Case Title: Office of Lawyer Regulation v. Ralph A. Kalal

Citation: 2005 WI 138

Docket Number: 2003AP002131-D

State: wisconsin

Court: Wisconsin Supreme Court

Date: 2005-10-14T00:00:00Z

Document:
2005 WI 138 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2003AP2131-D 
 
 
COMPLETE TITLE: 
 
 
In the Matter of Disciplinary Proceedings 
Against Ralph A. Kalal, Attorney at Law: 
 
Office of Lawyer Regulation, 
          Complainant, 
     v. 
Ralph A. Kalal, 
          Respondent. 
 
 
 
 
DISCIPLINARY PROCEEDINGS AGAINST KALAL 
 
 
OPINION FILED: 
October 14, 2005   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
        
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
        
 
COUNTY: 
        
 
JUDGE: 
        
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
        
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
      
 
 
2005 WI 138
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2003AP2131-D  
 
 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
In the Matter of Disciplinary Proceedings 
Against Ralph A. Kalal, Attorney at Law: 
 
Office of Lawyer Regulation, 
 
          Complainant, 
 
     v. 
 
Ralph A. Kalal, 
 
          Respondent. 
 
FILED 
 
OCT 14, 2005 
 
Cornelia G. Clark 
Clerk of Supreme Court 
 
 
 
 
 
ATTORNEY 
disciplinary 
proceeding.  Attorney's 
license 
suspended.   
 
¶1 
PER CURIAM. 
We review, pursuant to SCR 22.17(2), a 
report and recommendation filed by referee Judith Sperling-
Newton in this disciplinary proceeding involving Attorney Ralph 
A. Kalal ("Kalal").  Kalal entered pleas of "no contest" to the 
charges against him.  The matter was submitted to the referee, 
who issued a report incorporating the stipulation and adopting 
the recommended six-month suspension.    
No. 
2003AP2131-D   
 
2 
 
¶2 
The referee's findings of fact are to be affirmed 
unless 
they 
are 
clearly 
erroneous. 
In 
re 
Disciplinary 
Proceedings Against Sosnay, 209 Wis. 2d 241, 243, 562 N.W.2d 137 
(1997). We review the referee's conclusions of law de novo. In 
re Disciplinary Proceedings Against Carroll, 2001 WI 130, ¶29, 
248 Wis. 2d 662, 636 N.W.2d 718.  After our review of the record 
in this matter, we conclude that the referee's findings of fact 
are not clearly erroneous; accordingly we affirm and adopt them. 
We also agree with the referee's legal conclusion that Kalal's 
conduct violated the rules of professional conduct for lawyers, 
as set forth herein.  Therefore, we adopt the referee's 
conclusions of law.  We agree that a six-month suspension of 
Kalal's license to practice law is an appropriate sanction for 
his misconduct, and we further hold that Kalal should be 
required to pay the costs of these disciplinary proceedings, 
which totaled $10,884.10 as of April 19, 2005. 
¶3 
Kalal was admitted to practice law in Wisconsin in 
1973.  In 2002 he was publicly reprimanded for making a 
misrepresentation of fact in an oral argument to the supreme 
court in 
violation 
of SCR 
20:3.3. 
 
In 
re 
Disciplinary 
Proceedings Against Kalal, 2002 WI 45, 252 Wis. 2d 261, 643 
N.W.2d 466. 
¶4 
Kalal is the owner of Kalal & Associates, a sole 
proprietorship 
engaged 
in 
the 
practice 
of 
law. 
 
This 
disciplinary matter derives from a grievance filed by a former 
associate in Kalal's law firm who charged that Kalal had failed 
No. 
2003AP2131-D   
 
