Discipline by the IRS Office of Professional Responsibility

Tax preparers and accountants are subject to discipline at the federal level by IRS for misconduct.  When investigating tax practitioners, in conduct cases (possible misconduct other than tax non-compliance), the Internal Revenue Service Office of Professional Responsibility (“OPR”) will typically send a pre-allegation notice letter, which notifies the practitioner of the investigation and invites the practitioner to submit any relevant information.  If the practitioner's information does not resolve the matter, OPR sends an allegation letter specifying suspected violations of Circular 230 (the rules governing the OPR and IRS representation). 

This allegation letter is not a formal complaint that initiates formal disciplinary proceedings.  Instead, it provides the practitioner with written notice of the facts and laws that will be in the complaint if not resolved at this stage.  The practitioner is then provided the opportunity to dispute the facts, provide additional facts or mitigating circumstances, and to make arguments against the legal points raised in the letter.  The practitioner has three options for presenting this information.  The practitioner can provide the information in writing, they can request a conference (typically via telephone) to present the information, or they can choose to do both- provide a written response and request a conference. When we represent clients before OPR, we recommend doing both, prepare a written response and participate in a conference.  The conferences tend to be more concerned with establishing accurate facts and rehabilitation.  In other words, the focus is often on whether the alleged incident(s) happened and if the issue has been resolved. For example, if the OPR is disciplining for a revoked state license of an accountant or tax preparer, OPR seems to be less interested in why the license was revoked and more interested in whether the license has been reinstated.  If the license has been reinstated or the problem has been otherwise remediated, OPR can be willing to overlook the underlying action in favor of the obvious rehabilitation.

The matter may be resolved at either of these stages (pre-allegation or allegation notice).  The OPR may offer a reprimand, a censure, suspension, or disbarment to resolve the matter.  If a matter is not resolved at these stages, OPR sends the matter to the Office of the Associate Chief Counsel for representation in a formal disciplinary proceeding. 

The Chief Counsel will typically offer the practitioner one more chance to accept discipline (sanction, disbarment, etc) prior to drafting the complaint.  If a resolution is not reached, the Chief Counsel will serve a complaint (it will contain the laws violated and the facts to support those violations).  If the practitioner files a timely answer, the matter will be set for hearing before an administrative law judge (ALJ).  Under federal administrative law, a prehearing conference is set with typically the filing of formal briefs, and then an administrative hearing is conducted before an ALJ.

Following hearing, the ALJ has 180 days to issue a decision.  Unless appealed to the Secretary of the Treasury, within 30 days, the ALJ’s decision becomes the final decision.

IRS OPR disciplinary matters involve complex federal administrative procedures, and careful preparation and presentation of factual and legal arguments.  Our firm is pleased to offer federal administrative hearing defense as part of our portfolio of licensing and administrative law services.

DMV Salesperson's License Saved After Fraud Conviction

In 2016, our firm represented a DMV-licensed salesperson who had been convicted of a felony for making a false insurance claim.  With our help, he obtained a reduction of the felony and expugement of the resulting misdemeanor, but he had to defend his salesperson's license from an Accusation by the DMV in administrative court.  We consulted with this client as well as his business associate, who also had a conviction for the same crime. 

After hiring our firm, we saved the client's license and his sixteen-year career in the sales industry was saved.  The business associate, convicted of the same crime, represented himself and lost his license.  This case highlighted the importance of strong legal counsel and persuasive mitigation and rehabilitation evidence in licensing cases, and we are tremendously proud of our success in this matter.

This case does not represent a warranty, prediction, or guarantee about your individual matter.

Fighting to Save a DEA License from Discipline

The Controlled Substances Act of 1970 authorizes the Drug Enforcement Administration (DEA) to deny, suspend, or revoke a DEA registration.  However, the Attorney General may limit discipline to the controlled substance or chemical list that is the subject of the discipline.  A DEA registration is required for any health care professional who prescribes or dispenses controlled substances.

