Court Opinion

ID: 4181927
Source: CourtListenerOpinion
Date Created: 2017-06-29 04:06:32.386366+00
Date Added: 2024-06-11T07:47:17.152823
License: Public Domain

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             DISTRICT OF COLUMBIA COURT OF APPEALS

                                 No. 08-BG-1160

                     IN RE BARRY K. DOWNEY, RESPONDENT.

                               A Member of the Bar
                   of the District of Columbia Court of Appeals
                          (Bar Registration No. 416968 )

                          On Report and Recommendation
                    of the Board on Professional Responsibility
                                  (BDN-338-08)

(Argued December 5, 2016                                   Decided June 29, 2017)

      William R. Ross, Assistant Disciplinary Counsel, with whom Wallace E.
Shipp, Jr., Disciplinary Counsel at the time the brief was filed, Jennifer P. Lyman,
Senior Assistant Disciplinary Counsel, and Jelani Lowery, Senior Staff Attorney,
were on the brief, for the Office of Disciplinary Counsel.

      Aron U. Raskas for respondent.

     Before FISHER, Associate Judge, and WASHINGTON* and RUIZ, Senior
Judges.

      FISHER, Associate Judge:       The Board on Professional Responsibility

(“Board”) recommends that Respondent Barry K. Downey receive an informal

admonition. Disciplinary Counsel argues for disbarment or, at minimum, a three-

      *
         Judge Washington was Chief Judge of the court at the time of argument.
His status changed to Senior Judge on March 20, 2017.
                                         2

year suspension with reinstatement conditioned on proof of rehabilitation. These

widely differing recommendations arise from the fact that Respondent pled guilty

to a felony (albeit, a strict liability offense) but disputes Disciplinary Counsel‟s

allegations that he has been dishonest in explaining the circumstances of that crime

and that he committed a crime of moral turpitude. Applying the enhanced burden

of proof that Disciplinary Counsel bears and deferring to credibility determinations

and factual findings supported by the record, as we are required to do, we adopt the

recommendation of the Board.

                                 I.     Background

      Respondent Downey has been a member of the District of Columbia Bar

since 1989, focusing his practice on issues related to the Employee Retirement

Income Security Act of 1974 (“ERISA”).            In the mid-1990s, a friend of

Respondent developed a method to use digital currency backed by gold bullion to

facilitate monetary transactions over the Internet.    This innovation led to the

creation of two companies known as Gold & Silver Reserve (“GSR”) and E-Gold

(collectively “E-GOLD”). Respondent invested in E-GOLD and became Director

of E-Gold and Secretary, Vice-President, and Director of GSR.
                                        3

      In 1995, before investing in E-GOLD, Respondent informally consulted a

corporate lawyer named David Seidl. Respondent later testified that Mr. Seidl

orally advised that E-GOLD was not “doing banking” and was not “subject to

banking regulations.” Mr. Seidl does not appear to have charged a fee or rendered

any written opinion.

      Five years later, the District of Columbia enacted a statute requiring a

license to engage in a money transmitting business. See D.C. Code § 26-1002

(2012 Repl.). Then, in 2001, the Patriot Act changed provisions of the Bank

Secrecy Act related to the licensing of money transmitting businesses.        See

18 U.S.C. § 1960 (a) (2001). In August or September 2002, Respondent sought

legal advice from the law firm of Drinker Biddle & Reath about whether the

Patriot Act provisions applied to E-GOLD.

