Opinion ID: 2165672
Heading Depth: 1
Heading Rank: 8

Heading: jurisdiction

Text: Zwygart appeals from the judgment of the district court which affirmed the action of the Board. A judgment or final order rendered by a district court in a judicial review pursuant to the Administrative Procedure Act may be reversed, vacated, or modified by an appellate court for errors appearing on the record. Wilson v. Nebraska Dept. of Health & Human Servs., 272 Neb. 131, 718 N.W.2d 544 (2006). When reviewing such an order, the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable. See id. The Board is authorized to discipline the holders of certificates and permits who fail to comply with the technical or ethical standards of the public accountancy profession. See Neb.Rev.Stat. § 1-105.01 (Reissue 1997). The Board may adopt and promulgate rules and regulations of professional conduct. Neb.Rev.Stat. § 1-112 (Reissue 1997). The Board may take disciplinary action for any one or any combination of nine enumerated causes set forth in § 1-137. Relevant to this action are § 1-137(2), which allows discipline for [d]ishonesty, fraud, or gross negligence in the practice of public accountancy, and § 1-137(4), which allows discipline for [v]iolation of a rule of professional conduct adopted and promulgated by the board under the authority granted by the act. Zwygart argues that the Board did not have jurisdiction to discipline him because his actions in the Fauss cases were not undertaken in the practice of public accountancy. See § 1-137(2). However, the district court found that Zwygart performed accounting activities for the corporations, Fauss, and Anderson and that Zwygart prepared income tax returns for each of them. The district court found that Zwygart's practice of accounting was intermingled with his conduct as an officer and shareholder of the various corporations. Zwygart or his accounting firm served as the bookkeeper and accountant for all of the business entities, and Zwygart prepared the tax returns and filed other regulatory documents on behalf of those entities with the Secretary of State and the Nebraska Liquor Control Commission. Zwygart maintained the financial and legal corporate books and records. Zwygart was Anderson's accountant, and he completed Internal Revenue Service reports for both Anderson and his business. Anderson relied on the advice of Zwygart in the stock transaction at issue in the Fauss cases. The evidence was clear that Zwygart held himself out to the public as an accountant who prepared tax returns and provided advice on tax matters. Zwygart submitted billings for professional services over a period of years to the business entities in question. In Smith v. State Board of Accountancy of Kentucky, 271 S.W.2d 875, 876 (Ky. 1954), the Kentucky Court of Appeals reviewed the revocation of the certificate to practice as a CPA of an accountant (Smith) after he was charged with `[d]ishonesty, fraud or negligence in the practice of public accounting. Smith had two lawsuits brought against him by different parties for an accounting, and recovery was obtained against him in each case. In one case, Smith had been the administrator of an estate and was elected an officer in a corporation whose stock was owned by the estate. The corporation was engaged in leasing and drilling gas wells. Smith undertook management of the gas development interest of the heirs of the estate, charging $200 per month for his services. He also kept the company's accounts. The court found in Smith that the accounts were poorly kept, that reports made to other interested parties were inaccurate and misleading, that funds were handled in an unbusinesslike manner, that the cash balances in the reports did not match those in the bank records, and that Smith commingled his own funds with those of the company. Smith claimed that he was acting only as agent for the other stockholders and that any dereliction of duty on his part was not in the practice of public accounting. The court stated: While it is true that some of the services performed by him were not related to public accounting several of them certainly were, and association with a corporation in some other capacity does not relieve [Smith] of his duty to comply with the high standards of public accounting. Id. at 877. In the other lawsuit, Smith was sued after he became a partner in the development of gas wells and charged the partners $60,000 for their share of drilling a particular well. It was later determined in a suit for accounting that the cost had been only $43,000. Smith also charged $4,500 for personal services, which the court said was apparently unjustified. In addition, proper records were not kept and Smith commingled his own funds with those of the partnership. Smith again argued that these actions were those of a businessman in a business venture and not part of the practice of public accounting. The court found it obvious that Smith's qualifications as a CPA were important to his partners and that the books he kept should have been above question. Certainly the high standards of a[CPA] must be maintained in business transactions where he performs accounting services as a fiduciary and where his counsel is relied upon. Id. The appellate court affirmed the revocation of Smith's certificate, stating: The field of public accounting is a specialized one and the legislature has seen fit to regulate it. A certificate