If a tax adviser is convicted in criminal proceedings, professional disciplinary proceedings loom as a further collateral consequence. A criminal defence lawyer has to keep an eye on this danger at an early stage when defending members of the regulated professions.
I. The professional disciplinary court as a collateral consequence of a criminal conviction
There are a number of similarities between professional disciplinary proceedings against lawyers and professional disciplinary proceedings against tax advisers, but there are also differences. Probably the most important difference is procedural in nature. Whereas the Lawyers’ Disciplinary Courts (Anwaltsgerichte) are staffed with lawyers themselves in professional disciplinary proceedings at first and second instance, professional disciplinary proceedings against tax advisers are decided primarily by professional judges. Representatives of the profession are provided for only as associate judges, comparable to the function of lay judges (Schöffen).
Professional disciplinary proceedings against tax advisers fall within the jurisdiction of specialised chambers at the Regional Courts (Landgerichte) and at the Higher Regional Courts (Oberlandesgerichte) and the Federal Court of Justice (Bundesgerichtshof, BGH). The respective presiding judges are therefore judges who normally sit in “ordinary criminal proceedings”. Unlike lawyers, in this procedural situation tax advisers cannot always rely on the people who have to sit in judgment on their fate having any particular understanding of the worries and hardships of a self-employed professional.
1) The threshold of inhibition against criminal prosecution has fallen
Only a few years ago it was regarded as a gentlemen’s agreement to open criminal proceedings against members of the regulated professions only in extreme exceptional cases. In recent years, however, public prosecutors’ inhibitions about prosecuting lawyers and tax advisers have fallen markedly. No one is safe from criminal prosecution any more.
The sources of criminal-law danger to which tax advisers in particular see themselves exposed in their everyday work are manifold. If a client commits tax evasion and is caught doing so, that client’s first defensive reflex is often to shift the blame onto the tax adviser. If the tax office’s fines and criminal matters unit (Bußgeld- und Strafsachenstelle) or the public prosecutor’s office believes such a statement, the opening of criminal investigation proceedings against the adviser for aiding and abetting tax evasion looms. If the (former) client’s statement is untrue, it is a case of “one person’s word against another’s (Aussage gegen Aussage)”.
If criminal proceedings are opened against a tax adviser, negative consequences loom on several levels:
- First of all, in the event of a conviction the accused is hit by the penalty itself, i.e. a fine, a suspended sentence or, in extreme cases, a custodial sentence without suspension.
- In addition, a wide range of collateral consequences under criminal law loom. These can range from withdrawal of the driving licence through to liability for tax. There is also the possibility of confiscation of the proceeds of crime – where, for example, the state confiscates the fee which a tax adviser obtained for assisting a client with tax evasion.
- Finally, once the criminal indictment has been preferred, parallel professional disciplinary investigation proceedings are regularly opened shortly afterwards.
If an indictment under criminal law is preferred against a tax adviser, the public prosecutor’s office is required to notify the Chamber of Tax Advisers of this where the alleged offence is connected with the practice of the profession (cf. no. 23 MiStra, the Regulation on Notifications in Criminal Matters). At that point at the latest, the separate opening of professional disciplinary investigation proceedings conducted alongside the criminal proceedings is very likely.
The basic rules governing professional disciplinary proceedings against tax advisers are laid down in the Tax Advisory Act (Steuerberatungsgesetz, StBerG).
2) Professional disciplinary measures and criminal penalties
A professional disciplinary measure is not a criminal penalty. Whereas punishment is aimed at “hurting” the convicted person, professional disciplinary proceedings are primarily about restoring the standing of the profession and exerting an “educational” influence on the adviser. In other words: “black sheep” are to be branded as such. Through the professional disciplinary proceedings the professional associations want, as it were, to “wash themselves clean” again. The public’s trust in the privileges which the profession of tax adviser brings with it is not to be abused for the commission of criminal offences.
For that reason, the degree of culpability is not the only thing in the foreground when it comes to the professional disciplinary sanction. Rather, what matters above all is also the question whether the conduct of the charged tax adviser is capable of damaging the standing of the profession in the eyes of the public. In this connection, particular account must also be taken of the general public’s interest in a properly functioning administration of justice and of maintaining the trust of all those seeking justice in the integrity of the tax advisers’ guild.