      In March 2003 Drinker Biddle sent Respondent a memorandum stating that

E-GOLD “may wish to consider” whether to register GSR with federal and state

authorities. It warned that GSR‟s operations “may lead it to be categorized as” an

entity that would be “vulnerable to a regulatory claim that it is an unregistered

money service business.” However, the memorandum also stated that “there is no

clear answer” to whether E-GOLD qualified as a “financial institution” covered by
                                         4

the Patriot Act, and “there is no definition that completely captures” E-GOLD‟s

business. The memorandum recommended that E-GOLD consider “whether the

benefits” of reaching out to the United States Treasury Department for clarification

would “outweigh[] the risks.” Regarding state law, the memorandum‟s appendix

noted that “a handful of states have begun to license and regulate such diverse

entities as . . . non-bank stored-value issuers, Internet bill payment services and

Internet money transfer systems,” and that the Uniform Money Services Act had

apparently “expand[ed] the term „money service business.‟” It concluded that the

companies “may want to survey the laws of the various states to ensure that GSR is

not in violation of any licensing requirements for a [money service business].”

Respondent believed that the memorandum contained several factual inaccuracies,

and he testified that he “did not view [it] as advice on anything.” Respondent

wanted Drinker Biddle to correct and clarify the memorandum, but he did not

receive a revised version.

      In or around January 2005, Respondent hired attorney Mitchell Fuerst to

advise E-GOLD. Respondent later testified that Mr. Fuerst believed that E-GOLD

was not required to register as a money transmitter. By January of the next year,

the government had brought a civil forfeiture action against E-GOLD claiming that

certain funds that were being transmitted through its service were the proceeds of
                                         5

money laundering. Mr. Fuerst argued that GSR was not a “money transmitting

business” or “domestic financial institution” required to have a license under the

Patriot Act. Respondent later testified that these arguments were consistent with

Mr. Fuerst‟s previous advice.

      In 2007 the United States charged E-GOLD, Respondent, and other

individuals with violations of federal and District of Columbia criminal laws,

including conspiracy to commit money laundering and operation of an unlicensed

money transmitting business. The government alleged, among other things, that

the businesses and the individuals had conspired to conduct financial transactions

that involved the proceeds of unlawful activity such as child exploitation and fraud.

Respondent pled guilty in the United States District Court for the District of

Columbia to a felony violation of D.C. Code § 26-1002, a strict liability offense

which prohibits operation of a money transmitting business without a license. The

indictment asserted that Respondent committed this crime between 2002 and 2003,

and Respondent agreed to a Statement of Offense that gave examples of

transactions during those years.     As part of a plea bargain, the government

dismissed the remaining charges against Respondent, including conspiracy to

commit money laundering.
                                         6

        At sentencing, Respondent told Judge Rosemary Collyer that he “did not

intend” to violate the law regarding licensing, but he admitted that he “was

wrong[.]” Respondent noted that he did not have expertise in the relevant area and

claimed that he had “looked to experts just like when others have looked to me on

employee benefits issue[s].”

        Judge Collyer stated that she “believe[d] [Respondent] when he says that he

didn‟t intend to violate the law.” She recognized that Respondent and E-GOLD

had been “in a slow prodding comfortable way trying to figure . . . out” their legal

obligations, including by “meeting with the government . . . and trying to get

advice[.]” Finally, she noted that Respondent “is clearly a good lawyer and a good

husband and a good father and a good member of his church in his community and

has no criminal history.”      Judge Collyer sentenced Respondent to 180 days‟

incarceration, suspended in favor of 36 months‟ probation, and imposed a $2,500

fine.

        Urging this court not to impose an interim suspension, Respondent

continued to assert that he had sought legal advice. We decided to defer any

sanction, citing, among other things, Respondent‟s “prior unblemished record as an

attorney” and the “fact that his violation arose from conduct outside of his normal
                                         7

legal practice[.]” In re Downey, 960 A.2d 1135, 1137 (D.C. 2008). We also

expressed concern that the length of an “interim suspension might exceed the

sanction that will eventually be imposed[.]” Id.

      Recognizing the importance of developing a factual record, we directed the

Board to determine whether Respondent committed a crime of moral turpitude.

