In re Barry K. Downey, Respondent. A Member of the Bar of the District of Columbia Court of Appeals (Bar Registration No. 416968)
December 5, 2016
Report and Recommendation of the Board on Professional
William R. Ross, Assistant Disciplinary Counsel, with whom
Wallace E. Shipp, Jr., Disciplinary Counsel at the time the
brief was filed, Jennifer P. Lyman, Senior Assistant
Disciplinary Counsel, and Jelani Lowery, Senior Staff
Attorney, were on the brief, for the Office of Disciplinary
U. Raskas for respondent.
Fisher, Associate Judge, and Washington [*] and Ruiz, Senior Judges.
FISHER, ASSOCIATE JUDGE.
Board on Professional Responsibility ("Board")
recommends that Respondent Barry K. Downey receive an
informal admonition. Disciplinary Counsel argues for
disbarment or, at minimum, a three-year suspension with
reinstatement conditioned on proof of rehabilitation. These
widely differing recommendations arise from the fact that
Respondent pled guilty to a felony (albeit, a strict
liability offense) but disputes Disciplinary Counsel's
allegations that he has been dishonest in explaining the
circumstances of that crime and that he committed a crime of
moral turpitude. Applying the enhanced burden of proof that
Disciplinary Counsel bears and deferring to credibility
determinations and factual findings supported by the record,
as we are required to do, we adopt the recommendation of the
Downey has been a member of the District of Columbia Bar
since 1989, focusing his practice on issues related to the
Employee Retirement Income Security Act of 1974
("ERISA"). In the mid-1990s, a friend of Respondent
developed a method to use digital currency backed by gold
bullion to facilitate monetary transactions over the
Internet. This innovation led to the creation of two
companies known as Gold & Silver Reserve
("GSR") and E-Gold (collectively
"E-GOLD"). Respondent invested in E-GOLD and became
Director of E-Gold and Secretary, Vice-President, and
Director of GSR.
1995, before investing in E-GOLD, Respondent informally
consulted a corporate lawyer named David Seidl. Respondent
later testified that Mr. Seidl orally advised that E-GOLD was
not "doing banking" and was not "subject to
banking regulations." Mr. Seidl does not appear to have
charged a fee or rendered any written opinion.
years later, the District of Columbia enacted a statute
requiring a license to engage in a money transmitting
business. See D.C. Code § 26-1002 (2012 Repl.).
Then, in 2001, the Patriot Act changed provisions of the Bank
Secrecy Act related to the licensing of money transmitting
businesses. See 18 U.S.C. § 1960 (a) (2001). In
August or September 2002, Respondent sought legal advice from
the law firm of Drinker Biddle & Reath about whether the
Patriot Act provisions applied to E-GOLD.
March 2003 Drinker Biddle sent Respondent a memorandum
stating that E-GOLD "may wish to consider" whether
to register GSR with federal and state authorities. It warned
that GSR's operations "may lead it to be categorized
as" an entity that would be "vulnerable to a
regulatory claim that it is an unregistered money service
business." However, the memorandum also stated that
"there is no clear answer" to whether E-GOLD
qualified as a "financial institution" covered by
the Patriot Act, and "there is no definition that
completely captures" E-GOLD's business. The
memorandum recommended that E-GOLD consider "whether the
benefits" of reaching out to the United States Treasury
Department for clarification would "outweigh the
risks." Regarding state law, the memorandum's
appendix noted that "a handful of states have begun to
license and regulate such diverse entities as . . . non-bank
stored-value issuers, Internet bill payment services and
Internet money transfer systems," and that the Uniform
Money Services Act had apparently "expand[ed] the term
'money service business.'" It concluded that the
companies "may want to survey the laws of the various
states to ensure that GSR is not in violation of any
licensing requirements for a [money service business]."
Respondent believed that the memorandum contained several
factual inaccuracies, and he testified that he "did not
view [it] as advice on anything." Respondent wanted
Drinker Biddle to correct and clarify the memorandum, but he
did not receive a revised version.
around January 2005, Respondent hired attorney Mitchell
Fuerst to advise E-GOLD. Respondent later testified that Mr.
Fuerst believed that E-GOLD was not required to register as a
money transmitter. By January of the next year, the
government had brought a civil forfeiture action against
E-GOLD claiming that certain funds that were being
transmitted through its service were the proceeds of money
laundering. Mr. Fuerst argued that GSR was not a "money
transmitting business" or "domestic financial
institution" required to have a license under the
Patriot Act. Respondent later testified that these arguments
were consistent with Mr. Fuerst's previous advice.
the United States charged E-GOLD, Respondent, and other
individuals with violations of federal and District of
Columbia criminal laws, including conspiracy to commit money
laundering and operation of an unlicensed money transmitting
business. The government alleged, among other things, that
the businesses and the individuals had conspired to conduct
financial transactions that involved the proceeds of unlawful
activity such as child exploitation and fraud. Respondent
pled guilty in the United States District Court for the
District of Columbia to a felony violation of D.C. Code
§ 26-1002, a strict liability offense which prohibits
operation of a money transmitting business without a license.
The indictment asserted that Respondent committed this crime
between 2002 and 2003, and Respondent agreed to a Statement
of Offense that gave examples of transactions during those
years. As part of a plea bargain, the government dismissed
the remaining charges against Respondent, including
conspiracy to commit money laundering.
sentencing, Respondent told Judge Rosemary Collyer that he
"did not intend" to violate the law regarding
licensing, but he admitted that he "was wrong[.]"
Respondent noted that he did not have expertise in the
relevant area and claimed that he had "looked to experts
just like when others have looked to me on employee benefits
Collyer stated that she "believe[d] [Respondent] when he
says that he didn't intend to violate the law." She
recognized that Respondent and E-GOLD had been "in a
slow prodding comfortable way trying to figure . . .
out" their legal obligations, including by "meeting
with the government . . . and trying to get advice[.]"
Finally, she noted that Respondent "is clearly a good
lawyer and a good husband and a good father and a good member
of his church in his community and has no criminal
history." Judge Collyer sentenced Respondent to 180
days' incarceration, suspended in favor of 36 months'
probation, and imposed a $2,500 fine.
this court not to impose an interim suspension, Respondent
continued to assert that he had sought legal advice. We
decided to defer any sanction, citing, among other things,
Respondent's "prior unblemished record as an
attorney" and the "fact that his violation arose
from conduct outside of his normal legal practice[.]"
In re Downey, 960 A.2d 1135, 1137 (D.C. 2008). We
also expressed concern that the length of an "interim
suspension might exceed the sanction that will eventually be
the importance of developing a factual record, we directed
the Board to determine whether Respondent committed a crime
of moral turpitude. The Board found that the offense did not
involve moral turpitude per se and referred the
matter to a Hearing Committee to determine "whether
Respondent's conviction involves moral turpitude on the
facts[.]" Before Respondent's hearing, Disciplinary
Counsel stated that he had not charged Respondent with
committing a crime of ...