Criminal Convictions and Accountant Discipline in California

If you're an accountant in California and have had a run-in with the law, more than your freedom is at stake.  Your career and livelihood are in jeopardy, too.

A criminal conviction can trigger disciplinary action by the Board of Accountancy.

Our California Criminal Defense Lawyers may be able to help.  We represent people accused of crimes and have particular experience helping accountants avoid losing their licenses in disciplinary actions.1

This article is about criminal convictions and accountant discipline in California.  If you have further questions after reading it, we invite you to contact us for a consultation.

This article covers:

1. Who regulates accountants in California?
2. What criminal convictions trigger
Board of Accountancy discipline?
3. Can I fight for my license?

(Click on a title to proceed directly to that section)

1. Who regulates accountants in California?

The California Board of Accountancy regulates accountants in California.  The Board is a state governmental agency within the California Department of Consumer Affairs.

The Board enforces the California Accountancy Act and implements regulations in accordance with its mission of public protection.2

2. What criminal convictions trigger
Board of Accountancy discipline?

Convictions that are "substantially related" to the qualifications, functions, or duties of an accountant can trigger Board of Accountancy discipline in the form of license revocation or suspension, or censure.  Such convictions constitute "unprofessional conduct."3

The "substantial relationship" requirement is based in both statute and in the Constitution.  Your right to practice your chosen profession can only be impeded for a reason that relates to your fitness to practice that profession.4

In terms of sanction, the Board's Disciplinary Guidelines recommend license revocation as a maximum penalty for felony or "several misdemeanor" convictions.

As a minimum penalty for such convictions, the Guidelines call for a period of actual suspension with possible probation conditions including restitution, ethics course, community service and/or administrative penalty.5

"substantially related"

A substantially related conviction is one that "evidences present or potential unfitness of a certified public accountant or public accountant to perform the functions authorized by his or her certificate or permit in a manner consistent with the public health, safety, or welfare."6

The Board specifies by regulation that crimes involving dishonesty, fraud or breach of fiduciary responsibility, as well as violations of the California Accountancy Act, are included.7

According to Board newsletters (and related enforcement documents), the following kinds of convictions have netted disciplinary action against California accountants:

These are just examples.  This is by no means a definitive or exhaustive list.

We recommend consulting an attorney when it comes to assessing whether a particular conviction is likely to be considered by the Board of Accountancy or a court to be substantially related to accounting.

Convictions

Convictions include felony and misdemeanor convictions secured through guilty pleas and verdicts, no contest pleas and convictions that may later be expunged under California Penal Code Section 1203.4.14

Generally speaking, the Board can act with respect to a conviction when the time for appeal has passed, the judgment of conviction has been affirmed on appeal, or an order granting probation is made suspending imposition of sentence.15

However, the reporting obligations discussed below define convictions more broadly to include initial pleas and sentence pronouncements.

Reportable events

Like doctors and lawyers, accountants in California have ongoing reporting obligations in connection with criminal actions.  Under Bus. & Prof. Code � 5063, accountants must notify the Board of Accountancy within 30 days of certain criminal convictions.16

Courts in which such convictions are secured also have reporting obligations.17

3. Can I fight for my license?

Yes. If you're a California accountant and you receive an Accusation notifying you that the Board seeks to discipline you by suspending or revoking your license, all is not lost.18

There may still be a chance to negotiate a favorable settlement with the Board.19

Further, as we discuss in our related article Administrative Hearings, you have the right to a hearing in front of an administrative law judge.

You have the right to discovery of relevant evidence in preparation for the hearing and the right to introduce evidence and cross-examine witnesses at the hearing.

You also can present key evidence showing that you have been rehabilitated from your crime.20

Finally, even if you should lose your permit or certificate, eventually you will be able to petition the Board for reinstatement.21

Our California Criminal Defense Lawyers Can Help.
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If you or loved one is charged with a crime and is an accountant and you are looking to hire an attorney for representation, we invite you to contact us at Shouse Law Group. We can provide a free consultation in office or by phone. We have local offices in Los Angeles, the San Fernando Valley, Pasadena, Long Beach, Orange County, Ventura, San Bernardino, Rancho Cucamonga, Riverside, San Diego, Sacramento, Oakland, San Francisco, San Jose and throughout California.

