The competitive pressures and technical complexities of a sophisticated estate planning practice can be daunting. Not surprisingly, estate planning is one of the most common areas for legal malpractice claims.
For me, what really matters is not whether you’ve ever made a mistake (no one’s perfect), it’s what you do after you realize you’ve made a mistake that really counts. While we’ve all learned that the cover-up is usually worse than the crime, if we’re not careful, very human frailties can overcome ethics, one lie can lead to another, and before you know it a bad – but manageable – situation has morphed into a career-ending catastrophe.
That’s the bitter lesson Suzanne P. Land, a successful estate planning attorney, first female capital partner of her large Cincinnati, OH law firm, active community volunteer and single-mother of two young children (click here, and scroll down), is learning.
Land did estate planning work for a wealthy couple involving the creation of family limited liability companies (“LLC’s”). The LLC’s were supposed to lower the family’s estate tax bill by creating valuation discounts. Although this kind of estate tax planning is fairly common, it’s not without its complexities and hidden traps [click here for a sample memo explaining how it's all supposed to work]. One of those traps caught Land unawares; causing the LLC’s to fail from a tax planning perspective. This mistake will likely cost Land’s clients an extra $1.1 million in estate taxes.
When Land’s mistake came to light during an estate-tax audit, rather than admit her mistake and deal with it head on, she tried to cover it up. The cover up included:
- Forging client signatures to create false, back-dated amendments to the LLC operating agreements
- Lying to the IRS about the forged LLC documents
- Creating fake client correspondence and legal invoices to reflect work she never performed, then providing these fake documents to the IRS to authenticate the forged LLC documents
- Providing two false affidavits to the IRS to authenticate the forged LLC documents
Cover Up = Criminal Prosecution:
No one should make light of how scary and professionally embarrassing a potential $1+ million malpractice claim must have appeared to Land. But no matter how bad the malpractice claim may end up being, it’s nothing compared to the career-ending catastrophe the cover up lead to. After the cover up unraveled, Land eventually pled guilty to one count of tax obstruction (26 USC § 7212(a)). This type of felony can result in up to a three year prison sentence.
A DOJ press release described Land’s conduct as follows:
According to the [unsealed portion of her plea agreement] and statements made in court, to conceal from the IRS the deficiencies in the documents that she drafted for her wealthy clients, Land forged the posthumous signatures of both her deceased clients and their living children on amendments to the documents. Land also misled an appraiser as to the value of the estates, created fake legal invoices that reflected work she never performed, and lied to the IRS about the circumstances surrounding the creation of the amendments. According to the terms of the plea agreement, Land admitted that the “relevant and foreseeable” tax loss that could have resulted from her obstruction was approximately $1,140,636.
According to the felony conviction/final judgment, Land was sentenced to 5 years of probation, including 3 years of what amounts to house arrest. It could have been much worse; at least she’s not going to jail (unlike the Texas attorney I wrote about here, who was sentenced to two years in federal prison for intentionally falsifying an estate tax return).
At the time she pled guilty the local NBC affiliate reported here that Land’s defense attorney stated she had voluntarily ceased practicing law and was “looking forward to getting this process through to the end.” I’m not sure how “voluntary” this last step was. Land’s felony conviction resulted in the automatic suspension of her law license in Ohio and Kentucky, effectively ending her legal career for the foreseeable future.