Self-styled tax fighter Philippe DioGuardi has been given a six-week suspension, a $5,000 fine and an order to pay $75,000 in legal costs after being found guilty of professional misconduct by the Law Society of Upper Canada.
The flamboyant DioGuardi, 54, who has spent more than a decade developing a reputation as the bulldog lawyer who takes on the Canada Revenue Agency, was put on a short leash Friday after the law society tribunal agreed to a joint submission by lawyers for DioGuardi and the law society.
DioGuardi has become famous for a series of slick advertising campaigns featuring tax agents in dark suits and sunglasses and inviting tax debtors to call him at “the first sign of tax trouble.”
DioGuardi was present at the hearing but did not speak to the tribunal.
“The lawyer admits that he committed professional misconduct,” said Louise Hurteau, the law society’s discipline counsel.
The law society’s application to the tribunal included allegations that DioGuardi took money from six clients before performing “any or very little legal service,” and in some cases “failed to perform legal services to the standard of a competent lawyer.” DioGuardi also failed to file income tax returns for a client in a timely manner, the law society alleged in its application.
In an email to the Star later Friday, DioGuardi said the suspension was “fair and appropriate.”
“I chose to bring this disciplinary matter to an end when it became apparent to me that perfect adherence to the bylaw took precedence over protection of client property,” DioGuardi wrote.
“For this reason, and to protect my family and my family name from media attention that expanded beyond the disciplinary matter to include private personal details, I entered into an agreement with the law society, and I will comply fully with the law society bylaws.”
As part of the agreed-upon penalty, DioGuardi must submit to a review of his practice by the law society.
In its submissions, the law society charged that DioGuardi “failed to act with integrity” by having eight clients sign retainer agreements that benefited his law firm, DioGuardi Tax Law, to the “potential detriment” of those clients.
Law society lawyer Hurteau described a pattern in which DioGuardi would deposit client retainer money into the firm’s general account, as opposed to a trust account. This move gave DioGuardi ownership over client money prior to any work being done. A law society bylaw states that client funds must be deposited in a trust account and can only be drawn once work is completed.
“The lawyer admits . . . that he was asking his clients to effectively relieve him of his regulatory requirements, which is not permitted,” Hurteau told the tribunal. “I think what has to be brought home to lawyers is that you can’t contract out your professional responsibilities.”
DioGuardi’s lawyer, Melvyn Solmon, told the tribunal the reason DioGuardi did not leave his clients’ money in a trust account was to keep it out of the hands of the CRA if they came looking for it. He said his client had no intention of breaching the law society bylaw.
“His intention was to protect the clients’ retainer funds,” said Solmon, who told the tribunal that “no client was hurt.”
Hurteau also said DioGuardi would meet with clients, take a retainer, then delegate work to other staff in his office, “but (with) Mr. DioGuardi always having responsibility and oversight.” She said there were patterns in which DioGuardi failed to keep clients up to date with the status of their files, failed to obtain information from the CRA and failed to give advice “which ought to have been given.”
Solmon said DioGuardi acknowledged that some clients were not served.
“It doesn’t matter the reason why, whether it’s failure to monitor, failure to delegate properly or even missing deadlines, the objective is to make sure the client is served. If the client is not served, then that is professional misconduct,” Solmon told the tribunal.
A Star investigation earlier this year of DioGuardi’s practice and lifestyle revealed an embattled lawyer fighting on several fronts: defending himself against the law society misconduct charges; fending off lawsuits from angry clients; trying to keep the CRA at bay; and dealing with a nasty divorce.
The Star story also revealed that he overdrew his firm’s account by $2 million, and at one point owed the CRA more than $140,000 in back taxes. DioGuardi told the Star earlier this year that “the arrears were paid off in full over time.”
Known for his penchant for beaver and wolf fur coats and luxury cars, DioGuardi blamed his financial woes partly on a nasty divorce from his wife, Elena DioGuardi, who was at one time demanding $25,000 a month in spousal support, the Star investigation showed.
DioGuardi explained in his affidavit for his divorce proceedings that, in an attempt to appease Elena, he purchased a condo and Mercedes for her in Russia, spent more than $200,000 on furs, $200,000 on jewelry and $20,000 on designer handbags.
In a letter to the Star earlier this year, DioGuardi said he is responsible for putting two of his children through university and caring for his youngest child, who is autistic and requires “extraordinary financial support.”
DioGuardi, who has offices in Toronto, Mississauga and Ottawa, has built a career as an “adversarial” tax lawyer through a slick multimillion-dollar infomercial and ad campaign.
In one radio ad, DioGuardi depicts a CRA agent as playing “Mr. Nice Guy to get details about your bank accounts and your house, and then sends in the wolves to seize your money and your assets.”
Philippe DioGuardi’s responses to questions from the Toronto Star
1. What is your response to the LSUC tribunal penalty?
The penalty, being a suspension of only six weeks, is fair and appropriate. In my adversarial tax practice, when the client owes tax, there is a very foreseeable risk that the Canada Revenue Agency will attempt to seize retainer funds held in trust for the client. S. 224 Third Party Demand to Pay orders were issued against six of the complainants, to their banks or their employers, either before they retained me, or during my representation. The Law Society prosecution accepted that the Canada Revenue Agency may be able to seizure client fees held in a lawyer’s trust account. But the Law Society’s bylaws as they stand today do not permit a lawyer to take steps to protect a client’s fees, even in the face of such foreseeable risk. The public is entitled to a standard of perfection, which is defined as absolute compliance with the letter of the bylaw. As a lawyer I accept that.
I chose to bring this disciplinary matter to an end when it became apparent to me that perfect adherence to the bylaw took precedence over protection of client property.
For this reason, and to protect my family and my family name from media attention that expanded beyond the disciplinary matter to include private personal details, I entered into an agreement with the Law Society, and I will comply fully with the Law Society bylaws.
My father, Paul DioGuardi, and my sister Brigitte DioGuardi will continue to represent the clients of DioGuardi Tax Law during the term of my suspension.
2. How do you feel the discipline process was handled?
I have no comment to make. The Law Society has done its duty, which is to protect the public, including compliance with its bylaws, and ensure that lawyers adhere to nothing less than a standard of perfection.
3. What is the status of your policy review request?
I am preparing an application for review of the policy issue in order to protect clients who are subject to CRA collection and have the risk of their retainer funds being seized by the Canada Revenue Agency. I expect to make this written submission to the Law Society’s Policy Review Directorate before the end of this year.