3 
 
to properly manage contributions to the firm's 401(k) plan.1  As 
noted, Kalal eventually executed a stipulation and no-contest 
plea to the charges and, on March 29, 2005, the referee filed a 
report and recommendation concluding that Kalal had committed 
professional misconduct in his handling of the employee 401(k) 
retirement plan and client trust accounts. 
¶5 
The complaint filed by the Office of Lawyer Regulation 
(OLR) alleged, and the referee found, that from approximately 
October 15, 1997 to August 15, 2001, Michele Tjader was employed 
as an associate attorney in Kalal's firm.  From September 29, 
1997 to August 15, 2001, Sarah Schmeiser was employed as a 
receptionist, and subsequently as a paralegal, at the firm.  
Jackie Bennett, Kalal's wife, worked as the firm's office 
manager during the time of Tjader's and Schmeiser's employment.  
Among other tasks, Bennett did the firm's bookkeeping work.  
Bennett is not a lawyer and was under Kalal's direct supervisory 
authority. 
¶6 
In January 1998, the firm implemented a 401(k) 
retirement plan, which permitted employees to designate up to 
10% of their salary to be contributed to the plan from pre-tax 
dollars.  The plan provided that the firm would match 50% of the 
employees' contributions of up to 6% of their earnings. 
                                                 
1 One of the grievants, Attorney Tjader also independently 
pursued an action based on these facts in Dane County Circuit 
Court, see State v. Circuit Court for Dane County, 2004 WI 58, 
271 Wis. 2d 633, 681 N.W.2d 110. 
No. 
2003AP2131-D   
 
4 
 
¶7 
Employees were required to work for the firm for one 
year before they became eligible to participate in the 401(k) 
plan.  Tjader and Schmeiser became eligible to participate in 
the retirement plan in January 1999.  Both completed an 
enrollment form and provided it to Bennett, indicating they 
wished to contribute 6% of their earnings to the plan.  The firm 
was therefore obligated to make matching contributions of 50% of 
each employee's personal contributions. 
¶8 
Bennett never forwarded Tjader's or Schmeiser's forms 
to the plan administrator, Firstar Bank.  Beginning in January 
1999 however, 6% of Tjader's and Schmeiser's earnings were 
withheld from each of their paychecks.  The firm kept the 
withheld earnings and did not turn them over to Firstar Bank.  
The firm also failed to pay the employer's matching 50% 
contributions to the plan. 
¶9 
Despite the fact that none of Tjader's contributions 
had been paid into the 401(k) plan for 1999, Tjader's 1999 W-2 
tax form from the firm reported that $4225 of Tjader's wages had 
been 
paid 
into the plan. 
 
Similarly, although none of 
Schmeiser's contributions had been paid into the 401(k) plan for 
1999, Schmeiser's 1999 W-2 tax form from the firm reported that 
$1765 had been paid into the plan. 
¶10 Similarly, for the year 2000, none of Tjader's or 
Schmeiser's withheld earnings were paid into the plan, but 
Tjader's 2000 W-2 tax form reflected a $4875 contribution and 
Schmeiser's 2000 W-2 tax form reflected a $2175 contribution. 
No. 
2003AP2131-D   
 
5 
 
¶11 Kalal was permitted to deduct, as a business expense, 
salary amounts and employee expenses actually paid on his 1999 
and 2000 personal income tax returns.  Kalal deducted the full 
amount of the salaries that were reported to the IRS on Tjader's 
and Schmeiser's W-2 tax forms, although 6% of those salaries had 
not been paid.  Kalal also deducted payments in purported 
employer contributions to pension and profit-sharing plans on 
his 
1999 
personal 
income 
tax 
return, 
although 
no 
such 
contributions were made in 1999. 
¶12 In 2000, Schmeiser worked part-time for another law 
firm and contributed to that firm's 401(k) plan. She contacted 
Bennett requesting information needed to complete a transfer 
form, but received no response.  The transfer was never 
completed and Schmeiser was required to take a cash distribution 
on which she was taxed. 
¶13 After receiving that cash distribution in the summer 
of 2001, Schmeiser and Tjader realized that neither of them had 
received a report for the previous year regarding their 
retirement accounts.  They contacted Firstar Bank and were 
informed that the bank had no retirement accounts for them. 
¶14 Tjader and Schmeiser met with Kalal, who acknowledged 
that the firm had been unable to make employer contributions for 
some time due to financial concerns. 
¶15 The referee found that Firstar Bank made numerous 
telephone calls to Kalal at both his office and at his home for 
a period of approximately two weeks in an effort to discuss the 
discrepancy with him.  Kalal did not return these telephone 
No. 
2003AP2131-D   
 
