Title: Office of Lawyer Regulation v. Mark A. Phillips

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

2006 WI 43 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2004AP1914-D 
 
 
COMPLETE TITLE: 
 
 
In the Matter of Disciplinary Proceedings 
Against Mark A. Phillips, Attorney at Law: 
 
Office of Lawyer Regulation, 
          Complainant-Respondent, 
     v. 
Mark A. Phillips, 
          Respondent-Appellant. 
 
 
 
 
DISCIPLINARY PROCEEDINGS AGAINST PHILLIPS 
 
 
OPINION FILED: 
May 12, 2006   
SUBMITTED ON BRIEFS: 
December 13,2005 
ORAL ARGUMENT: 
        
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
        
 
COUNTY: 
        
 
JUDGE: 
        
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
        
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the respondent-appellant there were briefs by Mark A. 
Phillips and Law Offices of Mark A. Phillips SC, Brookfield. 
 
For the complainant-respondent there was a brief by Gregg 
Herman, Matthew J. Price, and Loeb & Herman, S.C., Milwaukee. 
 
 
2006 WI 43
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2004AP1914-D  
 
 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
In the Matter of Disciplinary Proceedings 
Against Mark A. Phillips, Attorney at Law: 
 
Office of Lawyer Regulation, 
 
          Complainant-Respondent, 
 
     v. 
 
Mark A. Phillips, 
 
          Respondent-Appellant. 
 
FILED 
 
MAY 12, 2006 
 
Cornelia G. Clark 
Clerk of Supreme Court 
 
 
 
 
 
ATTORNEY 
disciplinary 
proceeding.   
Attorney's 
license 
suspended. 
 
¶1 
PER CURIAM.   Attorney Mark A. Phillips appeals from 
the referee's report and recommendation that his license to 
practice law in Wisconsin be suspended for a period of one year, 
that he be ordered to pay $145,000 and certain related expenses 
to his former client R.M., and that he be ordered to pay the 
costs of this proceeding.  After our independent review of the 
record, we adopt the referee's findings of fact and conclusions 
of law.  We also agree that Attorney Phillips' misconduct 
No. 
2004AP1914-D   
 
2 
 
requires that his license to practice law be suspended for a 
period of one year, that he make certain restitutionary payments 
to R.M., and that he pay the costs of this disciplinary 
proceeding.  Although we are aware of Attorney Phillips' recent 
criminal conviction for tax evasion, which has some connection 
with the facts underlying the present disciplinary complaint, we 
leave for another day the question of any additional discipline 
for that conduct or Attorney Phillips' conduct during this 
proceeding. 
¶2 
The present disciplinary proceeding was initiated by 
the filing of a complaint by the Office of Lawyer Regulation 
(OLR) on July 19, 2004.  The complaint contains seven counts, 
stemming from two grievances, one by Attorney Phillips' former 
client R.M. (Counts I-VI) and one by the Wisconsin Department of 
Revenue (DOR) (Count VII). 
¶3 
Counts I and II allege that Attorney Phillips violated 
SCR 20:1.8(a)1 because at the time of two loans by R.M. to 
                                                 
1 SCR 20:1.8(a) states:  Conflict of interest: prohibited 
transactions. 
 
(a) A lawyer shall not enter into a business 
transaction with a client or knowingly acquire an 
ownership, possessory, security or other pecuniary 
interest adverse to a client unless: 
 
(1) the transaction and terms on which the 
lawyer acquires the interest are fair and reasonable 
to the client and are fully disclosed and transmitted 
in writing to the client in a manner which can be 
reasonably understood by the client; 
No. 
2004AP1914-D   
 