The DEA’s disciplinary process works as follows.  First, the DEA will serve an Order to Show Cause or an Immediate Suspension Order upon its registrant, such as a physician, nurse practitioner, dentist or pharmacist.   The order will contain a statement of facts, the legal reason for the discipline, and a time and place for a hearing on the matter.  Despite having a hearing date provided, the registrant still must file a formal request for a hearing within 30 days or they will have waived their right to present their evidence and their case is sent to the DEA Administrator for the final decision.  If the DEA does not receive a formal request for hearing, the outcome is usually revocation of the registration. 

If a hearing is requested, the case is assigned to a federal administrative law judge (ALJ).  The ALJ’s first step is typically to require both parties to file prehearing statements that address the issues that will be raised at hearing and the documents and witnesses that will be presented at hearing.  The prehearing statements are formal pleadings drafted in accordance with the federal Administrative Procedure Act.  These statements are then discussed at a prehearing conference with the ALJ, which can also serve as an opportunity for settlement.  The hearing date is confirmed at that time (typically the hearing date is extended out from the first date listed in the order).

The hearing is held either in person or through video teleconferencing, usually in a venue in a major city in the same area as the registrant.  Following the hearing, both parties are offered the opportunity to file post-hearing briefs, which should also list the proposed factual findings and legal conclusions.  After receiving those briefs, the ALJ will issue a recommended decision.  Both parties receive the decision and are offered the opportunity to file exceptions to the ALJ’s recommendation if they believe it contains errors.  After waiting at least 25 days from when the recommended decision is issued, the ALJ certifies the case record and sends it to the Office of the Administrative for final review.  That record, along with the recommended decision, are reviewed and either adopted or non-adopted by the Administrator.  

We represent healthcare professionals in proceedings before the Drug Enforcement Administration.  If you are facing discipline, we can help with experienced administrative law representation.

Insurance Producer Accused of Fraud and Theft Ordered Only to Pay a Fine

We represented an insurance agent in 2016 who was accused by a former partner of diverting premium payments from his clients.  Over a two-day hearing, the Department of Insurance aggressively brought evidence and witnesses against our client alleging that he was dishonest and lacked integrity.

We successfully proved that the client did not divert any funds and demonstrated that his business practices had been corrected.  Instead of revoking the license or even restricting our client's license at all, the administrative law judge ordered only that he pay a small fine.  His license was otherwise unaffected and he was able to continue operating his successful agency.

This case does not represent a warranty, prediction, or guarantee about your individual matter.

Reinstating an Insurance Broker License After Revocation

Insurance Code section 1669(d) empowers the California Insurance Commissioner to summarily deny (without a hearing) a license application within five years of a license revocation.  For an insurance broker who has lost their license, this five year window can present a trap.  If you re-apply within five years and are denied, under section 1669(c), the five year period starts again.  Five years is a very long time to wait to resuscitate a career.  Is there any faster way back to licensure?

The key to breaking this cycle is presenting a correct message and evidence of rehabilitation and mitigation through non-statutory remedies.  This critical information also needs to be presented to the correct decision-maker at the Department of Insurance in a format that will trigger action by the Insurance Commissioner.

The road back to licensure can be difficult.  Although we have had many instances where we could persuade the Department to issue a license without a hearing, the Insurance Commissioner may want the matter to be heard before an administrative law judge before a license can be issued.  This may entail additional litigation, although occasionally a settlement can be reached.  Also, sometimes in a particularly difficult case, our efforts may result in denial, and we may have to build a stronger case upon that denial in a subsequent effort until the license is reinstated.  In this process, we have to partner with the client to be patient, positive and persistent.   However, almost always this approach is much faster than waiting five years to re-start the licensure process.  

Lastly, and importantly, waiting five years is not a guarantee of regaining a license.  The Department may still want a hearing before an administrative judge, which can add anywhere from eight months to two years to the process.  Therefore, it is an easy decision to initiate the process of re-licensure much earlier than five years with the help of an experienced license attorney.