6 
 
calls until he was advised that the matter was being referred to 
Firstar Bank's legal department and to appropriate federal 
authorities. 
¶16 On or about August 9, 2001, Kalal sent various 
required documents and funds totaling $26,448.75 to Firstar 
Bank. 
¶17 During the OLR's investigation of this matter it was 
also determined, and the referee subsequently found, that during 
late 1998 and 1999, the firm failed to timely file several 
employment tax returns which require employers to report and pay 
the taxes they withhold from employees' paychecks, as well as 
the employer's share of social security and Medicare taxes. 
¶18 Kalal acknowledged that these returns were not filed 
for the quarterly tax periods ending September 30, 1998, March 
31, 1999, June 30, 1999, and September 30, 1999, although tax 
payments were withheld from the employees' paychecks for those 
periods.  Kalal explained that the tax returns were not filed 
because funds were not available to pay the taxes due. 
¶19 In addition, the referee determined that Kalal had 
continued to hold money in his client trust account for certain 
clients where the legal representation had concluded.  Kalal 
acknowledged that, upon reviewing his trust account records, he 
had identified approximately 75 clients whose files were closed 
but who still had funds on deposit in his trust account.  In 
addition, the firm's client trust account contained some 
$3425.57 more than the sum of the individual client ledgers; 
ownership of these funds could not be immediately identified.  
No. 
2003AP2131-D   
 
7 
 
¶20 Kalal then began submitting to the OLR monthly lists 
of clients who had funds on deposit in his trust account, 
beginning in January 2001.  Of the 148 clients shown on the 
January 2001 list, 97 were clients whose files had been closed 
and who were owed refunds.  Of those 97 clients, 74 were clients 
for whom the office had active client ledgers and 23 were 
clients for whom the office had no ledgers.  The 23 clients 
without ledgers had files that dated back to 1997 or earlier.  
The amounts owing to these individual clients ranged from less 
than $1 to amounts in excess of $500.  The referee found that 31 
clients were owed funds in excess of $100.  Because the firm did 
not prepare a monthly schedule of subsidiary client ledgers, it 
was not possible to reconcile the bank statement balance with 
the total funds that should have been available for clients. 
¶21 As noted, Kalal executed a stipulation and a no-
contest plea in response to the OLR's charges regarding these 
matters.  The matter was submitted to the referee, who found 
that the OLR had met its burden of proof to establish Kalal's 
violation of the supreme court rules by clear, satisfactory and 
convincing evidence.   
¶22 Supreme Court Rule 20:8.4(c) provides that it is 
professional misconduct for a lawyer to "engage in conduct 
involving dishonesty, fraud, deceit or misrepresentation."  The 
referee concluded that: 
By failing to deposit funds that had 
been deducted from employees' paychecks as 
contributions for a 401(k) plan into the 
plan and instead putting the withheld funds 
to personal use, by failing to pay matching 
No. 
2003AP2131-D   
 
8 
 
employer contributions to the 401(k) plan as 
required 
under 
the 
plan, 
by 
falsely 
reporting on employees' W-2 tax forms that 
contributions had been paid in to the 401(k) 
plan when they had not, and by claiming 
deductions 
on 
his 
personal 
income 
tax 
returns for payments that were not made, 
Respondent 
engaged 
in 
conduct 
involving 
dishonesty, 
fraud, 
deceit, 
and 
misrepresentation, 
contrary 
to 
SCR 
20:8.4(c). 
¶23 Supreme Court Rule 
20:5.3(b) 
provides 
that 
with 
respect to a nonlawyer employed or retained by or associated 
with a lawyer, "[a] lawyer having direct supervisory authority 
over the nonlawyer shall make reasonable efforts to ensure that 
the person's conduct is compatible with the professional 
obligations of the lawyer."  The referee found that by failing to 
implement measures designed to monitor bookkeeping and related 
work performed by Bennett, a nonlawyer, Kalal violated SCR 
20:5.3(b).   
¶24 The referee also concluded that by failing to file 
timely employer tax returns for the quarterly tax periods ending 
September 30, 1998, March 31, 1999, June 30, 1999, and September 
30, 1999, Kalal violated a standard of conduct for attorneys as 
set forth in State v. Roggensack, 19 Wis. 2d 38, 199 N.W.2d 412 
(1963), in which this court deemed professional misconduct the 
"intentional violation of tax laws, even though without intent 
to defraud the government," in violation of SCR 20:8.4(f).2  Id. 
at 46. 
                                                 