The Board found that the offense did not involve moral turpitude per se and

referred the matter to a Hearing Committee to determine “whether Respondent‟s

conviction involves moral turpitude on the facts[.]” Before Respondent‟s hearing,

Disciplinary Counsel stated that he had not charged Respondent with committing a

crime of moral turpitude on the facts because he did “not have clear and

convincing evidence to support making such a charge[.]”

      Respondent‟s Answer again asserted that he had “sought the advice of

outside counsel with particular expertise” regarding “compliance issues.”       The

Answer also stated that E-GOLD had been “advised” that it was “not subject to

existing statutes and regulations” when the officers and directors “structured their

businesses[.]”
                                         8

      During the hearing, Respondent reiterated that E-GOLD “had hired outside

counsel to advise it . . . on [regulatory and compliance] issues.” When pressed on

why he had believed that E-GOLD was never “violating the law,” Respondent

testified: “Well, that‟s what the company was being told from the very beginning.

I mean, if a question arose, they would hire attorneys or accountants to answer the

question and to advise the company on how to be in compliance.”

      After this testimony, the Hearing Committee ordered Respondent to submit

all legal opinions that he had received regarding compliance with state regulations.

Respondent disclosed four documents: (1) Respondent‟s request for Mr. Seidl‟s

advice, (2) the Drinker Biddle memorandum, (3) emails from Respondent to

Drinker Biddle disputing the firm‟s bill, and (4) Mr. Fuerst‟s motion in the 2006

civil forfeiture proceeding.

      After reviewing these documents, Disciplinary Counsel asserted that there

was a “substantial conflict” between the documents and Respondent‟s prior

testimony at the disciplinary hearing and in other proceedings.        After cross-

examining Respondent again, Disciplinary Counsel argued that Respondent should

be disbarred because he had been convicted of a serious crime, he had exhibited

“flagrant” dishonesty when claiming that he had relied on advice of counsel, and
                                         9

“the circumstances surrounding Respondent‟s guilty plea involve[d] moral

turpitude[.]”

      The Hearing Committee agreed that Respondent had committed a serious

crime, but the majority found that “Respondent‟s claim that he relied on the advice

of counsel” was “credible[.]” It noted that Respondent had in fact “repeatedly

sought legal advice, and the evidence does not clearly show either that he was

advised that the regulations applied to E-GOLD or that he ignored such advice.”

The majority further noted that “nothing about Respondent‟s demeanor while

testifying causes us to question his truthfulness.” On the moral turpitude question,

the Committee unanimously concluded that there was no evidence that Respondent

intentionally failed to register E-GOLD in order to facilitate criminal activities.

The majority of the committee recommended that Respondent receive an informal

admonition. 1 The Board affirmed, unanimously 2 concluding that Disciplinary

Counsel had not proven either dishonesty or moral turpitude.

      1
         The Hearing Committee Chair dissented, agreeing on the serious crime
and moral turpitude questions but concluding that Respondent had “repeatedly
lied.” The Chair recommended a three-year suspension.
      2
          Two members of the Board had recused themselves.
                                            10

      Disciplinary Counsel takes exception to the Board‟s order, arguing that

Respondent committed a crime of moral turpitude on the facts and was dishonest.

Respondent disagrees and asks us to uphold the Board‟s recommendation of an

informal admonition.

                              II.   Standard of Review

      Disciplinary Counsel must prove by clear and convincing evidence both its

claim that Respondent committed a crime of moral turpitude and its claim that

Respondent was dishonest. See, e.g., In re Allen, 27 A.3d 1178, 1184 (D.C. 2011)

(moral turpitude on the facts); In re Chapman, 962 A.2d 922, 925 (D.C. 2009)

(“[D]eliberately false testimony” is “a significant aggravating factor” in favor of

enhancing sanction.); In re Cater, 887 A.2d 1, 25 (D.C. 2005) (Disciplinary

Counsel must “prove the facts that justify the enhancement [of a sanction] with

evidence that is clear and convincing.”).

