Opinion ID: 2165672
Heading Depth: 1
Heading Rank: 4

Heading: proceedings before board

Text: The Board held a hearing pursuant to its statutory authority to take disciplinary action. See § 1-137 and Neb.Rev.Stat. §§ 1-140 to 1-149 (Reissue 1997). The hearing officer adopted the trial court's findings of fact and noted the following relevant facts: In late 1992, Anderson sold his interest in Norfolk Big Red Bottle Shop, Inc. (Big Red), and Norfolk Avenue Liquor Mart, Inc. (Liquor Mart), to Zwygart and Fauss for $40,000. If a stock transfer had been entered in the corporate minutes, Zwygart and Fauss would each have owned 3,750 shares of Liquor Mart and 1,500 shares of Big Red. However, the stock was never transferred. Anderson believed his interest in the corporations was terminated at that time. From 1992 until January 1997, Anderson had no involvement in either corporation. Anderson's name no longer appeared on any corporate documents, including those filed with the State of Nebraska and the Internal Revenue Service that were prepared by Zwygart or under his direction. The hearing officer found that Anderson was linked to the corporations only by the failure of the corporations to transfer and deliver Anderson's shares to Fauss and Zwygart and by the pledge of Anderson's personal assets on secured notes of the corporations. After Anderson was removed from corporate affairs, the business relationship between Fauss and Zwygart became strained. In order to resolve the problems, Fauss and Zwygart agreed to split the management of the businesses, with Fauss' acting as operator and manager of Big Red and Liquor Mart. The parties also agreed as to the servicing of the debts of Big Red and Liquor Mart. In January 1997, Zwygart paid Anderson $100 for the Big Red shares and $100 for the Liquor Mart shares previously sold by Anderson but not transferred on the corporate books. The hearing officer found that Zwygart also induced Anderson to vote with Zwygart on the assurance that Fauss would be ousted and Anderson's personal obligation on the outstanding debts would be discharged. Zwygart and Anderson called a special meeting of the board of directors of Big Red and Liquor Mart for January 21, 1997, at which meeting Zwygart was elected as a new officer over the protest of Fauss. Zwygart then fired Fauss from his employment as manager of Big Red and Liquor Mart. Zwygart and Anderson outvoted Fauss by a margin of 2 to 1 in corporate business. Zwygart and Anderson then called a shareholders' meeting for February 3, despite Fauss' written and verbal objections. At that meeting, Zwygart voted his one-third interest and the one-third interest he had purchased from Anderson. All resolutions concerning corporate business were adopted at the January 21 and February 3 meetings based on the strength of Anderson's vote as a director and Zwygart's vote based on the shares he acquired from Anderson. Thereafter, Anderson again was no longer involved in the affairs of the corporations and Zwygart ran the businesses to the exclusion of Fauss. The trial court found that Zwygart perpetrated fraud in both the January 21 and February 3, 1997, meetings. Zwygart benefited from this fraud by the acquisition of management of the two businesses, and Fauss was excluded from the two businesses. Anderson was unaffected except for the $200 received from Zwygart. The trial court imposed a constructive trust in favor of Fauss on one-half of the shares of stock in Big Red and Liquor Mart transferred by Anderson to Zwygart in January 1997 and voided all actions of the directors, officers, and shareholders at the January 21 and February 3 meetings. Before the Board, Zwygart argued that the Board lacked jurisdiction over the subject matter because it was attempting to sanction him for actions other than those in the practice of public accountancy. See § 1-137(2). Zwygart asserted that he was a shareholder in the corporations, that the corporations were not his clients, and that he was acting in his capacity as a shareholder. The hearing officer concluded that the facts were sufficient to support the allegations in the complaint and that Zwygart was acting as a CPA during the performance of his duties and obligations on behalf of the corporations, as well as in actions he performed on behalf of Anderson. The hearing officer referred to definitions provided in the Board's rules and regulations: (Practice of Public Accountancy) shall mean the performance or offering to perform by a person holding himself out to the public as a permit holder, for a client or potential client, of one or more kinds of services involving: 001.17B : one or more kinds of management advisory or consulting services, or the preparation of tax returns or the furnishing of advice on tax matters. 288 Neb. ADMIN. Code Ch. 3 § 001.17 (1999). Based on the trial court's opinion and testimony given during trial, the hearing officer determined that Zwygart served as the CPA for all of the individuals and entities involved in this matter for many years. He acted as a CPA when filing documents with state and federal agencies. The hearing officer determined that Zwygart could not perform CPA duties on behalf of the corporations, Anderson, and Fauss and then suggest that he was merely acting as an agent or stockholder. [Zwygart] possesses a significant amount of training and education which allowed him to receive his certificate as [a CPA] and was possessed of specific training and skills to perform duties that the other stockholders were unable or untrained to perform. By performing these accounting duties and responsibilities [o]n behalf of these specific business entities and individuals, [Zwygart] was acting in the capacity as a[CPA] and was holding himself out as such. The hearing officer concluded that Zwygart was dishonest in his dealings with his business partners and that Zwygart committed fraud, as found by the trial court. Zwygart's actions reflected adversely on his fitness to engage in the practice of public accountancy because honesty, integrity and utmost truthfulness are at the very core of the business relationship which must exist between a[CPA] and his clients. The hearing officer found that Zwygart's conduct in excluding Fauss from the two corporations reflected adversely on Zwygart's fitness to engage in the practice of public accountancy. The hearing officer found no merit to Zwygart's allegation that the Board's complaint was barred by the doctrine of laches and the statute of limitations. The parties had previously entered into a consent order, which specifically provided that the Board had jurisdiction over Zwygart and the subject matter of the litigation. The hearing officer found that the record contained sufficient competent evidence that Zwygart should be disciplined. The hearing officer concluded that Zwygart violated § 1-137(2), which provides for discipline for dishonesty, fraud, or gross negligence in the practice of public accountancy, and that Zwygart violated the Board's rules and regulations by committing dishonesty, fraud, or gross negligence in the practice of public accountancy and by committing acts which reflected adversely on his fitness to engage in the practice of public accountancy. On September 15, 2003, the Board voted to accept the hearing officer's findings of fact and conclusions of law. The Board found that Zwygart violated § 1-137 and rules and regulations promulgated by the Board and determined that Zwygart should be disciplined by the revocation of his CPA certificate and permit to practice. The order also assessed attorney fees and costs against Zwygart in the amount of $14,693.05.