 
2 SCR 20:8.4(f) provides that it is professional misconduct 
to "violate a statute, supreme court rule, supreme court order 
or supreme court decision regulating the conduct of lawyers." 
No. 
2003AP2131-D   
 
9 
 
¶25 The referee found that by failing to timely pay 
refunds to some 97 clients who still had funds on deposit in his 
trust account at the conclusion of their representation, Kalal 
failed to deliver promptly to the client any trust account funds 
or other property which the client is entitled to receive, in 
violation of former SCR 20:1.15(b).3 
¶26 In addition, by failing to maintain subsidiary ledgers 
for all clients for whom funds were held in his firm's client 
trust account, and by failing to prepare a monthly schedule of 
the subsidiary ledgers which could then be reconciled with the 
balances actually on hand in the account, Kalal failed to 
maintain all trust account records required under former SCR 
20:1.15(e),4 which governs operational requirements for trust 
funds. 
                                                 
3 Former SCR 20:1.15 applies to misconduct committed prior 
to July 1, 2004.  Former SCR 20:1.15(b) provides: 
 
Upon receiving funds or other property in which a 
client or third person has an interest, a lawyer shall 
promptly notify the client or third person in writing.  
Except as stated in this rule or otherwise permitted 
by law or by agreement with the client, a lawyer shall 
promptly deliver to the client or third person any 
funds or other property that the client or third 
person is entitled to receive and, upon request by the 
client or third person, shall render a full accounting 
regarding such property. 
4 Former SCR 20:1.15(e) provides: 
 
Complete records of trust account funds and other 
trust property shall be kept by the lawyer and shall 
be preserved for a period of at least six years after 
termination of the representation.  Complete records 
shall include:  (i) a cash receipts journal, listing 
the 
sources 
and 
date 
of 
each 
receipt, 
(ii) 
a 
No. 
2003AP2131-D   
 
10 
 
¶27 After our review of the record in this matter, we 
adopt the referee's findings of fact and conclusions of law as 
stipulated to by the parties.  
¶28 Turning to the question of the appropriate discipline, 
the 
referee 
considered 
several 
factors 
in 
assessing 
the 
appropriate discipline for Kalal's misconduct, including the 
seriousness of the misconduct, the need to impress upon him the 
seriousness of the misconduct, the need to protect the public, 
the courts, and the legal system from a repetition of the 
misconduct, and the need to deter other attorneys from similar 
misconduct.  See, e.g., In re Disciplinary Proceedings Against 
Carroll, 2001 WI 130, ¶40, 248 Wis. 2d 662, 636 N.W.2d 718.  The 
referee specifically noted that she considered Kalal's prior 
discipline as an aggravating factor.  She considered Kalal's 
commitment to making restitution to be a mitigating factor, and, 
                                                                                                                                                             
disbursements journal, listing the date and payee of 
each disbursement, with all disbursements being paid 
by check, (iii) a subsidiary ledger containing a 
separate page for each person or company for whom 
funds have been received in trust, showing the date 
and amount of each receipt, the date and amount of 
each disbursement, and any unexpended balance, (iv) a 
monthly schedule of the subsidiary ledger, indicating 
the balance of each client's account at the end of 
each month, (v) a determination of the cash balance 
(checkbook balance) at the end of each month, taken 
from the cash receipts and cash disbursement journals 
and a reconciliation of the cash balance (checkbook 
balance) with the balance indicated in the bank 
statement, and (vi) monthly statements, including 
canceled 
checks, 
vouchers 
or 
share 
drafts, 
and 
duplicate 
deposit 
slips. . . . 
All 
trust 
account 
records shall be deemed to have public aspects as 
related to the lawyer's fitness to practice. 
No. 
2003AP2131-D   
 