3 
 
Attorney Phillips: (1) the terms of the loans were not fair and 
reasonable to R.M.; (2) those terms were not transmitted in 
writing in a manner that R.M. could reasonably understand; 
(3) Attorney 
Phillips 
failed 
to 
give 
R.M. 
a 
reasonable 
opportunity to seek the advice of independent counsel; and 
(4) Attorney Phillips failed to obtain written consent from R.M. 
for the transactions.  Count III alleges that Attorney Phillips 
violated SCR 20:1.8(b)2 by taking advantage of his knowledge of 
R.M.'s father's estate to obtain the two loans from R.M. 
totaling $145,000.  Count IV alleges that Attorney Phillips' 
partial truths concerning his financial situation and his 
failure to disclose the full credit risk to R.M. at the time of 
the loans violated SCR 20:8.4(c).3  Count V alleges that by 
failing to close R.M.'s father's estate in a timely fashion and 
to take action concerning the estate's failure to file a timely 
federal estate tax return, Attorney Phillips did not "act with 
reasonable diligence and promptness," contrary to SCR 20:1.3.  
Count VI alleges that Attorney Phillips failed to return R.M.'s 
                                                                                                                                                             
 
(2) the 
client 
is 
given 
a 
reasonable 
opportunity to seek the advice of independent counsel 
in the transaction; and 
 
(3) the client consents in writing thereto. 
2 SCR 20:1.8(b) states that "[a] lawyer shall not use 
information relating to representation of a client to the 
disadvantage of the client unless the client consents after 
consultation." 
3 SCR 20:8.4(c) states that it is professional misconduct 
for a lawyer to "engage in conduct involving dishonesty, fraud, 
deceit or misrepresentation." 
No. 
2004AP1914-D   
 
4 
 
files to him for over four months, despite repeated requests, in 
violation of SCR 20:1.16(d).4 
¶4 
With respect to the DOR grievance, Count VII alleges 
that Attorney Phillips' failure to file timely state income tax 
returns for the years 1998 through 2001 and to pay state income 
taxes when due violated a supreme court decision regulating the 
conduct of lawyers, see, e.g., In re Disciplinary Proceedings 
Against Owens, 172 Wis. 2d 54, 56-57, 492 N.W.2d 157 (1992), in 
violation of SCR 20:8.4(f).5 
¶5 
Attorney Phillips filed an answer that admitted many 
of the underlying transactions and admitted the allegation of 
wrongdoing in Count VII, but denied violating any other rule of 
professional conduct.   
 
 
 
                                                 
4 SCR 
20:1.16(d) 
provides: 
 
Declining 
or 
terminating 
representation. 
 
(d) Upon termination of representation, a lawyer 
shall take steps to the extent reasonably practicable 
to protect a client's interests, such as giving 
reasonable notice to the client, allowing time for 
employment of other counsel, surrendering papers and 
property to which the client is entitled and refunding 
any advance payment of fee that has not been earned.  
The lawyer may retain papers relating to the client to 
the extent permitted by other law. 
5 SCR 20:8.4(f) states that it is professional misconduct 
for a lawyer to "violate a statute, supreme court rule, supreme 
court order or supreme court decision regulating the conduct of 
lawyers." 
No. 
2004AP1914-D   
 
5 
 
I. REFEREE'S FINDINGS OF FACT 
¶6 
Attorney Stanley F. Hack was appointed referee and 
held a contested hearing on the matter on December 13, 2004, at 
which both R.M. and Attorney Phillips testified.  The referee 
then prepared his report and recommendation, which included 
detailed findings of fact and conclusions of law.   
¶7 
Attorney Phillips was admitted to practice law in 
Wisconsin in 1981.  For a substantial portion of his career, 
Attorney Phillips has been the sole principal in his own firm in 
Brookfield, Law Offices of Mark A. Phillips, S.C.  Attorney 
Phillips has not been the subject of discipline prior to the 
filing of the present complaint. 
¶8 
According to the referee's factual findings, R.M. was 
a longtime friend and client of Attorney Phillips on both 
business and personal matters.  In March 1997 R.M.'s father 
passed away.  R.M., as personal representative and sole 
beneficiary, retained Attorney Phillips to probate his father's 
estate.  On April 28, 1997, Attorney Phillips filed the initial 
papers to begin the probate of the estate.  Attorney Phillips 
remained the attorney of record for the estate until October 12, 
2000. 
¶9 
In February 1998 Attorney Phillips asked R.M. for a 
loan of $20,000.  Attorney Phillips told R.M. that he needed the 
money because he had missed an estimated tax payment to the 
Internal Revenue Service (IRS) and that he would have the money 
back to R.M. quickly.  On February 24, 1998, R.M. gave Attorney 
Phillips 
a 
check 
for 
$20,000, 
which 
Attorney 
Phillips 
No. 
2004AP1914-D   
 
