Iowa Supreme Court Attorney Disciplinary Bd. v. Sharpe

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Iowa Supreme Court Attorney Disciplinary Board, Complainant, v. Rebecca C. Sharpe, Respondent.

No. 24-0424

Supreme Court of Iowa

October 4, 2024

On review of the report of the Iowa Supreme Court Grievance Commission.

In an attorney disciplinary action, the grievance commission recommends revocation of the attorney's law license based on violations of our attorney ethics rules. License Revoked.

Tara van Brederode, Alexis Grove, and Robert A. Howard, Des Moines, for complainant.

Rebecca C. Sharpe, Bettendorf, pro se, and Joshua J. McIntyre (until withdrawal) of Lane & Waterman LLP, Davenport, for respondent.

Christensen, C.J., delivered the opinion of the court, in which all participating justices joined.

Waterman, J., took no part in the consideration or decision of the case.

Christensen, Chief Justice.

The Iowa Supreme Court Attorney Disciplinary Board (the Board) charged an Iowa attorney with violations of the Iowa Rules of Professional Conduct and Iowa Court Rules after she mishandled two client matters and her client trust account. The Iowa Supreme Court Grievance Commission (the commission) determined that the attorney committed various violations of our ethics rules and recommended revocation of her license. Upon a de novo review of the record, we revoke the attorney's license.

I. Background Facts and Proceedings.

Rebecca Sharpe was admitted to practice law in Iowa in 2009. Although she does not have a history of ethical violations, this court suspended Sharpe's license because of a physical disability that prevented her from discharging her professional responsibilities associated with the practice of law on March 22, 2023. Her license remains suspended. This case arises from Sharpe's representation of various clients and the mismanagement of her client trust account in the following matters prior to that suspension.

A. Haack Matter.

The first client matter concerns Sharpe's designation as the attorney to the estate of Evelyn Haack, who passed away on January 16, 2018. Sharpe was designated as the estate's attorney on February 23 by the estate's executor and Haack's niece, Carolyn McConnell. Several issues arose during Sharpe's designation as the estate's attorney.

First, Haack's last will and testament devised 5% of her estate to the St. Paul Lutheran Church Endowment Fund (the Church), where Haack had been a member for 55 years. The intended gift was approximately $100,000, but the Church never received notice of the probate proceeding or its intended bequest. The Church only learned of the possibility of an intended bequest about three years after the estate was opened when a friend of the decedent inquired about it to the Church. Ultimately, the Church never received any money from the estate. A resolution concerning the intended bequest was reached between the Church and Sharpe on October 23, 2023.

Prior to the resolution, Sharpe took several steps to hide the bequest from the Church. A $100,000 check from the client trust account was written for the Church but never delivered. Additionally, when McConnell checked on distributions in July 2019, Sharpe claimed there were not enough funds for the $100,000 devise to the Church, which was not true. Sharpe also hid the bequest from the probate court. The first and final report by the executor was filed on August 26 and did not list the Church as a beneficiary or include a waiver from the Church. The Church was included, however, in the amended report and inventory filed with the probate court on the same day and was included in the report and inventory sent to other beneficiaries. Lastly, in January 2021, a certified public accountant (CPA) enlisted by Sharpe to help with the estate again inquired about the Church's gift and Sharpe did not respond.

An issue also arose with the estate taxes. On April 5, 2018, Sharpe contacted Haack's accountant, Randy Linn, to file the necessary returns. She informed Linn that she would presume he was handling Haack's personal taxes and the estate taxes unless he responded otherwise. Sharpe also stated that once the estate was closed, she would reach out with final documents for filing a United States estate tax return (Form 706) and Iowa inheritance tax return (Form IA 706). Linn did not respond to Sharpe's message. Sharpe contacted Linn once more on January 17, 2019, stating that she would continue to drop off documents for the estate taxes and documents for the final tax returns once the estate closed. Despite these statements to Linn, on March 14, Sharpe filed an application with the probate court that stated, "A United States Estate Tax Return (Form 706) and the Iowa Inheritance/Estate Tax Return (Form IA 706) are not required to be filed."

The estate was closed on August 27 without any estate taxes being filed. Sharpe once again contacted Linn on September 1 and did not receive a response. Linn passed away on February 7, 2020, without having filed any taxes for the Haack estate.