11 
 
indeed, the court has been advised that full restitution to both 
employees' 401(k) accounts has been made, and that all clients 
that Kalal could identify and locate have received complete 
refunds.  Based on our own review we agree that a suspension of 
six months is appropriate discipline for Kalal's professional 
misconduct. 
¶29 This brings us to a related question on which Kalal 
has requested the court's guidance.  As noted, Kalal's trust 
account contains funds belonging to clients that he has been 
unable to identify.  It is not entirely clear from the record 
precisely how much money remains at issue.  Initially, estimates 
indicated an amount of approximately $3425.57.  
¶30 On July 15, 2005, this court issued an order to the 
parties 
regarding 
the 
appropriate 
resolution 
of 
these 
unidentified client funds.  The OLR responded on July 20, 2005, 
as supplemented on August 5, 2005.  We agree with the OLR that 
pursuant to SCR 22.26, Kalal has a duty to timely disburse all 
remaining funds from his trust account and to close the same.  
Based on the OLR's response, we direct Attorney Kalal to seek 
direction from the OLR as to the appropriate course of conduct 
for resolving the issue of the unidentified client funds.  
Attorney Kalal shall notify this court within 30 days of the 
date of this decision as to how the remaining unidentified funds 
will be managed.  The OLR shall timely advise this court whether 
it considers the proposed resolution satisfactory under the 
circumstances of this matter. 
No. 
2003AP2131-D   
 
12 
 
¶31 Finally, we turn to Kalal's request that this court 
postpone his suspension so that it will commence on or after 
November 1, 2005.  As his counsel has explained in a letter to 
the court, filed May 3, 2005: 
Understanding that he will lose his 
license to practice for a period of time, 
Mr. Kalal has ceased taking in new clients.  
He does have seven criminal cases that will 
get resolved during the course of the Summer 
and into the early Fall.  He believes that 
the last will be resolved in October of this 
year.  Mr. Kalal has put substantial work 
into these matters and would like to see 
them through to completion, rather than 
refer them to new counsel who will have to 
start from scratch.  We ask that any 
suspension ordered by the Court not start 
until November 1, 2005. 
The OLR does not support the request.   
¶32 Although such requests are not generally favored, in 
recognition of Kalal's efforts to make restitution to the 
injured employees and clients in this matter, his cooperation 
with the OLR in this proceeding, and in reliance on the 
representation of his counsel, Attorney Waring Fincke, that 
Kalal has ceased taking new clients, we will delay Kalal's 
suspension until November 1, 2005, solely to permit him to 
complete the seven client matters he specifically identified.  
Representation of any other client or undertaking representation 
of the remaining clients on any new matter will be grounds for 
additional 
discipline 
and 
may 
adversely 
affect 
future 
reinstatement proceedings.  
¶33 IT IS ORDERED that the license of Attorney Ralph A. 
Kalal to practice law in Wisconsin is suspended for a period of 
No. 
2003AP2131-D   
 
13 
 
six months, effective November 1, 2005, on the terms set forth 
in this decision. 
¶34 IT IS FURTHER ORDERED that within 30 days of the date 
of this order Attorney Ralph A. Kalal shall seek direction from 
the Office of Lawyer Regulation regarding the appropriate course 
of conduct for resolving the issue of unidentified client funds 
remaining in his custody and control, and shall submit a written 
statement to the court explaining how the remaining unidentified 
funds will be managed.  Upon receipt of this statement, the OLR 
shall timely advise this court whether it considers the 
resolution satisfactory under the circumstances of this matter. 
¶35 IT IS FURTHER ORDERED that within 60 days of the date 
of this order Attorney Ralph A. Kalal shall pay to the Office of 
Lawyer Regulation the costs of this proceeding.  If those costs 
are not paid within the time specified and absent a showing to 
this court of an inability to pay those costs within that time, 
the license of Attorney Ralph A. Kalal to practice law shall 
remain suspended until further order of the court. 
¶36 IT IS FURTHER ORDERED that Attorney Kalal comply with 
the provisions of SCR 22.26 concerning the duties of an attorney 
whose license to practice law has been suspended. 
No. 
2003AP2131-D   
 
 
 
1