Office of Lawyer Regulation v. Bauer (In Re Bauer) , 381 Wis. 2d 474 ( 2018 )

2018 WI 49
SUPREME COURT OF WISCONSIN
CASE NO.: 2016AP1259-D
COMPLETE TITLE: In the Matter of Disciplinary Proceedings
Against Michael R. Bauer, Attorney at Law:
Office of Lawyer Regulation,
Complainant-Respondent,
v.
Michael R. Bauer,
Respondent-Appellant.
DISCIPLINARY PROCEEDINGS AGAINST BAUER
OPINION FILED: May 16, 2018
SUBMITTED ON BRIEFS:
ORAL ARGUMENT:
SOURCE OF APPEAL:
COURT:
COUNTY:
JUDGE:
JUSTICES:
CONCURRED:
DISSENTED:
NOT PARTICIPATING:
ATTORNEYS:
For the respondent-appellant, there was a brief filed by
Michael J. Short and Short Law Office, Madison.
For the complainant-respondent, there was a brief filed by
Paul W. Schwarzenbart and Office of Lawyer Regulation, Madison.
2018 WI 49
NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2016AP1259-D
STATE OF WISCONSIN : IN SUPREME COURT
In the Matter of Disciplinary Proceedings
Against Michael R. Bauer, Attorney at Law:
Office of Lawyer Regulation, FILED
Complainant-Respondent,
MAY 16, 2018
v.
Sheila T. Reiff
Clerk of Supreme Court
Michael R. Bauer,
Respondent-Appellant.
ATTORNEY disciplinary proceeding. Attorney's license
suspended.
¶1 PER CURIAM. We review the report and recommendation
of Referee John B. Murphy that Attorney Michael R. Bauer's
license to practice law in Wisconsin be suspended for a period
of one year for professional misconduct and that he pay the full
costs of this proceeding, which are $15,727.40 as of April 25,
2018.
¶2 Upon careful review of the matter, we adopt the
referee's findings of fact and conclusions of law. We agree
No. 2016AP1259-D
that a one-year suspension of Attorney Bauer's license is an
appropriate sanction for his misconduct. We also agree that the
full costs of this proceeding should be assessed against him.
¶3 Attorney Bauer was admitted to practice law in
Wisconsin in 1988. He has not previously been disciplined. At
the time pertinent to this case he was a member of Bauer & Bach,
LLC in Madison. He now practices as Bauer Law Office in
Madison.
¶4 Bauer & Bach maintained both a trust account and a
business account at Capitol Bank. Attorney Bauer was the
attorney primarily responsible for the record keeping for both
the trust and business accounts. T.P., a paralegal assistant at
the firm, assisted the attorneys by preparing business and trust
account checks and by making entries in the QuickBooks
bookkeeping program used by the firm for the purpose of, among
other things, serving as the transaction register for the
accounts. At no time during the pertinent time frame at issue
here did the trust account ever have a negative balance.
Attorney Bauer also maintained accounts for Sports Advisors,
Inc., a business he owned, at Capitol Bank and at US Bank.
¶5 On June 24, 2016, the Office of Lawyer Regulation
(OLR) filed a complaint against Attorney Bauer alleging 28
counts of misconduct. The complaint alleged that between
December 2013 and October 2014, Attorney Bauer misused seven
clients' trust funds and mismanaged his trust account. On
numerous occasions he transferred client funds from one account
to another without permission of the clients, failed to make
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No. 2016AP1259-D
notations of the transfers, transferred trust account funds to
fill gaps created in other client accounts to avoid detection,
transferred trust funds to his office account and to the account
of his subsidiary business, Sports Advisors, Inc., and borrowed
money to reestablish correct account balances. It is undisputed
that all of the clients received all monies due them. It is
also undisputed that none of the clients consented to the use of
their money to fund disbursements that benefitted others.
¶6 Attorney Bauer filed an answer on August 16, 2016,
admitting some allegations in the complaint and denying others.
The referee was appointed on October 8, 2016. On May 15, 2017,
the parties entered into a stipulation whereby Attorney Bauer
did not contest 13 of the counts; the OLR agreed to dismiss four
counts; the parties agreed that four other counts could be
amended to conform to the evidence; and Attorney Bauer contested
seven counts that alleged he had converted client funds.