      This court defers to the factual and credibility findings made by the Hearing

Committee and the Board unless they are unsupported by substantial evidence.

D.C. Bar R. XI, § 9 (h)(1). We review questions of law and ultimate facts de novo.

In re Martin, 67 A.3d 1032, 1039 (D.C. 2013). Moreover, we adopt a sanction
                                          11

recommendation “unless to do so would foster a tendency toward inconsistent

dispositions for comparable conduct or would otherwise be unwarranted.” In re

Daniel, 11 A.3d 291, 299 (D.C. 2011). When we “disagree[] with the Board as to

the seriousness of the offense,” we may give the Board‟s recommendation “less

weight.” Id. at 300.

                                   III.    Analysis

      Because he pled guilty to a felony, Respondent does not contest that he

committed a “serious crime.” See D.C. Bar R. XI, § 10 (b) (“The term „serious

crime‟ shall include (1) any felony . . . .”). Thus, the only issues before us are

whether Respondent committed a crime of moral turpitude, whether he was

dishonest, and what sanction is appropriate.

        A. Whether Respondent Committed a Crime of Moral Turpitude

      A crime involves moral turpitude if it “offends the generally accepted moral

code of mankind”; involves “baseness, vileness or depravity”; or “is contrary to

justice, honesty, modesty, or good morals.” In re Rehberger, 891 A.2d 249, 251

(D.C. 2006) (internal quotation marks and citations omitted). We must disbar an
                                        12

attorney who has been convicted of a crime of moral turpitude. D.C. Code § 11-

2503 (a) (2012 Repl.).

      Disciplinary Counsel argues that Respondent “facilitated” crimes that

“involve moral turpitude” such as “credit card fraud, investment fraud, and

distribution of child pornography.” He emphasizes that the government alleged

those facts as part of its charge that Respondent conspired to engage in money

laundering.3 But Respondent was not convicted of facilitating credit card fraud,

investment fraud, or distribution of child pornography. In fact, the government

dismissed its charges against Respondent for conspiring to engage in money

laundering. Respondent was convicted instead of a strict liability offense which

did not require proof of scienter: operating an unlicensed money transmitting

business.

      Nor did Respondent admit facts establishing crimes of moral turpitude when

he pled guilty. To be sure, the count of the indictment that alleged a licensing

violation contained cross-references to other allegations. During the plea colloquy,

      3
         Disciplinary Counsel also argues that Respondent‟s subsequent dishonesty
before Judge Collyer and in disciplinary proceedings indicates that he intentionally
failed to register E-GOLD in order to benefit financially from criminal activity.
Because we hold below that Disciplinary Counsel did not prove that Respondent
was dishonest before those tribunals, we reject this argument.
                                         13

however, Judge Collyer read from or summarized the Statement of Offense, which

only contained facts related to the licensing offense.       Disciplinary Counsel

introduced no independent proof of moral turpitude, and he cannot rely upon the

unproven allegations of the indictment to meet his burden.

      Every single member of the Hearing Committee and the Board who

analyzed this question found that Disciplinary Counsel had not proven moral

turpitude. On this record, we find no basis to disagree. See, e.g., In re Allen, 27
A.3d at 1187 (declining to find moral turpitude because “[i]n the end, this case

turns on the allocation of the burden of proof”).

                      B. Whether Respondent Was Dishonest

      Disciplinary Counsel also argues that Respondent‟s statements to Judge

Collyer and in subsequent proceedings were misleading because he could not have

relied on advice of counsel at the time he committed the offense of which he was

convicted. Disciplinary Counsel reads Drinker Biddle‟s 2003 memorandum as

“suggesting registration was required.” He stresses that the Statement of Offense

indicates that Respondent committed the crime during 2002 and 2003, around the
                                       14

same time that he was allegedly rejecting Drinker Biddle‟s advice and before he

received more favorable advice from Mr. Fuerst in 2005.