You might also be interested in reading our related articles Administrative Hearings, Doctor License Revocation, Nurse License Revocation, Dentist License Revocation, Attorney License Revocation, Teacher License Revocation, Social Worker License Revocation, Real Estate Agent License Revocation, Contractor License Revocation and Police Officer Discipline.

Helpful links:

California Board of Accountancy

California Department of Consumer Affairs

California Office of Administrative Hearings

References:

1Our California Criminal Defense Lawyers have local offices in Beverly Hills, Burbank, Glendale, Lancaster, Long Beach, Los Angeles, Pasadena, Pomona, San Diego, San Francisco, Torrance, Van Nuys, West Covina, and Whittier.

2See California Business and Professions Code Section 5000 et seq; California Code of Regulations Title 16, Division 1 (State Board of Accountancy).  See also California Business and Professions Code Section 5000.1, which emphasizes:  "Protection of the public shall be the highest priority for the California Board of Accountancy in exercising its licensing, regulatory, and disciplinary functions.  Whenever the protection of the public is inconsistent with other interests sought to be promoted, the protection of the public shall be paramount."

3California Business and Professions Code Section 5100 (a) provides:  "After notice and hearing the board may revoke, suspend, or refuse to renew any permit or certificate granted under Article 4 (commencing with Section 5070) and Article 5 (commencing with Section 5080), or may censure the holder of that permit or certificate for unprofessional conduct that includes, but is not limited to, one or any combination of the following causes:  (a) Conviction of any crime substantially related to the qualifications, functions and duties of a certified public accountant or a public accountant."  SEE ALSO California Business and Professions Code Section 490, which provides:  "(a) In addition to any other action that a board is permitted to take against a licensee, a board may suspend or revoke a license on the ground that the licensee has been convicted of a crime, if the crime is substantially related to the qualifications, functions, or duties of the business or profession for which the license was issued.  (b) Notwithstanding any other provision of law, a board may exercise any authority to discipline a licensee for conviction of a crime that is independent of the authority granted under subdivision (a) only if the crime is substantially related to the qualifications, functions, or duties of the business or profession for which the licensee's license was issued.  (c) A conviction within the meaning of this section means a plea or verdict of guilty or a conviction following a plea of nolo contendere.  Any action that a board is permitted to take following the establishment of a conviction may be taken when the time for appeal has elapsed, or the judgment of conviction has been affirmed on appeal, or when an order granting probation is made suspending the imposition of sentence, irrespective of a subsequent order under the provisions of Section 1203.4 of the Penal Code.  (d) The Legislature hereby finds and declares that the application of this section has been made unclear by the holding in Petropoulos v. Department of Real Estate (2006) 142 Cal.App.4th 554, and that the holding in that case has placed a significant number of statutes and regulations in question, resulting in potential harm to the consumers of California from licensees who have been convicted of crimes.  Therefore, the Legislature finds and declares that this section establishes an independent basis for a board to impose discipline upon a licensee, and that the amendments to this section made by Senate Bill 797 of the 2007-08 Regular Session do not constitute a change to, but rather are declaratory of, existing law."

4Hughes v. Board of Architectural Examiners, 17 Cal.4th 763, 788 (1998) ("It is axiomatic that the right of an individual to engage in any of the common occupations of life is among the several fundamental liberties protected by the due process and equal protection clauses of the Fourteenth Amendment.  Therefore, for example, a statute constitutionally can prohibit an individual from practicing a lawful profession only for reasons related to his or her fitness or competence to practice that profession." (Internal citations omitted)

5As to administrative penalties, see California Business and Professions Code Section 5116.2, which provides:  "In accordance with Section 5116 and applicable regulations, any licensee who violates subdivision (a), (c), (i), (j) or (k) of Section 5100 may be assessed an administrative penalty of not more than one million dollars ($1,000,000) for the first violation and not more than five million dollars ($5,000,000) for any subsequent violation, except that a licensee who is a natural person may be assessed an administrative penalty of not more than fifty thousand dollars ($50,000) for the first violation and not more than one hundred thousand dollars ($100,000) for any subsequent violation."