¶7 A brief evidentiary hearing was held on May 22, 2017.
At the hearing, Attorney Bauer admitted mishandling the trust
account but described what happened as being sloppy and the
result of neglect. He blamed some of the problems on the fact
that "starting probably late 2014 up through mid-2015"1 he spent
a lot of time in Washington, D.C. He said:
I neglected it. I mean, in the end, I mean, I thought
that -- it was one of those deals that I thought it
was all going to be over the next day. So I thought,
1
The mishandling of the trust account occurred between
December 2013 and October 2014.
3
No. 2016AP1259-D
well, I'm going to get this over and get back and get
things straight. The next day went into the next day,
and I was still not around.
So all of a sudden the focus came on making sure that
-- I guess more making sure -- I didn't have access to
QuickBooks when I was out there, but I did have access
on-line to the bank account. So then I was suddenly
more focused on just making sure that there was always
money in the appropriate accounts to cover any checks
that were being cut.
¶8 Attorney Bauer said that things came to a head when
the firm's paralegal looked at the bank statements and saw the
problems with the trust account. She then notified Attorney
Bach, who confronted Attorney Bauer. Attorney Bauer said he
apologized to Attorney Bach and admitted, "I should have asked
for some help whether from him or the accountant when I knew I
wasn't taking care of it properly."
¶9 The parties subsequently filed briefs discussing the
seven contested counts. On August 8, 2017, the referee issued a
report accepting the stipulation and finding that the OLR had
met its burden of proof with respect to five of the seven
contested counts. The referee found that Attorney Bauer had
converted $376,818.63. The referee found that the OLR had not
met its burden of proof on the other two contested counts. The
referee said:
During the period between December 2, 2013 and October
16, 2014, Bauer carried out the unauthorized use of
client trust funds for his own purposes. He did so
knowingly and with clear disregard for the rules of
trust account maintenance. The funds improperly
handled were used to fill gaps in other clients'
account balances or to infuse money into the firm
business account and the account of Sports Advisors,
Inc.
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No. 2016AP1259-D
Bauer appears to see his offenses regarding the Trust
Account as being related to sloppy business practices
and nothing more. The facts contained in the counts
for which Bauer has now been found guilty suggest
something well beyond sloppy work. They strongly
support the belief that Bauer saw his Trust Accounts
as something akin to a slush fund. He removed funds
without permission and clearly seemed to constantly be
in the process of "robbing Peter to pay Paul" and, in
some cases, to pay Michael Bauer. Such behavior is
unacceptable at any level and especially onerous when
carried out by a person licensed to practice law.
¶10 The referee found that the OLR met its burden of proof
on 17 trust account violations and five violations of
SCR 20:8.4(c). Attorney Bauer stipulated, and the referee
agreed, that he violated the following trust account rules:
SCR 20:1.15(b)(1);2 former SCR 20:1.15(b)(3);3 former
SCR 20:1.15(f)(1)a.;4 and former SCR 20:1.15(e)(4)c.5 Most rules
2
SCR 20:1.15(b)(1) provides:
A lawyer shall hold in trust, separate from the
lawyer's own property, that property of clients and
3rd parties that is in the lawyer's possession in
connection with a representation. All funds of clients
and 3rd parties paid to a lawyer or law firm in
connection with a representation shall be deposited in
one or more identifiable trust accounts.
3
Effective July 1, 2016, substantial changes were made to
Supreme Court Rule 20:1.15, the "trust account rule." See S.
Ct. Order 14-07, (issued Apr. 4, 2016, eff. July 1, 2016).
Because the conduct underlying this case arose prior to July 1,
2016, unless otherwise indicated, all references to the supreme
court rules will be to those in effect prior to July 1, 2016.
Former SCR 20:1.15(b)(3) provided: "No funds belonging to
a lawyer or law firm, except funds reasonably sufficient to pay
monthly account service charges, may be deposited or retained in
a trust account."