as a[CPA] indicates to the public that the person holding such a certificate possesses the highest sort of qualifications and is one in whom may be placed the utmost trust and confidence. The facts in this record show that [Smith] as a[CPA] has failed to live up to well recognized standards. After a full and fair hearing by a competent Board of experts and an excellent circuit judge, we find nothing to indicate that the action of the Board was unjustified. Smith v. State Board of Accountancy of Kentucky, 271 S.W.2d 875, 877 (Ky.1954). This court has considered other professional licensure actions. In a case involving a license to practice as a chiropractor, this court noted that state law allows the revocation of a license when the licensee is guilty of `grossly immoral or dishonorable conduct evidencing his unfitness.' See Poor v. State, 266 Neb. 183, 190, 663 N.W.2d 109, 116 (2003). Gregory Poor had been found guilty in federal court of introducing misbranded and adulterated drugs into interstate commerce. We agreed with the licensing agency that Poor's conduct fell within the plain and ordinary meaning of grossly immoral or dishonorable conduct. We then turned to the question whether his conviction had a rational connection with his fitness or capacity to practice the profession. Chiropractic medicine is a regulated health care profession. Patients necessarily rely upon the chiropractor's honesty, integrity, sound professional judgment, and compliance with applicable governmental regulations. The record shows that Poor introduced misbranded and adulterated drugs into interstate commerce with the intent to defraud and mislead. . . . We find that the record contains sufficient competent evidence to support the determination of the district court that Poor's federal felony conviction and conduct upon which it was based are rationally connected to Poor's fitness or capacity to practice his profession. Id. at 194-95, 663 N.W.2d at 118 (emphasis omitted). It is readily apparent that individuals rely upon honesty, integrity, sound professional judgment, and compliance with government regulations when they consult a CPA, even if the CPA may not be specifically acting as an accountant. The actions of Zwygart as a partner in the corporations were rationally connected to his activities as a CPA. Accounting is a regulated profession, and its members are held to standards established by the Board. The Board is authorized by state law to adopt rules to regulate practitioners. Zwygart complains because the district court referred to several attorney disciplinary actions in reaching its decision to affirm the Board's revocation of his license. The district court stated, In professional licensure, it is not unusual for conduct outside the practice of the profession to be found to reflect adversely on the licensee's fitness to practice his or her profession. We find no error in the district court's comparison of attorneys and accountants. Both professions are regulated and bound by certain codes. For attorneys, the Code of Professional Responsibility, which was in effect during the period of time at issue in this case, provided that a lawyer was not to [e]ngage in any other conduct that adversely reflect[ed] on his or her fitness to practice law. Canon 1, DR 1-102(A)(6). The district court found that Zwygart's practice of accountancy was intermingled with his conduct as an officer and shareholder of the corporations, but that even if his actions did not occur while he was practicing accountancy, his conduct clearly `reflect[ed] adversely' on his fitness to practice accountancy. The district court considered the trial court's decisions and additional facts submitted to the Board. The district court stated: The evidence adduced before the Board and Zwygart's arguments attempt to excuse or rationalize his dishonesty. There is evidence in which Zwygart blames his attorney. The fact remains that it is Zwygart who carried out the acts of dishonesty and fraud. Much of Zwygart's argument relies on his claim that the evidence did not support a finding that his actions were taken while in the practice of public accountancy. However, he seems to ignore that by adopting the hearing officer's findings, the Board determined he was guilty of violating both § 1-137(2), based on dishonesty, fraud, or gross negligence in the practice of public accountancy, and § 1-137(4), violation of a rule of professional conduct. The complaint alleged that Zwygart violated the following: A licensee shall not commit an act that reflects adversely on his fitness to engage in the practice of public accountancy. This provision does not require that the actions resulting in revocation arise from the practice of public accountancy. Any activity that reflects adversely on a CPA's fitness to engage in public accounting can lead to revocation. The hearing officer determined that Zwygart's actions related to the corporations in the Fauss cases reflected adversely on his fitness to engage in public accounting. The Board agreed and revoked his license. The district court, upon de novo review, also concluded that Zwygart's dishonesty and fraud on his business associates reflected adversely on his fitness to practice as a CPA. We find no error in this holding. It conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable. See Wilson v. Nebraska Dept. of Health & Human Servs., 272 Neb. 131, 718 N.W.2d 544 (2006).