6 
 
immediately cashed.  Other than the check, there was no written 
document to memorialize the loan.  There was no agreement for 
payment of interest or any repayment schedule.  Although there 
was some conflicting testimony on these points, the referee also 
specifically found that Attorney Phillips did not offer any 
collateral or security for the loan to R.M. and did not advise 
R.M. to seek independent counsel to review the loan. 
¶10 During the OLR's investigation, Attorney Phillips 
produced an unsigned copy of a letter from himself to R.M. that 
was dated April 11, 1998.  The letter purported to advise R.M. 
to seek the counsel of another lawyer and to offer R.M. a 
mortgage on two properties that Attorney Phillips owned.  Based 
on R.M.'s testimony that he never received any such letter prior 
to receiving it from the OLR during its investigation, the 
referee found that the letter had never been sent.6 
¶11 At some point after the initial $20,000 loan, Attorney 
Phillips asked R.M. for an additional loan of $100,000 allegedly 
because of problems with the IRS.  When R.M. responded that he 
did not have that amount of money available to loan, Attorney 
Phillips asked R.M. about the sale of R.M.'s father's house, 
which was part of the father's estate. 
                                                 
6 In a malpractice action by R.M. against Attorney Phillips 
concerning his father's estate, which is discussed later, 
discovery requests asked Attorney Phillips to produce copies of 
all documents he sent to R.M. at any time after March 1997.  
Attorney Phillips did not produce the April 11, 1998, letter 
during the malpractice case.  He claimed at the disciplinary 
hearing that his failure to search for and produce the letter 
was because he thought it was not relevant.   
No. 
2004AP1914-D   
 
7 
 
¶12 Ultimately, the father's house was sold and the sales 
proceeds of nearly $170,000 were deposited into one of R.M.'s 
bank accounts.  Attorney Phillips again asked R.M. about an 
additional loan.  R.M. ultimately agreed to an additional loan 
of $125,000.  At the time of the loan, Attorney Phillips told 
R.M. that the loan was needed to pay IRS penalties.  According 
to R.M.'s testimony, Attorney Phillips told R.M. that the loan 
would make him debt-free.7 
¶13 R.M. gave Attorney Phillips a check for $125,000, and 
on March 23, 1999, Attorney Phillips executed a promissory note 
in favor of R.M.  Other than the check, the note was the only 
written evidence of the loan.  No collateral was given in 
exchange for the loan.   
¶14 The note stated that Attorney Phillips promised to pay 
the principal amount of $145,000, the amount of both loans, 
"payable together with interest to date of payment at the rate 
                                                 
7 These statements to R.M., as found by the referee, appear 
to be inconsistent with Attorney Phillips' 2005 plea agreement 
on a federal income tax evasion charge.  See infra ¶¶33-35.  In 
that plea agreement, of which this court takes judicial notice, 
Attorney Phillips admitted that he did not use the $125,000 loan 
proceeds to pay his back taxes, but instead hid the loan 
proceeds in multiple cashier's checks that he subsequently 
converted into cash using his client trust account and a bank 
account held solely in his wife's name.  Attorney Phillips also 
admitted that he ultimately used the loan proceeds primarily to 
pay his personal living expenses.  These admissions also appear 
to be inconsistent with the referee's conclusion, based on 
Attorney Phillips' testimony at the disciplinary hearing, that 
Attorney Phillips could not testify as to what happened to the 
$145,000 in loan proceeds, other than that he paid some taxes 
and some bills. 
No. 
2004AP1914-D   
 