4
Former SCR 20:1.15(f)(1)a. provided:
(continued)
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No. 2016AP1259-D
were violated multiple times. The five counts that Attorney
Bauer had contested and the referee ultimately found had been
proven by the OLR all involved violations of SCR 20:8.4(c).6
Attorney Bauer had argued that the five SCR 20:8.4(c) counts
were subsumed into the trust account counts and that the
Complete records of a trust account that is a
draft account shall include a transaction register;
individual client ledgers for IOLTA accounts and other
pooled trust accounts; a ledger for account fees and
charges, if law firm funds are held in the account
pursuant to sub. (b)(3); deposit records; disbursement
records; monthly statements; and reconciliation
reports, subject to all of the following:
a. The transaction register shall contain a
chronological record of all account transactions, and
shall include all of the following:
1. the date, source, and amount of all deposits;
2. the date, check or transaction number, payee
and amount of all disbursements, whether by check,
wire transfer, or other means;
3. the date and amount of every other deposit or
deduction of whatever nature;
4. the identity of the client for whom funds were
deposited or disbursed; and
5. the balance in the account after each
transaction.
5
Former SCR 20:l.15(e)(4)c. provided: "A lawyer shall not
make deposits to or disbursements from a trust account by way of
an Internet transaction."
6
SCR 20:8.4(c) provides: "It is professional misconduct for
a lawyer to engage in conduct involving dishonesty, fraud,
deceit or misrepresentation."
6
No. 2016AP1259-D
evidence was insufficient to support the allegations. The
referee found otherwise.
¶11 On October 13, 2017, the referee issued a
recommendation as to discipline. While the OLR sought a two-
year suspension and Attorney Bauer suggested a 60-day suspension
would be an appropriate sanction, the referee ultimately
concluded that a one-year suspension was in order.
¶12 The referee said while, in the end, Attorney Bauer
made good on all of the accounts and no client lost any money,
this did nothing to excuse Attorney Bauer's behavior since
"Bauer had no right to use his client's funds without permission
and the fact that he avoided getting caught for his behavior by
'robbing Peter to pay Paul' in no way lessens the seriousness of
these offenses."
¶13 The referee noted that Attorney Bauer was an
experienced attorney, having practiced law since 1988, so he
could not claim he was not familiar with the supreme court rules
regarding the management of trust accounts. The referee said
Attorney Bauer himself asserted that he appropriately managed
his trust accounts before and after 2014 so he could not suggest
he did not understand how to handle trust account issues
appropriately. The referee commented that "[t]here was little
or no explanation from Bauer as to WHY the 'wheels came off' his
trust account management practices in 2014."
¶14 The referee said once confronted, Attorney Bauer
admitted guilt as to many of the allegations; he fully
cooperated with the OLR investigation; and he expressed remorse
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No. 2016AP1259-D
for his misbehavior. However, the referee went on to say, "That
said, he did continue to suggest that his behavior was more in
the nature of technical bookkeeping errors as opposed to
intentional acts. The facts . . . suggest otherwise."
¶15 The referee termed Attorney Bauer's violations
"extensive and long-lasting." The referee said Attorney Bauer:
Had numerous opportunities to stop his inappropriate
manipulation of the trust accounts and yet he failed
to do so. He not only shifted funds around between
clients but he moved funds completely out of the trust
account and "made whole" his business account and
Sports Advisor, Inc., accounts while borrowing money
to fill the trust account gaps which he had created.
Finally, he failed to seek help from those around him
who could have, if asked, given him the guidance and
expertise needed to put an end to what had become a
downward spiral of misbehavior.
¶16 The referee said the 60-day suspension suggested by
Attorney Bauer was clearly inadequate, but on the other hand the
two-year suspension sought by the OLR was excessive under the
theory of progressive discipline given that Attorney Bauer had
no previous disciplinary history. Accordingly, the referee
recommended a one-year license suspension and also recommended
that Attorney Bauer be ordered to pay the full costs of the
proceeding.
¶17 Attorney Bauer appealed the referee's recommendation
for a one-year suspension but after all briefs were filed he
voluntarily dismissed his appeal.
¶18 A referee's findings of fact are affirmed unless they
are clearly erroneous. Conclusions of law are reviewed de novo.