6California Code of Regulations Title 16, Division 1, Section 99 provides:  "For the purposes of denial, suspension, or revocation of a certificate or permit pursuant to Division 1.5 (commencing with Section 475) of the Business and Professions Code, a crime or act shall be considered to be substantially related to the qualifications, functions or duties of a certified public accountant or public accountant if to a substantial degree it evidences present or potential unfitness of a certified public accountant or public accountant to perform the functions authorized by his or her certificate or permit in a manner consistent with the public health, safety, or welfare. Such crimes or acts shall include but not be limited to those involving the following:  (a) Dishonesty, fraud, or breach of fiduciary responsibility of any kind;  (b) Fraud or deceit in obtaining a certified public accountant's certificate or a public accountant's permit under Chapter 1, Division III of the Business and Professions Code;  (c) Gross negligence in the practice of public accountancy or in the performance of the bookkeeping operations described in Section 5052 of the code;  (d) Violation of any of the provisions of Chapter 1, Division III of the Business and Professions Code or willful violation of any rule or regulation of the board.

7California Code of Regulations Title 16, Division 1, Section 99, id.

8In the Matter of the Accusation Against Susan Rachele (CPA) Case No. AC-2009-35 [default decision revoking license after conviction of 107 counts of forgery]

9In the Matter of the Accusation Against William Russell Murray (CPA) Case No. AC-2010-26 [default decision revoking license after guilty plea in federal mail fraud and interfering with tax administration case]; In the Matter of the Accusation Against Mamie Tang (CPA) Case No. AC-2004-10 [stipulated settlement and disciplinary order revoking license after conviction for mail fraud]

10In the Matter of the Accusation Against Alejandro Sady-Kennedy (CPA) AC-2007-26 [stipulated settlement and disciplinary order revoking license after conviction for bank fraud, wire fraud and money laundering]

11In the Matter of the Accusation Against Jerold J. Werner (CPA) Case No. AC-2004-18 [default decision revoking license after conviction on no contest plea for grand theft]; In the Matter of the Accusation Against Michael Alan Feldman (CPA) Case No. AC-2005-36 [default decision revoking license after conviction for grand theft by embezzlement]

12In the Matter of the Amended Accusation Against Wade Vincent Shang (CPA) Case No. AC-2004-20 [license revoked after conviction by jury verdict for tax evasion]

13In the Matter of the Accusation Against Michael D. Stava (CPA) Case No.  AC-96-35 [license revoked by stipulated settlement after conviction by jury verdict for carjacking and robbery]

14See California Business and Professions Code Section 5106 provides:  "A plea or verdict of guilty or a conviction following a plea of nolo contendere is deemed to be a conviction within the meaning of this article.  The record of the conviction shall be conclusive evidence thereof.  The board may order the certificate or permit suspended or revoked, or may decline to issue a certificate or permit, when the time for appeal has elapsed, or the judgment of conviction has been affirmed on appeal or when an order granting probation is made, suspending the imposition of sentence, irrespective of a subsequent order under the provisions of Section 1203.4 of the Penal Code allowing such person to withdraw his plea of guilty and to enter a plea of not guilty, or setting aside the verdict of guilty or dismissing the accusation, information or indictment."