3) Disciplinary or professional-law surplus (Überhang)
Under § 92 StBerG, a professional disciplinary measure alongside a criminal conviction is in fact only to be considered by way of exception. What is required is a so-called disciplinary or professional-law surplus (Überhang), that is to say an additional need for a professional sanction over and above the criminal penalty. This means that it must always be examined in the individual case whether the penalty as such is not already sufficient to restore the purposes of professional law.
According to the case law of the Federal Constitutional Court (Bundesverfassungsgericht, BVerfG), a professional disciplinary sanction alongside a penalty or another measure (administrative fine or disciplinary penalty or measure) does not infringe Art. 103 para. 3 GG, i.e. the prohibition of double punishment (ne bis in idem). This is because a professional disciplinary or disciplinary sanction is said to be something other than a “penalty” (BVerfG of 2 May 1967, case no. 2 BvR 391/64, 2 BvR 263/66):
“Criminal law and disciplinary law differ in their legal basis and in their purpose. The criminal offence lies in the violation of one of the legal interests generally protected by the legal order, in a disturbance of public order. The disciplinary offence consists in the disturbance of the special order imposed only on a particular group of citizens. Alongside deterrence and improvement, the criminal penalty serves the purpose of retribution; it is measured according to the normatively established value of the legal interest violated and the culpability of the offender. The disciplinary penalty, by contrast, is by its nature a means of discipline and education; its purpose is to maintain the orderly conduct of official business and it is determined by the requirements thereof. With its two principal penalties, the criminal penalty affects the offender in his general status as a citizen, in his liberty and in his assets. The disciplinary penalty relates to the special status of rights and duties of the person concerned.”
Put differently: the disciplinary sanction is not there to inflict a further evil on the person concerned, but pursues other purposes. The prohibition of double punishment is therefore said not to preclude a professional disciplinary conviction alongside a criminal conviction. This idea also underlies § 92 StBerG.
The BVerfG is likely to maintain this case law from 1967 even today. It may well be, however, that the European Court of Human Rights (ECtHR) takes a different view. Since proceedings there last an average of 5 to 7 years, an application to the ECtHR is usually not a practicable option for a defence strategy where, for example, the aim is to prevent a prohibition from practising.
A disciplinary surplus is affirmed where such a sanction is necessary in order to hold the tax adviser to the performance of his duties and to preserve the standing of the profession. Both requirements must be met cumulatively. A professional disciplinary sanction alongside a criminal conviction for the same facts can only still come into consideration in order to exert a necessary educational effect on the member of the profession and, in addition, to preserve the standing of the profession impaired by his conduct (OLG Celle, 6 February 2017 – 1 StO 1/16).
A professional-law surplus is affirmed in particular where a criminal offence is connected with the practice of the profession. The Higher Regional Court of Munich, for example, took the view that false statements in a tax return, even where it is one’s own, are to a particular degree capable of impairing respect and trust in a manner significant for the standing of the profession (OLG München, 19 June 2008, 2 StO 2/08, DStRE 09, 831). Although the duty to file tax returns is addressed not only to tax advisers but equally to everyone else, disregard of these duties (even in one’s own affairs) is consequently regarded as a breach of professional duty under § 89 para. 1 StBerG and not, say, as conduct outside the profession under § 89 para. 2 StBerG.
§ 92 sentence 1 StBerG presupposes the imposition of a penalty, a disciplinary measure, a measure imposed by a court of honour, another professional disciplinary measure or a regulatory measure. In cases of discontinuance under § 153, § 153a StPO or of an acquittal (in that case subject to the additional requirements of § 109 para. 2 StBerG), a professional disciplinary sanction can therefore also be imposed without a disciplinary surplus being present. A professional disciplinary measure can therefore even come into consideration where a (person’s own) voluntary self-disclosure with exemption from punishment has been filed. The voluntary self-disclosure merely constitutes a personal ground excluding punishment, but leaves the unlawfulness of the offence and the culpability of the offender untouched. Professional disciplinary proceedings, however, are not concerned with the question of the penalty commensurate with culpability, but with that reaction to professional misconduct which is appropriate and necessary in order to guarantee the proper functioning and the integrity of the profession (LG Frankfurt/M., 17 June 2011 – 5/35 StL 7/11).