      As the dissenting opinion of the Hearing Committee Chair demonstrates, this

is not a frivolous claim. However, we are not persuaded that Disciplinary Counsel

proved dishonesty as an aggravating factor by clear and convincing evidence. See

In re Cater, 887 A.2d at 25. Until the first disciplinary hearing, Respondent

essentially stated that he was not an expert in the field, that he had sought the

advice of counsel, and that he had been advised that E-GOLD was “not subject to

existing statutes and regulations” when the company was being “structured.”4 The

record lends some support to these statements. Respondent is an ERISA lawyer

who sought advice from Drinker Biddle in 2002 and from Mr. Fuerst, who argued

in January 2006 that GSR was not required to have a license under the Patriot Act.

Further, Respondent testified that Mr. Seidl advised that E-GOLD was not “doing

      4
         Disciplinary Counsel also notes statements made by Respondent‟s counsel
at sentencing and during disciplinary proceedings. Even assuming that we can
impute these statements to Respondent, many of them are properly interpreted as
advocacy rather than factual representations. In any event, these statements are
largely duplicative of the statements by Respondent that we have summarized.
                                         15

banking” and was not “subject to banking regulations” when the company was

being formed in the mid-1990s.5

      In addition, the Drinker Biddle memorandum is too ambiguous to prove that

Respondent knew he had to register E-GOLD. It uses equivocal language, such as

that E-GOLD “may wish to consider” whether to register and that GSR‟s

operations “may lead it to be categorized as” an entity that would be

“vulnerable[.]” The memorandum also stated that “there is no clear answer” to

whether E-GOLD would meet the definition of a “financial institution.”

Ultimately, it recommended that E-GOLD consider “whether the benefits” of

contacting the government for more information would “outweigh[] the risks.”

Regarding state law, it indicated that some states had begun to license “diverse

entities,” but it merely recommended that the companies “may want to survey the

laws of the various states[.]” Further, there is substantial evidence that Respondent

      5
         We are also satisfied that Respondent‟s remarks to Judge Collyer were not
intentionally misleading when placed in context. Judge Collyer‟s question whether
Respondent should be sentenced more harshly than his co-defendants because he is
a lawyer sparked a lengthy exchange between Respondent‟s counsel and the
government. Given this focus on Respondent‟s status as an attorney, it is not
surprising that Respondent would briefly reiterate that he was not an expert in this
area of the law and had attempted to consult attorneys who were. Further, Judge
Collyer‟s remark that Respondent and E-GOLD were “in a slow prodding
comfortable way trying to figure . . . out” their legal obligations indicates that she
knew that Respondent had not received concrete advice on the registration issue at
all relevant times.
                                           16

believed that the memorandum contained factual errors that could have affected the

legal analysis.

      We acknowledge that Respondent‟s statement before the Hearing

Committee—that E-GOLD had been “told from the very beginning” that it was not

violating the law—is troubling.         Certain statements in the Drinker Biddle

memorandum, such as that GSR may be “vulnerable to a regulatory claim”

indicated that E-GOLD might have to grapple with compliance issues. Moreover,

there is no evidence in the record that Respondent sought or received advice about

D.C. law specifically.

      Nonetheless, we find persuasive the Board‟s examination of the context

surrounding Respondent‟s statement, including his subsequent elaboration that the

regulatory climate was uncertain, that government publications had at times

indicated that registration might not be required, and that one of Respondent‟s

partners had met with the government. Respondent also testified that E-GOLD had

hired Ernst & Young to advise it on how to structure its business and to comply

with regulatory laws. Thus, as the Board noted, Respondent‟s statement could be

interpreted as referring to multiple sources, not just legal counsel, for his belief that

E-GOLD was not violating the law. In addition, Respondent testified that Mr.
                                           17

Seidl advised that E-GOLD was not subject to regulations when the company was

being formed, and Mr. Fuerst later gave advice that would have reaffirmed that

belief.

