Administrative Record on September 9, 2011, and the parties filed their cross-motions for summary judgment on September 23, 2011. For the reasons discussed below, the Court will deny Mr. Legel's Motion and grant Appellees' Motion.

II. LEGAL STANDARD

The Court's review of a final agency decision is governed by the Administrative Procedure Act, 5 U.S.C. §§ 701 et seq. ("APA"). Pursuant to this Act, "[t]he reviewing court shall . . . hold unlawful and set aside agency action, findings, and conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." 5 U.S.C. § 706(2)(A). The Eleventh Circuit has described the standard of review under the APA as follows:

This deferential standard presumes the validity of the agency action and prohibits a reviewing court from substituting its judgment for that of the agency. See Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 413-14 (1971). "Administrative decisions should be set aside in this context, as in every other, only for substantial procedural or substantive reasons as mandated by statute . . . not simply because the court is unhappy with the result reached." Vermont Yankee Nuclear Power Corp. v. Natural Res. Def. Council, Inc., 435 U.S. 519, 558 (1979).

The courts' proper function in reviewing an agency's action is to determine whether the agency has "considered the relevant factors and articulated a rational connection between the facts found and the choices made."

Baltimore Gas & Elec. Co. v. Natural Res. Def. Council, Inc., 462 U.S. 87, 105 (1983); Bowman Trasp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 285 (1974). To affirm, a court must only determine that the agency had a rational basis for its decision.

Manasota-88, Inc. v. Thomas, 799 F.2d 687, 691 (11th Cir. 1986). Additionally, in an APA case such as this, the Court must evaluate the agency's actions based on the administrative record. See 5 U.S.C. § 706; Preserve Endangered Areas of Cobb's History, Inc. v. U.S. Army Corps of Engineers, 87 F.3d 1242, 1246 (11th Cir. 1996) ("The role of the court is not to conduct its own investigation").

III. ANALYSIS

Upon review of the Administrative Record, the Court finds that the Decision on Appeal was not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law. Rather, the agency proceedings complied with Circular 230. The suspension, the expedited suspension proceeding, and the appeal each conformed to the procedures and regulations outlined in Circular 230. Mr. Legel had the appropriate opportunities to respond, and the appellate authority acted within its authority in issuing the Decision on Appeal. As Appellees note, "[t]he IRS and the public hold a strong interest in the proper enforcement of the internal revenue laws and ensuring that taxpayers receive competent representation in proceedings before the IRS. When a tax practitioner has admitted that he himself has committed a tax-related crime, both the IRS and the public have a compelling interest in ensuring that the practitioner has received an adequate consequence before allowing that practitioner again to represent members of the public before the IRS." Appellees' Mot. at 4-5. A three-year suspension from practice before the IRS is rationally connected to this interest.

Mr. Legel nonetheless requests that the Court reverse the Decision on Appeal and reaffirm the administrative law judge's decision. Legel's Mot. at 1. He urges "that the suspension should be automatically lifted immediately and retroactively, effective back to September 29, 2010." Legel's Brief ...


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