Apart from that, a disciplinary surplus comes into consideration in particular in the areas of property offences such as misappropriation or breach of trust (Untreue). With these offences, the general public’s trust in the integrity of the tax adviser’s profession is shaken to a particular degree (LG Düsseldorf, 23 July 2010 – 45 StL 2/10; see also OLG Koblenz, 29 July 2009 – 2 St 1/09).
It is not a safe defence strategy to work towards a high penalty in the criminal proceedings in the hope of thereby being able to prevent additional professional disciplinary measures. The OLG Koblenz, for example, takes the view that precisely in those cases in which the criminal proceedings have led to a substantial punishment, a professional disciplinary sanction is as a rule called for in order to preserve the standing of the profession (OLG Koblenz, 29 July 2009 – 2 St 1/09).
4) Binding effect of the criminal proceedings
For the decision in the professional disciplinary proceedings, the factual findings of a previous conviction in criminal proceedings are in principle binding, § 109 para. 3 StBerG.
This binding effect attaches only to genuine judgments, and not to a penalty order (Strafbefehl) or an administrative fine notice (LG Düsseldorf of 1 June 1979, case no. 45 StL 2/79). For only factual findings made on the basis of the taking of evidence in the main hearing offer the guarantee of reliable clarification with sufficient opportunity to be heard. The binding effect of genuine judgments in criminal or administrative fine proceedings extends only to such findings as they are based on, and therefore not to facts which have no legal relevance whatsoever for the decision under criminal or administrative fine law.
By way of exception, the professional disciplinary court may order that evidence be taken afresh. In particular, it must not decide “with its eyes open” on the basis of facts which are incorrect or which, for rule-of-law reasons, cannot be used. For that reason the binding effect of § 109 para. 3 sentence 1 StBerG does not apply, among other things, in the case of criminal judgments which came about on a decisive point in manifest breach of central procedural provisions (BGH StbSt (R) 1/15 – order of 11 December 2015). This is often an obvious conclusion in particular in the case of questionable “deals in criminal proceedings”.
5) Relationship to the criminal proceedings: requirement of expedition
Under § 109 para. 1 sentence 1 StBerG, professional disciplinary proceedings are in principle to be stayed where an indictment has already been preferred. Under § 109 para. 1 sentence 3, however, the professional disciplinary proceedings are to be continued where the clarification of the facts appears so secure that contradictory decisions are not to be expected.
The exception applies where either the clarification of the facts appears so secure that contradictory decisions are not to be expected, or where the criminal proceedings cannot be heard for reasons relating to the person of the member of the profession concerned. In these cases the professional disciplinary court or the charging authority must continue the professional disciplinary proceedings. This mandatory procedural provision is a special provision taking precedence over the discretionary rule in § 111 StBerG, according to which the professional disciplinary proceedings may be stayed where a question has to be decided in other proceedings governed by statute, the assessment of which is of material significance for the decision in the professional disciplinary proceedings.
It is questionable whether the requirement of expedition (Beschleunigungsgebot) in § 109 para. 1 StBerG is addressed not only to the professional disciplinary court but also, even before the formal “initiation” of the professional disciplinary proceedings (§ 114 StBerG), to the public prosecutor’s office.
In practice this question is rarely asked. Rather, the public prosecutor’s office responsible for handling the professional disciplinary proceedings usually waits until the criminal proceedings have finally been concluded. This is questionable not only because, after a wait that often lasts years, a professional disciplinary sanction fails to achieve its purpose. In addition, under the customary practice there is no opportunity, for example in the context of an agreement with the criminal court, to reach an agreement with the professional disciplinary court at the same time on any additional consequences.