          The statement that E-GOLD had been “told from the very beginning” that it

was not violating the law comes perilously close to being misleading, but the

Hearing Committee ultimately found that Respondent was credible. Indeed, every

member of the Hearing Committee (save one) and the Board who analyzed this

question found that Disciplinary Counsel had failed to prove dishonesty by clear

and convincing evidence. There are no affirmative findings that Respondent was

honest and did not mislead.        This case likely would turn out differently if

Respondent had the burden of proof. But Disciplinary Counsel had the burden to

show, by clear and convincing evidence, that Respondent was dishonest. In this

case, he has failed to meet that burden.

                             C. The Appropriate Sanction

          Having held that Disciplinary Counsel did not meet his burden to prove

moral turpitude or dishonesty, we are left with the fact that Respondent was
                                         18

convicted of a serious crime. The undisputed fact that Respondent committed a

felony makes the choice of an appropriate sanction especially difficult.6

      Further, although Disciplinary Counsel did not prove that Respondent‟s

conduct rose to the level of moral turpitude, the crime to which Respondent pled

guilty has consequences beyond the simple failure to file a registration form. As

Judge Collyer noted:

             [T]he failure to register is what leads to the ability of
             criminals to make use of the E-Gold system for nefarious
             purposes . . . . Because once you register you have to
             report things and therefore it‟s not as anonymous or
             private . . . . So on one hand it‟s just a regulatory
             compliance issue. On the other hand it‟s a very serious
             problem[.]

      6
         The cases that the Board and Respondent cite in support of an informal
admonition do not involve a “serious crime.” See, e.g., In re Sofaer, 728 A.2d 625,
626 (D.C. 1999) (violation of a disciplinary rule involving work on matters that
lawyer participated in when serving as a public employee); In re Confidential, 670
A.2d 1343, 1343 (D.C. 1996) (violation of a disciplinary rule involving splitting of
fees); In re L.R., 640 A.2d 697, 701 (D.C. 1994) (violation of a disciplinary rule
when respondent misunderstood the payment system under the Criminal Justice
Act). Respondent also points to In re Kline, 113 A.3d 202 (D.C. 2015), but that is
not an informal admonition case. See id. at 216 (declining to impose a sanction).
Nor does it involve a serious crime. See id. at 214 (holding that a prosecutor
violated a disciplinary rule related to disclosure obligations).
                                        19

Given the serious consequences that may follow from a failure to register, and the

fact that Respondent has been convicted of a felony, it is far from obvious that an

informal admonition is a sufficient sanction. See In re Allen, 27 A.3d at 1188-89

(noting that the fact that respondent‟s conduct “did not involve moral turpitude

does not diminish the severity of respondent‟s misconduct”).

      Ultimately, however, we must keep in mind that “the purpose of imposing a

sanction is not to punish the attorney, but to protect the public and the courts,

safeguard the integrity of the profession, and deter respondent and other attorneys

from engaging in similar misconduct.” In re Cater, 887 A.2d at 17. Here we

emphasize that Respondent‟s misconduct did not arise from his practice of law,

and that the goal of deterring similar conduct has been served by the prosecution of

criminal charges. We therefore defer to the Board‟s careful weighing of the

circumstances:

            This case presents the rare, if not unique, situation
            wherein a respondent pleaded guilty to a single non-
            scienter felony unrelated to the practice of law, the crime
            was committed in a climate of legal and regulatory
            uncertainty, Bar Counsel has failed to prove moral
            turpitude or dishonesty by clear and convincing evidence,
            there are no other disciplinary charges, and Respondent‟s
            disciplinary record and character are unblemished.
                                           20

                                     IV.   Conclusion

      The order of the Board on Professional Responsibility is hereby affirmed.

Disciplinary Counsel is directed to issue an informal admonition to Respondent for

his conviction of a serious crime.

                                                It is so ordered.