 

ABCs of BRE Broker Audits

The Bureau of Real Estate can dispatch an auditor to conduct an on-site audit of a broker's operations.  These audits typically focus on proper use of the broker's trust account, but usually also include a full compliance check of the real estate broker's operations.  BRE audits are usually triggered by a complaint.  A typical audit will involve the auditor working on-site for a few days, however, if the brokerage is large, an audit may stretch to several weeks.  A broker will usually get a phone call to set up an audit, then a letter notice as required under Business and Professions Code section 10148.   The notice will have a laundry list of documents to be examined and, importantly, the time frame of records to be examined.

The auditor, also known as an examiner, will often present a subpoena to the broker on the first day of the audit.  The documents demanded in the subpoena can be extensive.  An attorney representative or hired forensic auditor expert can sometimes negotiate with the examiner to limit the scope of the subpoena, particularly if compliance will involve undue consumption of time and yield documents far beyond what is necessary for the audit.   The examiner will also pose questions to the broker during the audit.  The examination, in this way, can be as much an interrogation as an examination of records.

For trust accounts, the broker will want to see that the trust account has been properly opened, and that there is no comingling of earned and unearned monies, and most importantly, that there has been no conversion (theft) of client funds.  The examiner will review the trust account records and then test those records by demanding records of individual transactions, for example, invoices, receipts or canceled checks.

The examiner also can review real estate transaction files for compliance issues, and may walk the premises as well, looking at signs, business cards and promotional materials.  The examiner will want to confirm that every real estate salesperson is properly licensed, licensed under the broker's license, and working under a proper contract.  Files will be examined to make sure that clients have been given appropriate disclosures.  

At the conclusion of the audit, the auditor will typically share the audit findings with the broker.  The broker at that point can respond with information that rebuts the findings and also with remediation (corrective action).  The auditor can refer the matter to the legal department at BRE for the filing of an accusation to discipline the broker's license.

An attorney, working in conjunction with a forensic auditor experienced in BRE matters, can provide many useful services.  First, after notice of the audit but before the audit begins, corrective action can be taken to fix improperly opened trust accounts, organize records, account for shortages or overages and remediate these outcomes, and insure the broker is complaint with BRE rules and regulations to the fullest extent possible.  During the examination, an attorney or forensic accountant can speak on behalf of the broker and help the broker navigate technical or thorny issues that arise.  And finally, when the audit is over expert assistance can help respond to or remedy violations to take an discipline case down to a mere warning, if possible.

Our law firm represents real estate brokers who transact real estate and manage properties before BRE auditors in BRE audits.  We also work with experienced forensic auditors.  Audits are expensive.  The BRE will charge the licensee for the auditor's time which can be significant, and resulting required fixes demanded by BRE and discipline by BRE can be very costly.  Seeking expert help is a very wise investment of time and money.

Your Hearing's Around the Corner? It's Not Too Late to Get Legal Help

If for whatever reason your license discipline or license denial hearing has snuck up on you and is right around the corner, don’t throw in the towel or go it alone.  Even with just a few days to prepare, an experienced license defense attorney can make a night-and-day difference in the outcome of an administrative hearing.   Here are some considerations in getting even last minute help for a license discipline hearing on an accusation or a license denial hearing due to a statement of issues.

The first consideration is whether you can continue (postpone) the hearing before hiring an attorney, or just continue it without an attorney’s help to buy more time.  As a hearing date draws very near, the Office of Administrative Hearings (OAH) is often much less likely to postpone a hearing.  If you ask to continue (postpone) the hearing and wait for an answer from OAH, you might not get the answer until a day or two before hearing!  And that answer is often “no.”  OAH disfavors postponing hearings at the last minute, since it really disrupts their schedule.  It's just like canceling an appointment at the last minute.  An attorney has a better chance of persuading the Presiding Administrative Law Judge to grant a continuance, but in any event, the case should be prepared for hearing as if it will go forward.    