8 
 
of seven (7%) percent per annum until fully paid."  It also 
stated that Attorney Phillips was to make 60 payments of $845.83 
per month.  Thus, the note provided for interest-only payments, 
although the note did not state this explicitly.  The note also 
did not specifically state when the principal was to be repaid.  
Although Attorney Phillips has referred to the note as a demand 
note, the terms of the note nowhere require repayment upon 
demand.  According to R.M., he was unaware that the note 
provided for interest-only payments.   
¶15 The referee found that R.M. was not advised to seek 
the counsel of another lawyer with respect to this $125,000 
loan.  The referee further found that Attorney Phillips did not 
obtain R.M.'s written consent to the transaction.  Although 
Attorney Phillips produced to the OLR and submitted to the 
referee a copy of another letter, dated March 23, 1999, in which 
Attorney Phillips again purported to advise R.M. to obtain 
independent counsel and to offer collateral, the referee found 
that this letter, like the April 11, 1998 letter, had not been 
sent to R.M. 
¶16 Attorney Phillips made 18 interest-only payments on 
the note.  These payments were often not on time.  Attorney 
Phillips' last payment occurred in September 2000.  After 
Attorney Phillips defaulted on the note, R.M. sued and obtained 
a 
judgment 
against 
Attorney 
Phillips 
in 
the 
amount 
of 
$148,511.37, which was docketed in January 2001.  Attorney 
Phillips has made no payments on the judgment. 
No. 
2004AP1914-D   
 
9 
 
¶17 R.M.'s father's estate remained open until March 2003.  
In August 2000 R.M. discovered that the federal estate tax 
return was long overdue, resulting in penalties and interest of 
approximately $155,000 in addition to the tax due.  R.M. 
retained new counsel to complete the estate and brought a 
malpractice action against Attorney Phillips and the accountant 
working with Attorney Phillips on the estate.  A jury ultimately 
returned a verdict for $155,246 in damages in R.M.'s favor that 
found the accountant 55 percent negligent, Phillips 35 percent 
negligent, and R.M. 10 percent negligent.  Because Attorney 
Phillips did not have malpractice insurance and because the 
accountant had been found more than 50 percent negligent, the 
accountant's insurance carrier paid Attorney Phillips' portion 
of the damages. 
¶18 The jury also awarded R.M. $20,000 in punitive damages 
against Attorney Phillips, based on a finding that Attorney 
Phillips 
had 
acted 
maliciously 
toward 
R.M. 
or 
with 
an 
intentional disregard of R.M.'s rights.  Although Attorney 
Phillips initially stipulated to pay the punitive damages award, 
he made no payments and a judgment for the punitive damages 
award in the amount of $28,571.35 was ultimately entered against 
Attorney Phillips in January 2003.  Attorney Phillips has not 
made any payments on this judgment. 
¶19 Based on Consolidated Court Automation Program (CCAP) 
records, the referee found that Attorney Phillips' financial 
situation 
was 
significantly 
more 
precarious 
than Attorney 
Phillips disclosed to R.M.  The records indicate at least the 
No. 
2004AP1914-D   
 