In current practice the provision of § 109 para. 1 sentence 3 StBerG is effectively a dead letter for as long as no statement of charges has been received by the court. That § 109 para. 1 sentence 3 StBerG is, as a requirement to act, however also addressed directly to the public prosecutor’s office follows, among other things, from the fact that sentence 3 ties in with sentence 1 of the first paragraph and that the “initiation” of the proceedings mentioned there in the formal sense (= filing of the statement of charges, § 114 StBerG) is possible only by the public prosecutor’s office. Moreover, no reason is apparent why, where the facts are established, a court decision in the professional disciplinary proceedings should be permissible but a statement of charges should not – for such a statement is a necessary condition for a “continuation” of the proceedings within the meaning of § 109 para. 1 sentence 3 StBerG. The current practice of “waiting and seeing” should therefore be reconsidered. If § 109 para. 1 sentence 3 StBerG is interpreted as a requirement to act which is ALSO addressed directly to the public prosecutor’s office, a public prosecutor’s office MUST press on with the proceedings as soon as a sufficiently secure factual basis has been established.
The Act itself does not prescribe any legal consequence for a breach of the mandatory provision of § 109 para. 1 sentence 3 StBerG. That does not mean, however, that a breach is without consequences. The correct view must be that a breach of the duty to continue the proceedings has the effect that, for the suspension of the limitation period under § 93 para. 2 StBerG, the relevant point in time is the point at which the proceedings ought to have been continued.
The legislature accepts the risk of contradictory decisions where the requirement of expedition is strictly observed. That risk materialises where errors in the criminal conviction only come to light after a professional disciplinary sanction has already been imposed. For this case, § 109 para. 4 StBerG creates a special ground for reopening the professional disciplinary proceedings. This rarely noticed provision, too, makes it clear that the current practice of the public prosecutors’ offices of “putting the boot in” by initiating professional disciplinary proceedings only AFTER the final conclusion of the criminal proceedings rests on feet of clay.
II. The course of the professional disciplinary proceedings
1) Statement of charges (Anschuldigungsschrift) and first instance
As a rule, a notification is sent to the Prosecutor General (Generalstaatsanwalt) of the relevant district as soon as an indictment is preferred against a tax adviser. This notification is usually made at the instigation of the case officer in the original criminal proceedings, passed on through the senior public prosecutor (leitender Oberstaatsanwalt). Professional disciplinary proceedings against a tax adviser can also be initiated where the Chamber has already issued an admonition (Rüge).
At the Office of the Prosecutor General (Generalstaatsanwaltschaft), a case number is first of all assigned, for example “2 StV 28/18”. The first figure denotes the department in which the case is handled. “StV” is the general designation for professional disciplinary proceedings concerning tax advisers at the Office of the Prosecutor General. As with many case numbers used in the justice system, the meaning of the abbreviation used is not readily apparent.
As a rule, a tax adviser accused in criminal proceedings therefore also receives, shortly after the criminal indictment, the letter from the Prosecutor General notifying him of the initiation of professional disciplinary proceedings.
If the original criminal proceedings end with a discontinuance or an acquittal, the professional disciplinary proceedings are also discontinued shortly afterwards. This usually also happens where the original proceedings were discontinued under § 153a StPO against payment of a monetary condition. This is not certain, however (cf. above under I.3)!
If, on the other hand, the original criminal proceedings end in a conviction, the Prosecutor General begins his actual work in the professional disciplinary proceedings at that point at the latest, by filing a so-called statement of charges with the competent specialised chamber of the Regional Court (cf. § 114 StBerG).
The account of the facts in the statement of charges is structured in a similar way to an indictment in “ordinary” criminal proceedings. Whereas in general criminal proceedings reference is usually made very specifically to individual offences under the Criminal Code (Strafgesetzbuch, StGB), the charge in a professional disciplinary indictment is as a rule kept very general, for example as follows:
“The person concerned is charged with intentionally, as a tax adviser, not having practised his profession conscientiously and with intentionally, as a tax adviser, not having refrained from any activity which is incompatible with his profession or with the standing of the profession, to be sanctioned as an intentional breach of general professional duties pursuant to §§ 57 para. 1, para. 2, 89 para. 1 StBerG.”
If the Regional Court opens the main proceedings, the professional disciplinary proceedings at first instance are given an StL case number and a main hearing takes place before the professional disciplinary court.
Unlike ordinary criminal proceedings, professional disciplinary proceedings are as a rule held with the public excluded. On application, however, the public can be admitted (§ 122 para. 1 StBerG).