A second consideration in favor of hiring a lawyer, even at the last minute, is the lack of good options after the hearing is done.  The three options after losing a hearing (suffering license revocation or an outright denial) are reconsideration, appeal by writ petition, and reapplication or reinstatement.  Reconsideration is asking the agency that just took away your license or denied it to rethink that decision.  Some pretty powerful evidence or arguments are needed to get reconsideration granted.  Reconsideration often doesn’t work.  An appeal by writ, which happens in Superior Court, costs a lot more money usually than having a lawyer at the administrative hearing, and the odds of winning are usually a lot worse.  Reapplication or reinstatement can take years, and is made harder by the history of a lost hearing in a someone’s background.

A third consideration is the cost of not getting a lawyer.  Although a lawyer can be expensive, years of lost wages can be 100 times the cost of a lawyer’s fees.  A license discipline or denial hearing is one of those rare life events, like a serious illness, death, divorce or birth of a child, that unfortunately imposes a financial burden.    

Even if the hearing is almost here, and the chances don’t look good at all, a fourth consideration is taking the long view.  A license discipline or denial hearing is a public record that can damage a licensee or license applicant’s reputation, particularly in our Internet age.  Most people who lose a license hearing will later come back for the license again, and at that time must live with the damage wrought by the prior license hearing.  Even in defeat, an experienced license attorney’s legal skill at hearing can soften the decision and set a much more positive stage for a later career comeback. 

We have the resources to rise to your defense even as your hearing date approaches.  Please don’t wait until the last minute, but, if you do, don’t give up.  Give us a call and let us make a positive difference.

 

Non-Adoption After Administrative Hearing

One of the most confusing parts of licensing law is the concept of “who makes the final decision?”  Even though licensees have the right to an administrative hearing before they are disciplined in any way by the agency, the written result of hearing is called the “proposed decision” and doesn’t become final until the agency itself reviews it and makes it official, a process called “adoption.”  If the agency rejects the proposed decision, that is called a "non-adoption."  The same term is also applied to a rejected proposed settlement. 

So, our clients ask, what’s the point?  Why go to hearing if I’m just going to have to deal with whatever the agency wants in the end?

First of all, non-adoptions are fairly rare.  Administrative law judges are legally trained to produce decisions that will be acceptable to state agencies, using disciplinary guidelines provided by the agencies themselves to create acceptable decisions.  The most common reason a proposed decision is non-adopted is not because the ultimate outcome is unacceptable to the Board, Bureau, Department or Agency but because the decision itself has left out something that an individual agency requires.  In that case, the decision often is revised in a minor, technical way, and then reissued with the same result.  A proposed decision can even be non-adopted in the client’s favor, to remove some condition that the judge proposed that the agency doesn’t want to be responsible for enforcing.

However, in many non-adoptions after hearing, the client usually has achieved a successful result at hearing, persuading the judge of the merits of his/her case, only to have the agency return the proposed decision because the agency fundamentally disagrees with the result.  This result is most common when the licensee is disciplined less harshly than the agency would like to see.  An agency may outright refuse to grant a license or insist on the outright revocation of a license.  Or, an agency may want probation where perhaps a judge would have allowed the client to practice freely, or an agency will insist on a condition that the judge did not find necessary.

Non-adoptions happen more frequently with cases handled by experienced license defense attorneys, because we sometimes will achieve a surprisingly good result for the client that the agency doesn’t expect.  However, after the agency studies the decision, they may come to understand the reasons for it and adopt it as written by the administrative law judge.

The agency holds most of the cards in this scenario, but the battle is not over for the licensee.  The client has the right, under the Administrative Procedure Act, to obtain a copy of the transcript and a chance to produce written argument directly to the agency (and occasionally, if granted, make an oral argument) about how the proposed decision should be treated.  Sometimes the agency ends up adopting the proposed decision in its entirely after written argument—a successful outcome in the end, albeit a frustrating path to success.  Sometimes a compromise is reached where the outcome isn’t quite the vindication offered by the proposed decision, but is better than the alternative the agency would prefer.  It is sometimes possible to negotiate a slightly different outcome after non-adoption and avoid the need for further proceedings.