15California Business and Professions Code Section 5106, supra.  SEE ALSO California Business and Professions Code Section 7.5, which provides:  "A conviction within the meaning of this code means a plea or verdict of guilty or a conviction following a plea of nolo contendere.  Any action which a board is permitted to take following the establishment of a conviction may be taken when the time for appeal has elapsed, or the judgment of conviction has been affirmed on appeal or when an order granting probation is made suspending the imposition of sentence, irrespective of a subsequent order under the provisions of Section 1203.4 of the Penal Code.  However, a board may not deny a license to an applicant who is otherwise qualified pursuant to subdivision (b) of Section 480.  Nothing in this section shall apply to the licensure of persons pursuant to Chapter 4 (commencing with Section 6000) of Division 3."  The referenced California Business and Professions Code Section 480 deals with license denials and provides: "(a) A board may deny a license regulated by this code on the grounds that the applicant has one of the following:  (1) Been convicted of a crime.  A conviction within the meaning of this section means a plea or verdict of guilty or a conviction following a plea of nolo contendere.  Any action that a board is permitted to take following the establishment of a conviction may be taken when the time for appeal has elapsed, or the judgment of conviction has been affirmed on appeal, or when an order granting probation is made suspending the imposition of sentence, irrespective of a subsequent order under the provisions of Section 1203.4 of the Penal Code.  (2) Done any act involving dishonesty, fraud, or deceit with the intent to substantially benefit himself or herself or another, or substantially injure another.  (3) (A) Done any act that if done by a licentiate of the business or profession in question, would be grounds for suspension or revocation of license.  (B) The board may deny a license pursuant to this subdivision only if the crime or act is substantially related to the qualifications, functions, or duties of the business or profession for which application is made.  (b) Notwithstanding any other provision of this code, no person shall be denied a license solely on the basis that he or she has been convicted of a felony if he or she has obtained a certificate of rehabilitation under Chapter 3.5 (commencing with Section 4852.01) of Title 6 of Part 3 of the Penal Code or that he or she has been convicted of a misdemeanor if he or she has met all applicable requirements of the criteria of rehabilitation developed by the board to evaluate the rehabilitation of a person when considering the denial of a license under subdivision (a) of Section 482.  (c) A board may deny a license regulated by this code on the ground that the applicant knowingly made a false statement of fact required to be revealed in the application for the license."

16California Business and Professions Code Section 5063 provides:  "(a) A licensee shall report to the board in writing of the occurrence of any of the following events occurring on or after January 1, 1997, within 30 days of the date the licensee has knowledge of these events:  (1) The conviction of the licensee of any of the following:  (A) A felony.  (B) Any crime related to the qualifications, functions, or duties of a public accountant or certified public accountant, or to acts or activities in the course and scope of the practice of public accountancy.  (C) Any crime involving theft, embezzlement, misappropriation of funds or property, breach of a fiduciary responsibility, or the preparation, publication, or dissemination of false, fraudulent, or materially misleading financial statements, reports, or information.  As used in this section, a conviction includes the initial plea, verdict, or finding of guilt, pleas of no contest, or pronouncement of sentence by a trial court even though that conviction may not be final or sentence actually imposed until appeals are exhausted.  (2) The cancellation, revocation, or suspension of a certificate, other authority to practice or refusal to renew a certificate or other authority to practice as a certified public accountant or a public accountant, by any other state or foreign country.  (3) The cancellation, revocation, or suspension of the right to practice as a certified public accountant or a public accountant before any governmental body or agency.  (b) A licensee shall report to the board in writing the occurrence of any of the following events occurring on or after January 1, 2003, within 30 days of the date the licensee has knowledge of the events:  (1) Any restatement of a financial statement and related disclosures by a client audited by the licensee.  (2) Any civil action settlement or arbitration award against the licensee relating to the practice of public accountancy where the amount or value of the settlement or arbitration award is thirty thousand dollars ($30,000) or greater and where the licensee is not insured for the full amount of the award.  (3) Any notice of the opening or initiation of a formal investigation of the licensee by the Securities and Exchange Commission or its designee.  (4) Any notice from the Securities and Exchange Commission to a licensee requesting a Wells Submission.  (5) Any notice of the opening or initiation of an investigation by the Public Company Accounting Oversight Board or its designee, as defined pursuant to subdivision (g).  (c) A licensee shall report to the board in writing, within 30 days of the entry of the judgment, any judgment entered on or after January 1, 2003, against the licensee in any civil action alleging any of the following:  (1) Dishonesty, fraud, gross negligence, or negligence.  (2) Breach of fiduciary responsibility.  (3) Preparation, publication, or dissemination of false, fraudulent, or materially misleading financial statements, reports, or information.  (4) Embezzlement, theft, misappropriation of funds or property, or obtaining money, property, or other valuable consideration by fraudulent means or false pretenses, or other errors or omissions.  (5) Any actionable conduct by the licensee in the practice of public accountancy, the performance of bookkeeping operations, or other professional practice.  (d) The report required by subdivisions (a), (b), and (c) shall be signed by the licensee and set forth the facts which constitute the reportable event.  If the reportable event involves the action of an administrative agency or court, then the report shall set forth the title of the matter, court or agency name, docket number, and dates of occurrence of the reportable event.  (e) A licensee shall promptly respond to oral or written inquiries from the board concerning the reportable events, including inquiries made by the board in conjunction with license renewal.  (f) Nothing in this section shall impose a duty upon any licensee to report to the board the occurrence of any of the events set forth in subdivision (a), (b), or (c) either by or against any other licensee.  (g) The board may adopt regulations to further define the reporting requirements of this section."