10 
 
following tax warrants filed against Attorney Phillips and/or 
his law office by the DOR: 
1. 
$15,972.25 (docketed June 2, 1998) 
2. 
$ 2,502.76 (docketed June 8, 1998) 
3. 
$ 8,540.11 (docketed February 4, 1999) 
4. 
$ 7,979.15 (docketed February 4, 1999) 
5. 
$ 4,941.70 (docketed February 4, 1999) 
6. 
$ 7,216.43 (docketed August 30, 1999) 
7. 
$44,013.33 (docketed May 19, 2003) 
8. 
$ 2,179.83 (docketed December 8, 2003) 
9. 
$18,262.98 (docketed May 13, 1997) 
¶20 Records also show many other liens and judgments 
against Attorney Phillips and the two pieces of real estate that 
he owns, including: 
1. 
$ 74,000.00—first mortgage in favor of a 
bank recorded on August 25, 1983; 
2. 
$ 50,000.00—second mortgage in favor of a 
relative recorded on November 16, 1994; 
3. 
$ 75,000.00—third mortgage in favor of a 
corporation 
in 
which 
Attorney 
Phillips 
invested recorded on December 29, 1995; 
4. 
$ 81,095.00—judgment in favor of Attorney 
Phillips' former law partner docketed on 
August 23, 1996; 
5. 
$ 16,859.64—federal tax lien recorded on 
August 23, 1995; 
6. 
$103,242.56—federal tax lien recorded on May 
7, 1998; 
7. 
$ 34,512.87—federal tax lien recorded on 
August 31, 2000; 
¶21 The referee specifically found that had R.M. been 
aware of Attorney Phillips' actual debt situation, he would not 
have made the loans to Attorney Phillips. 
No. 
2004AP1914-D   
 
11 
 
¶22 The referee also made findings regarding Attorney 
Phillips' failure to return R.M.'s files.  R.M. sent Attorney 
Phillips a letter on August 18, 2003, seeking the return of all 
of his personal and business files.  The letter stated that it 
was repeating R.M.'s prior oral requests.  Although Attorney 
Phillips responded that he would "personally see to it that the 
documents are delivered to you within the next few weeks," 
Attorney Phillips did not return the files.  R.M. sent follow-up 
letters on October 16 and 26, 2003.  In a letter to the OLR, 
dated November 13, 2003, R.M. stated that despite repeated 
requests, he still had not received his files or been given 
instructions on when to pick them up from Attorney Phillips' 
office.  After the OLR sent Attorney Phillips a letter inquiring 
as to the status of R.M.'s files, Attorney Phillips responded 
that he wanted to keep the files pending the resolution of the 
OLR's investigation.  After the OLR reminded Attorney Phillips 
that failure to return a client's files upon request is a 
violation of SCR 20:1.16(d), Attorney Phillips returned R.M.'s 
files. 
¶23 Based on information received from the DOR and as 
admitted by Attorney Phillips, the referee also found that 
Attorney Phillips did not file state income tax returns for the 
years 1998 through 2001, despite notifications from the DOR.  In 
addition, although he had filed returns for 1992 through 1997, 
Attorney Phillips had a delinquent balance for failing to pay 
the taxes due for those periods.  After the OLR contacted 
Attorney Phillips about this matter, in February 2003 Attorney 
No. 
2004AP1914-D   
 
12 
 
Phillips finally filed returns showing tax due in each of the 
relevant years, but did not include any payment with the 
returns.  Indeed, according to the DOR, Attorney Phillips' last 
payment to reduce his delinquency was made in December 1995.  
Because of Attorney Phillips' nonpayment, the DOR was forced to 
garnish his wife's wages beginning in August 1999. 
II. REFEREE'S CONCLUSIONS OF LAW 
¶24 On the basis of these factual findings, the referee 
concluded that the OLR had proven that Attorney Phillips had 
engaged in violations of the Supreme Court Rules of Professional 
Conduct, as alleged in each of the seven counts of the OLR 
complaint. 
¶25 With respect to the two loans between R.M. and 
Attorney Phillips, the referee concluded that Attorney Phillips 
had violated SCR 20:1.8(a) on both occasions because (1) the 
terms of the transaction were not fair and reasonable to R.M.; 
(2) the terms were not provided to R.M. in an understandable 
writing; (3) Attorney Phillips did not give R.M. a reasonable 
opportunity to seek the advice of independent counsel; and 
(4) Attorney Phillips did not obtain R.M.'s written consent to 
the transactions.   
¶26 The referee further concluded that Attorney Phillips 
had violated SCR 20:1.8(b) because he had used his knowledge of 
R.M.'s finances, including his knowledge of the sale of R.M.'s 
father's house, to obtain loans totaling $145,000 from R.M.   
¶27 Finally, with respect to the loans, the referee 
concluded that Attorney Phillips had violated SCR 20:8.4(c) by 
No. 
2004AP1914-D   
 