The hypothetical problems posed by a non-adoption can best be answered by qualified counsel.  An attorney who has litigated many hearings will be in the best position to know when a proposed settlement or resolution is a good deal for the licensee.  If the licensee might do better at hearing, then the attorney needs to know whether “doing better” is likely to be kicked back by the agency, or whether the settlement offer represents the best deal.  An attorney in this position knows when the agency is being unreasonable, as they will have seen cases where the agency insisted on conditions that a judge ultimately did not order.  Further, the attorney will have seen how the agency adopted a better result for the client than they were willing to offer in settlement.  That’s the most important factor—if your attorney knows that the agency is likely to accept a proposed decision from a judge, then hearing is the best way to achieve the result you want.

RN Accused of Gross Negligence Avoids Probation

Earlier this year we were able to persuade the Board of Registered Nursing to drop its demand for a lengthy license probation and instead give a registered nurse a reprimand.  Registered nurses are mandated reporters of abuse under California law.  A reprimand, also known as a public reproval, does show on the license record but does not require that the RN perform any task other than what is immediately required of the reprimand, usually taking a class or payment of money.  

In this case, the RN was charged with gross negligence and incompetence for failing to report a sexual assault in a psychiatric hospital.  We handled the matter from the time near the initial complaint, through the investigation and accusation stages, presenting mitigating and rehabilitating evidence to explain the nurse's actions and placing the incident in the context of an excellent work history.  The Board initially demanded placing the nurse on a lengthy probation.  However, upon further examination of the facts and negotiation, the Board of Registered Nursing agreed that there were significant mitigating facts explaining the nurse's decisions and that a low level of discipline was appropriate. We  were able to resolve the matter by accepting a reprimand and paying the Board's costs.  

DCA Investigations: Proceed With Caution

Being the target of a licensing investigation is one of the most surprising and stressful things that can happen to one of our professional clients.  Investigations often immediately follow a workplace incident, often where a disgruntled employer sometimes reaches out to the Board directly.  Or, a client may have a vindictive coworker or supervisor who reports their conduct to the agency.  Either way, the client is usually informed, rather suddenly, by a terse letter from the Department of Consumer Affairs, informing them that they’re being investigated.  What should they do next?  

Like most professionals who want to do the right thing and take pride in their jobs, our clients’ first instinct is usually to try to “straighten everything out” with the investigator.  They hope that perhaps a friendly conversation with an investigator will end the matter—they’ll see that the agency has made a mistake and in fact the person who made the complaint is usually to blame for the incident.  Most of the time, our clients really are put in a difficult position by the false allegations of someone else.  It’s natural for them to want to “clear things up” by making themselves available for interviews, or by signing releases, or by answering questions.

 

Unfortunately, clients are unaware of a critical fact about investigations: the investigator’s job is to gather information, not to assign blame.  The investigator is not a judge.  He or she does not determine whether or not the agency should take action.  The investigator, like a good journalist, is only collecting sides of the story.  When an investigation starts, usually one side of the story (the side unfavorable to our client) has already been collected.  That’s why we urge our clients to exercise caution when they are being investigated.  If the agency asks for records from our clients, we need to protect our clients' privacy.  If the agency wants to interview our client, we interview our client first so that our client is prepared and we know the full story.  And, in cases where our client is accused of misconduct, we make sure that client doesn’t waive their constitutional rights out of a mistaken sense that it will all go away if they just answer questions.


Most state agencies have regulations that mandate cooperation with agency investigations. However, clients can exercise their Fifth Amendment right to remain silent. Refusing to answer questions in an investigation interview can be a missed opportunity to provide critical balanced information to an agency, or be a good decision that prevents making damaging admissions.  That’s why we approach investigations with thoughtfulness and caution.