2) Appeal on facts and law (second instance)
An appeal on facts and law (Berufung) is available against a professional disciplinary conviction. As regards this legal remedy, few special rules apply compared with general criminal law. In departure from the general rules on jurisdiction, however, the appeal hearing takes place before a specialised panel at the Higher Regional Court.
3) Appeal on points of law (Revision)
Greater differences in the legal remedies compared with general criminal law arise with regard to the appeal on points of law (Revision). Whereas in criminal proceedings the appeal on points of law is available without any particular restriction (§ 333 StPO), its availability in professional disciplinary proceedings is limited. Professional disciplinary proceedings do not know a so-called leapfrog appeal on points of law (Sprungrevision) of the kind provided for in § 335 StPO.
In professional disciplinary proceedings an appeal on points of law is available to the person concerned without special hurdles only where he has been sentenced to exclusion from the profession (§ 129 para. 1 no. 1 StBerG). Under § 129 para. 1 no. 2 StBerG, according to the wording, an appeal on points of law may also be lodged where the public prosecutor’s office has applied for exclusion from the profession (§ 90 para. 1 no. 5 StBerG) but the Higher Regional Court has not granted that application. According to the case law of the BGH, however – contrary to the wording of the provision! – such an appeal can be lodged not by the member of the profession concerned, but only by the public prosecutor’s office (BGH of 11 December 1961, case no. AnwSt (B) 6/61).
In all other cases the appeal on points of law – comparable to proceedings before the Federal Fiscal Court (Bundesfinanzhof, BFH) under the Code of Procedure for Fiscal Courts (FGO) – is admissible only if it has been allowed or if a successful complaint against non-admission (Nichtzulassungsbeschwerde) has been lodged.
In this respect, § 129 para. 1 nos. 1–3 StBerG contains an exhaustive catalogue of grounds of admissibility for the legal remedy of the appeal on points of law in professional disciplinary proceedings. Under § 129 para. 2 StBerG, the substantive requirement for a decision allowing the appeal is that the appellate court has decided questions of law, both substantive and procedural, which are of fundamental significance for professional law, in particular the questions of professional duties, or for professional disciplinary procedural law. The questions of law must therefore be of general significance and their answer must be controversial and not obvious; in addition, the profession must have an urgent interest in these questions being clarified. It is further required that they have not yet been decided by the BGH.
III. Professional disciplinary sanctions
The possible sanctions which may be imposed in the event of a professional disciplinary conviction are listed in § 90 StBerG:
- Warning
- Reprimand
- Administrative fine (Geldbuße) of up to fifty thousand euros
- Prohibition from practising for a period of one to five years
- Exclusion from the profession.
In principle the professional disciplinary court has to choose between the various measures, which differ in the intensity of their interference. A reprimand and an administrative fine may, however, also be imposed alongside one another.
The Tax Advisory Act does not know any further or different measures than those listed in § 90 StBerG. It is striking that a substantive restriction or a time limit on exclusion from the profession, such as is possible for lawyers under § 114 para. 1 no. 4 BRAO, is not provided for in the case of tax advisers.
If a temporary prohibition from practising within the meaning of § 90 para. 1 no. 4 StBerG is imposed, the appointment as a tax adviser continues to exist in principle. It is merely suspended temporarily. During the period of the prohibition the tax adviser concerned is therefore legally prevented from practising his profession. There is accordingly the possibility of appointing a general deputy (§ 69 para. 1 StBerG). By appointing a deputy, an ongoing practice can, for example, be “rescued” for the duration of the temporary prohibition from practising.
The possibility of appointing a deputy is, however, limited to two years (§ 69 para. 5 sentence 1 StBerG). In many cases the imposition of a prohibition from practising lasting longer than two years is therefore in fact tantamount to exclusion from the profession and can only be justified in particularly serious cases.
The exclusion from the profession under § 90 para. 1 no. 5 StBerG may not, for reasons of proportionality alone, be for life (Art. 12 GG). § 48 para. 1 no. 2 StBerG therefore provides for the possibility of re-appointment after at least eight years have elapsed.
IV. Typical breaches of professional law
1) Professional breaches as criminal offences
The risk of criminal liability for tax advisers is high. Tax advice is work prone to hazards. Where criminal proceedings are brought against members of the profession, the allegation often consists in aiding and abetting offences committed by the adviser’s own client. This risk is particularly high where the companies being advised are at risk of insolvency.