13 
 
failing to make a complete disclosure to R.M. about Attorney 
Phillips' financial distress and the substantial risk of his 
nonpayment of the loans. 
¶28 The referee also found that Attorney Phillips had not 
acted with reasonable diligence, in violation of SCR 20:1.3, 
when he had failed to close R.M.'s father's estate in a timely 
manner and had failed to cause the federal estate tax return to 
be filed until 2 1/2 years after it was due, resulting in 
substantial penalties and interest payments. 
¶29 The referee concluded that Attorney Phillips had 
violated SCR 20:1.16(d) by improperly failing to return R.M.'s 
files for more than four months, despite repeated requests to do 
so. 
¶30 Finally, the referee concluded that Attorney Phillips' 
failure to file timely state income tax returns and to pay taxes 
that were due had violated this court's decisions that attorneys 
have an ethical obligation to file timely tax returns and pay 
taxes that are due.  See Owens, 172 Wis. 2d at 56-57.  
Consequently, the referee found that Attorney Phillips had 
violated SCR 20:8.4(f). 
III. REFEREE'S RECOMMENDATION 
¶31 The 
referee 
considered 
various 
aggravating 
and 
mitigating factors of which he was aware at the time in reaching 
a recommendation as to the level of discipline.  Aggravating 
factors included the substantial number of violations, the 
serious neglect of the probate matter, and using a personal 
friendship with a client to obtain loans on terms unfairly 
No. 
2004AP1914-D   
 
14 
 
weighted in Attorney Phillips' favor without having the client 
obtain independent advice.  On the other hand, the referee noted 
that the long-standing friendship between Attorney Phillips and 
R.M., while not excusing Attorney Phillips' conduct, may explain 
in part the manner in which the loans were made.   
¶32 In light of the totality of the circumstances, the 
referee recommended that Attorney Phillips' license to practice 
law in Wisconsin should be suspended for one year.  The referee 
also recommended that Attorney Phillips should be ordered to 
repay R.M. the $145,000 in loans that Attorney Phillips 
received, together with any costs incurred by R.M. in obtaining 
the judgment on the loans and any unpaid interest on the loans 
and the judgment up to the date of payment.  The referee further 
recommended that Attorney Phillips should be ordered to satisfy 
the $20,000 punitive judgment, together with interest on the 
judgment until the date of payment.  Finally, the referee 
recommended that Attorney Phillips should be ordered to pay the 
costs of this disciplinary proceeding, which total $9911.79 as 
of December 12, 2005. 
IV. SUMMARY SUSPENSION DUE TO CRIMINAL CONVICTION 
¶33 Before we turn to Attorney Phillips' appeal of the 
referee's report and recommendation, we briefly address events 
that have occurred since the date of the referee's report.  
While the briefing of the present appeal was occurring, Attorney 
Phillips was charged in the United States District Court with 
attempting to evade the payment of a large portion of his 
federal income tax.  This charge appears related to Attorney 
No. 
2004AP1914-D   
 