17California Business and Professions Code Section 5063.1 provides:  "Within 10 days of entry of a conviction described in paragraph (1) of subdivision (a) of Section 5063 or a judgment described in subdivision (c) of Section 5063 by a court of this state, the court that rendered the conviction or judgment shall report that fact to the board and provide the board with a copy of the conviction or judgment and any orders or opinions of the court accompanying or ordering the conviction or judgment."

18California Government Code Section 11503 provides:  "A hearing to determine whether a right, authority, license or privilege should be revoked, suspended, limited or conditioned shall be initiated by filing an accusation.  The accusation shall be a written statement of charges which shall set forth in ordinary and concise language the acts or omissions with which the respondent is charged, to the end that the respondent will be able to prepare his defense.  It shall specify the statutes and rules which the respondent is alleged to have violated, but shall not consist merely of charges phrased in the language of such statutes and rules.  The accusation shall be verified unless made by a public officer acting in his official capacity or by an employee of the agency before which the proceeding is to be held.  The verification may be on information and belief."

19See Disciplinary Guidelines, p. 2:  "The Board will consider stipulated settlements to promote cost effectiveness and to expedite disciplinary decisions if such agreements achieve its disciplinary objectives.  Deputy Attorneys General should inquire as to respondent's interest in stipulated settlement promptly after receipt of a notice of defense.  If stipulated settlement appears unlikely, the case should be set for hearing."

20See Disciplinary Guidelines for aggravating circumstances (including prior discipline and financial damage) and mitigating circumstances (including rehabilitation and remorse).  See also California Code of Regulations Title 16, Division 1, Section 99.1, which provides:  "When considering the denial of a certificate or permit under Section 480 of the Business and Professions Code, the suspension or revocation of a certificate or permit or restoration of a revoked certificate under Section 11522 of the Government Code, the board, in evaluating the rehabilitation of the applicant and his present eligibility for a certificate or permit, will consider the following criteria:  (1) Nature and severity of the act(s) or offense(s).  (2) Criminal record and evidence of any act(s) committed subsequent to the act(s) or offense(s) under consideration which also could be considered as grounds for denial, suspension or revocation.  (3) The time that has elapsed since commission of the act(s) or offense(s) referred to in subdivision (1) or (2).  (4) The extent to which the applicant or licensee has complied with any terms of parole, probation, restitution, or any other sanctions lawfully imposed against the applicant or licensee.  (5) If applicable, evidence of expungement proceedings pursuant to Section 1203.4 of the Penal Code.  (6) Evidence, if any, of rehabilitation submitted by the applicant or licensee."

21California Business and Professions Code Section 5115 provides:  "(a) A person whose license has been revoked or surrendered may petition the board for reinstatement or reduction of penalty after a period of not less than one year has elapsed from the effective date of the decision or from the date of the denial of a similar petition, unless a longer period, not to exceed three years, is specified by the board in any decision revoking the license, accepting the surrender of the license, or denying reinstatement of the license.  (b) A person whose license has not been revoked or surrendered but who has been disciplined by imposition of a suspension or otherwise disciplined may petition the board for reinstatement or reduction of penalty after a period of not less than one year has elapsed from the effective date of the decision.  (c) The board shall give notice to the Attorney General of the filing of the petition and the Attorney General and the petitioner shall be afforded an opportunity to present either oral or written argument before the board itself.  The board itself shall rule on the petition, and the decision shall include the reasons therefor and any terms and conditions that the board reasonably deems appropriate to impose as a condition of reinstatement or reduction of penalty, including, but not limited to, restrictions on the petitioner's scope of professional practice."

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