Typical criminal offences which regularly lead to professional disciplinary consequences are, for example:
- Backdating of contracts or manipulation of facts in order to enable tax evasion by the client (cf. LG Nürnberg-Fürth, judgment of 2 December 2016, case no. 1 StL 14/16);
- “Burials” of companies (Firmenbestattungen) – e.g. involvement in the “sale” of an insolvent GmbH to foreign straw men (= inter alia aiding and abetting delayed filing for insolvency within the meaning of § 15a para. 4 InsO);
- VAT carousels – here it is often highly contentious to what extent a tax adviser acts intentionally where he could and should have recognised that he was participating in a criminal system;
- Involvement in fraudulent internet dealings;
- Money laundering
We explain the anti-money-laundering duties in the everyday life of a practice in our article on anti-money-laundering compliance for lawyers and tax advisers.
2) Professional breaches which are not criminal offences
It is not only criminal offences within the meaning of the StGB that can lead to professional disciplinary sanctions. Under § 57 para. 2 StBerG, tax advisers must refrain from any activity which is incompatible with their profession or with the standing of the profession. Accordingly, tax advisers must also show themselves, outside their professional activity, to be worthy of the trust and the respect which their profession brings with it.
If a breach of these basic professional duties is assumed, the Chamber of Tax Advisers can itself apply to the Prosecutor General for the opening of professional disciplinary investigation proceedings. By this indirect route, even apparent “trifles” can have drastic consequences.
Separate proceedings can arise, for example, in the case of the following breaches of professional law – even without prior criminal proceedings:
- Prohibition of impermissible cooperation with persons outside the profession, §§ 56 StBerG in conjunction with § 52 BOStB (= Professional Code for Tax Advisers);
- Arrears in the Chamber contributions, §§ 57 para. 1, 79 StBerG, especially where these occur repeatedly and the Chamber has to take enforcement measures;
- Failure to answer enquiries from the Chamber following complaints, § 57 para. 1 StBerG in conjunction with § 34 para. 2 BOStB;
- Failure to hand over files despite a corresponding obligation (cf. LG Frankfurt a. M., judgment of 24 June 2018, case no. 5-35 StL 4/16) ;
- Breach of the prohibition of commercial activity, § 57 para. 4 no. 1 StBerG.
If a tax adviser, as the de facto managing director of a commercial undertaking, makes himself criminally liable for delayed filing for insolvency, then, in the view of the Regional Court of Nuremberg-Fürth, he has additionally also breached the professional-law prohibition on carrying out a commercial activity under § 57 para. 4 StBerG (LG Nürnberg-Fürth, 14 December 2004, case no. StL 11/2004).
V. Limitation (time bar)
Under § 93 I StBerG, breaches of professional duty are in principle time-barred after five years. Under § 93 II StBerG, the limitation period is suspended where criminal proceedings have already been opened on the same facts.
The criminal-law provisions on the interruption of the limitation period apply accordingly. Interruption means that the limitation period begins afresh (cf. § 78c para. 3 StGB). That means, for example, that the limitation period begins afresh where less than five years lie between the filing of a professional disciplinary statement of charges and the opening of the main professional disciplinary proceedings.
Even in cases where professional disciplinary proceedings lie dormant for more than five years without any measures interrupting the limitation period, limitation does not, however, necessarily set in. This is because, under § 93 para. 2 StBerG, the professional disciplinary proceedings are suspended for as long as the criminal proceedings last. Where the limitation period is suspended, the period does not, unlike in the case of interruption, begin to run afresh.
It is questionable whether a suspension of the limitation period under § 93 para. 2 StBerG which lasts longer than the limitation period itself is compatible with the purpose of the professional disciplinary proceedings. In such a case it is at any rate questionable whether there is a professional-law surplus which makes an additional professional disciplinary measure within the meaning of § 92 StBerG necessary alongside a criminal conviction.
In those cases too in which proceedings have been dragged out in breach of the requirement of expedition in § 109 para. 1 sentence 3 StBerG, limitation (in particular the suspension of the limitation period) must be examined particularly critically by the defence.