15 
 
Phillips' attempts, using in part his client trust account, to 
hide from the IRS the proceeds of the $125,000 loan so that it 
would not be subject to garnishment.  Pursuant to a plea 
agreement, Attorney Phillips pled guilty to the tax evasion 
charge on July 25, 2005.  Ultimately, the federal district court 
sentenced Attorney Phillips to five months of incarceration, 150 
days of home confinement, and three years of supervised release.  
Attorney Phillips did not inform the court of any of these 
events.   
¶34 After the OLR learned of these facts and while the 
present appeal remained pending, it filed a motion pursuant to 
SCR 22.20(1)8 for the summary suspension of Attorney Phillips' 
license to practice law in Wisconsin on the basis of his 
criminal conviction.  Attorney Phillips did not respond to the 
OLR's motion.  On January 20, 2006, this court granted the OLR's 
motion and summarily suspended Attorney Phillips' license to 
practice law in this state.  On February 8, 2006, the OLR filed 
a new complaint against Attorney Phillips relating to the tax 
                                                 
8 SCR 22.20(1) states:  Summary license suspension on 
criminal conviction. 
 
(1) 
Summary 
suspension. 
 
Upon 
receiving 
satisfactory proof that an attorney has been found 
guilty or convicted of a serious crime, the supreme 
court may summarily suspend the attorney's license to 
practice 
law 
pending 
final 
disposition 
of 
a 
disciplinary proceeding, whether the finding of guilt 
or the conviction resulted from a plea of guilty or no 
contest or from a verdict after trial and regardless 
of the pendency of an appeal. 
No. 
2004AP1914-D   
 
16 
 
evasion conviction, which has been assigned Case No. 2006AP334-
D. 
¶35 Although the facts underlying the criminal conviction 
appear to have some connection with one of the loans at issue in 
this proceeding, we do not address at this time whether 
discipline should be imposed for that conduct.  That matter will 
proceed according to SCR 22.20(6) and (7)9 in Case No. 2006AP334-
D, which this court will address in due course.  
 
 
 
                                                 
9 SCR 22.20(6) and (7) state:  Summary license suspension on 
criminal conviction. 
 
(6) Filing of complaint.  The director, or 
special investigator acting under SCR 22.25, shall 
file the complaint in the disciplinary proceeding 
within 2 months of the effective date of the summary 
suspension or shall show cause why the summary 
suspension should continue.  The respondent attorney 
may file a response with the supreme court within 10 
days of service.  Reinstatement under this section 
does not terminate any misconduct investigation or 
disciplinary proceeding pending against the attorney. 
 
(7) Filing of referee report.  The referee 
appointed to conduct a hearing on the complaint shall 
conduct the hearing promptly and file the report 
required by SCR 22.16 no later than 3 months after the 
filing of the complaint.  In the event the report is 
not filed within 3 months of the filing of the 
complaint, 
the respondent 
attorney 
may 
move the 
supreme court for reinstatement pending completion of 
the disciplinary proceeding.  Reinstatement under this 
section 
does 
not 
terminate 
any 
misconduct 
investigation 
or 
disciplinary 
proceeding 
pending 
against the attorney. 
No. 
2004AP1914-D   
 
17 
 
V. ATTORNEY PHILLIPS' APPEAL 
FROM THE REFEREE'S REPORT AND RECOMMENDATION 
¶36 Turning back to Attorney Phillips' appeal from the 
referee's recommendation in the present proceeding, we note that 
the standard of review requires us to affirm the referee's 
findings of fact unless they are clearly erroneous.  See 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, however, on a de novo basis.  See In re Disciplinary 
Proceedings Against Carroll, 2001 WI 130, ¶29, 248 Wis. 2d 662, 
636 N.W.2d 718. 
 