In early 2021, Sharpe hired a CPA to file the estate taxes. The delay in filing resulted in the Iowa Department of Revenue assessing approximately $51,000 in penalties and interest on the estate.^[1] In total, the estate owed $244,187.70 in taxes. In February, Sharpe paid $224,983.54 to the State of Iowa Treasurer out of the client trust account, and McConnell personally paid the remaining $19,204.16 without reimbursement from Sharpe. On August 12, 2022, the Iowa Department of Revenue certified that the Iowa inheritance tax was paid in full-almost three years after the estate closed.

The final issue concerns Sharpe's attorney fees as the designated attorney for the estate. On March 14, 2019, the probate court granted Sharpe's request for partial attorney fees in the amount of $19,073.27. Sharpe withdrew this amount from the client trust account on or about March 20. On August 26, Sharpe requested additional extraordinary fees in the amount of $89,709.29. The court again granted this request, allowing Sharpe to claim a total of $108,782.56 in attorney fees. From August 2019 to April 2021, Sharpe transferred money out of the estate labeled as "Trust Funds Probate Attorney Fees" and "Operating Account" in the client ledger. Sharpe made a total of twenty transfers to her firm ranging from $1,000 to $15,000. In total, the amount transferred from the estate was $65,290.71 more than the awarded attorney fees. Sharpe used these funds for personal expenses.

As Sharpe transferred excess funds to herself, she concealed her actions from McConnell. On March 1, 2021, Sharpe informed McConnell that there was no money left in the estate, so McConnell could not be reimbursed for an expense. Sharpe further claimed, "I have not been paid my entire fee because I was worried there wouldn't be enough money for taxes." At the time of that message, Sharpe had already overpaid herself by $54,290.71. When McConnell went to collect the estate's file on August 31, Sharpe produced two client ledgers that omitted all attorney fees claimed by Sharpe between August 28, 2019, and January 9, 2020, which totaled $91,500. Ultimately, when the estate taxes were finally paid, the Haack account had a negative balance because of Sharpe's excessive withdrawals.

B. Client Trust Account Matters.

Sharpe was a partner and partial owner of Aitken, Aitken & Sharpe, P.C. She was a signatory on the firm's client trust account and was primarily responsible for the firm's bookkeeping. In late 2020, the Client Security Commission (CSC) undertook an audit of Sharpe's client trust account that concluded in April 2022. The audit disclosed Sharpe's failure to prepare monthly triple reconciliations, failure to provide clients written notice at or prior to a withdrawal from the client trust account, two stale client accounts, a negative balance of $46,379.91 in the Haack client account in April 2021 that was not remedied until March 2022, two other negative client subaccount balances, and commingled funds. Sharpe also overdrew the client trust account twice, causing an overall negative balance of $3,475.55 in April 2021, and $660.92 in August 2021.

C. This Proceeding.

The Board filed a three-count complaint on May 1, 2023, and an amended complaint on September 20, alleging Sharpe violated several Iowa Rules of Professional Conduct and Iowa Court Rules. Count I concerns the Haack Matter and alleges Sharpe violated Iowa Rules of Professional Conduct 32:1.3; 32:1.15(a), (d), (f); 32:3.3(a)(1); and 32:8.4(b), (c). Count II concerns an adoption proceeding and alleges Sharpe violated Iowa Rules of Professional Conduct 32:1.3; 32:1.4(a)(3), (b); and 32:1.5(b). Count III concerns client trust account matters and alleges Sharpe violated Iowa Rule of Professional Conduct 32:1.15(a), (c), (f), and Iowa Court Rules 45.1; 45.2(2), (3)(a)(4), (3)(a)(9); and 45.7(3), (4). Sharpe filed an answer to the original complaint denying all alleged violations.

Sharpe was generally unresponsive throughout the proceedings. After discovery was served on Sharpe, she was granted an extension but the Board still had to file motions to compel discovery and for sanctions when Sharpe did not cooperate. Sharpe also requested that her hearing be continued twice, both of which were granted. She stated that health complications were the reason for the first requested continuance. After the continuance was granted, the Board found contradictory evidence to her health-related claims, which resulted in Sharpe's attorney withdrawing from the matter. Sharpe's second request for a continuance was to grant her time to retain a new attorney and again for health-related reasons. Eventually, the parties filed a partial stipulation of facts on December 5 and waived a formal hearing. Only the Board filed a...