See In re Disciplinary Proceedings Against Eisenberg, 2004 WI
8
 No. 2016AP1259-D
14, ¶5, 269 Wis. 2d 43, 675 N.W.2d 747. This court may impose
whatever sanction it sees fit, regardless of the referee's
recommendation. See In re Disciplinary Proceedings Against
Widule, 2003 WI 43, ¶44, 261 Wis. 2d 45, 660 N.W.2d 686.
¶19 There is no showing that any of the referee's findings
of fact are clearly erroneous. Accordingly, we adopt them. We
also agree with the referee's conclusions of law that Attorney
Bauer violated the supreme court rules set forth above.
¶20 With respect to the appropriate level of discipline,
upon careful review of this matter, we agree with the referee's
recommendation for a one-year suspension of Attorney Bauer's
license to practice law in Wisconsin. Although no two
disciplinary proceedings are identical, we find support for the
referee's recommended sanction in our decision in In re
Disciplinary Proceedings Against Goldstein, 2010 WI 26, 323
Wis. 2d 706, 782 N.W.2d 388.
¶21 Attorney Goldstein converted nearly $70,000 from three
estates where he had served as a special administrator or
personal representative. Like Attorney Bauer, Attorney
Goldstein's clients sustained no actual loss. Like Attorney
Bauer, Attorney Goldstein had no prior discipline over what had
been an otherwise distinguished 33-year legal career.
¶22 Attorney Goldstein was found to have committed 21
counts of misconduct, including six counts of violating
SCR 20:8.4(c). Attorney Goldstein's situation involved some
aggravating circumstances that are not present here. Attorney
Goldstein paid both personal and business expense and financed
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No. 2016AP1259-D
his personal real estate investments out of the converted funds.
Attorney Goldstein's actions actually deprived his clients of
money until he repaid the funds. Attorney Goldstein's
conversions took place over a long period of time. Attorney
Goldstein lied in his statements to the OLR, and he refused to
acknowledge the wrongful nature of his misconduct. Due to these
aggravating factors, which are not present here, Attorney
Goldstein received a two-year license suspension.
¶23 Although the amounts of the conversions at issue in
this case far exceed those in Goldstein, Attorney Bauer
cooperated with the OLR, and he entered into a partial
stipulation. Unlike the situation in Goldstein, none of
Attorney Bauer's clients lost any money. Thus, a two-year
suspension is not warranted. However, Attorney Bauer's
misconduct is nonetheless very serious and does warrant a
significant sanction.
¶24 The referee found that Attorney Bauer committed five
violations of SCR 20:8.4(c). As the referee noted, Attorney
Bauer made numerous improper transfers of multiple clients'
funds between his firm's trust account, the firm's business
account, and accounts belonging to Attorney Bauer's side
business, Sports Advisors, Inc. These labyrinthine transfers
support the referee's comments that Attorney Bauer saw his trust
account "as something akin to a slush fund" and that the
transfers "seemed to constantly be in the process of 'robbing
Peter to pay Paul' and, in some cases, to pay Michael Bauer."
The transfers continued for nearly one year. Attorney Bauer was
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No. 2016AP1259-D
an experienced attorney who should have known that the transfers
were improper. We agree with the referee that Attorney Bauer's
repeated acts of dishonesty, fraud, deceit and misrepresentation
in converting $376,000 in client funds, along with his failure
to comply with multiple supreme court rules regarding trust
account management, warrant a one-year suspension. As is our
usual custom, we also find it appropriate to assess the full
costs of the proceeding against Attorney Bauer.
¶25 IT IS ORDERED that the license of Michael R. Bauer to
practice law in Wisconsin is suspended for a period of one year,
effective June 27, 2018.
¶26 IT IS FURTHER ORDERED that within 60 days of the date
of this order, Michael R. Bauer shall pay to the Office of
Lawyer Regulation the costs of this proceeding, which are
$15,727.40 as of April 25, 2018.
¶27 IT IS FURTHER ORDERED that Michael R. Bauer shall
comply with the provisions of SCR 22.26 concerning the duties of
an attorney whose license to practice law has been suspended.
¶28 IT IS FURTHER ORDERED that compliance with all
conditions of this order is required for reinstatement. See
SCR 22.29(4)(c).
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No. 2016AP1259-D
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