A. Violations 
of 
SCR 
20:1.8(a), 
20:1.8(b), 
and 
20:8.4(c) 
Regarding the Client Loans 
¶37 Attorney Phillips challenges the referee's findings of 
fact and conclusions of law with respect to the two loans.  As 
admitted in his answer to the OLR complaint, Attorney Phillips 
acknowledges that he did not obtain R.M.'s signed consent to the 
loans, one of the requirements of SCR 20:1.8(a) for any 
transaction between a lawyer and a client.  Nonetheless, he 
argues that the referee erroneously concluded that Attorney 
Phillips had violated the other two requirements of SCR 
20:1.8(a). 
¶38 First, Attorney Phillips asserts that the terms of the 
loan transactions were fair and reasonable to R.M.  Indeed, he 
argues that there was really only one loan; that the initial 
$20,000 was always contemplated merely as an advance on a much 
larger loan that was ultimately completed with the $125,000 
check.  Although he did not state so explicitly, the referee's 
No. 
2004AP1914-D   
 
18 
 
report treats the two transfers from R.M. to Attorney Phillips 
as two separate loans.  Attorney Phillips asserts that this 
court is not bound by this finding because it is simply an 
inference drawn by the fact finder from documentary evidence.  
See State ex rel. Sieloff v. Golz, 80 Wis. 2d 225, 241, 258 
N.W.2d 700 (1977).  Attorney Phillips' argument ignores the fact 
that the referee reached his factual findings, including the 
implied finding that there were two separate loans, not only on 
the basis of the note, but also on the basis of Attorney 
Phillips' and R.M.'s testimony.  R.M.'s testimony spoke of two 
distinct loans and provided a sufficient ground to support the 
referee's finding. 
¶39 Moreover, 
the 
documentary 
evidence 
supports 
a 
conclusion that the two transfers of money from R.M. to Attorney 
Phillips should be treated as separate transactions.  The 
February 1998 loan of $20,000 was evidenced only by R.M.'s 
check.  There were no terms at all to that loan.  Attorney 
Phillips did not pay any interest on the loan (or principal 
either) for more than a year.  Attorney Phillips did not provide 
R.M. with any note, gave no collateral, and specified no date of 
repayment. 
¶40 The second transfer was of a substantially greater 
amount of money, creating a different level of risk for R.M.  As 
the referee found, R.M. did not immediately write out a check to 
Attorney Phillips when he requested this second, larger amount.  
It took a substantial amount of time (indisputably months) 
before R.M. agreed to turn over the second check.  Even if, as 
No. 
2004AP1914-D   
 
19 
 
Attorney Phillips claims, the parties had an understanding that 
R.M. would loan a second amount to Attorney Phillips, there was 
nothing definite in February 1998 that required him to do so.  
Writing out a second check (this one for $125,000) was a second 
volitional act by R.M. and should be considered as a separate 
transaction. 
¶41 Moreover, whether the loan was ultimately treated as a 
single debt because the entire loaned amount ultimately was 
covered by the March 23, 1999, promissory note, does not make 
much legal difference as to the conclusion that Attorney 
Phillips violated SCR 20:1.8(a).  SCR 20:1.8(a) states that a 
lawyer must take specified actions before entering into a 
business transaction with a client.  Attorney Phillips tries to 
argue that the loan was actually one transaction that occurred 
in March 1999 when the second loan check was issued.  It is 
undisputed, however, that R.M. initially lent money ($20,000) to 
Attorney Phillips in 1998.  Even if treated as a single loan, 
that was the date that Attorney Phillips "entered into" a loan 
transaction with R.M.  At least that date, regardless of the 
fact that the course of lending concluded more than a year 
later, would have to be the date for determining Attorney 
Phillips' compliance with SCR 20:1.8(a). 
¶42 The referee correctly found, however, that there were 
two transactions and that neither transaction was fair and 
reasonable 
to 
R.M. 
 
Attorney 
Phillips 
challenges 
this 
characterization.  With respect to the $20,000 loan, Attorney 
Phillips does not claim that this was fair and reasonable 
No. 
2004AP1914-D   
 
20 
 
standing alone because he considers it an advance on the later 
loan.  However, this was unquestionably a loan that stood on its 
own for more than a year.  It was undocumented and provided no 
interest or security for R.M.  As the OLR notes, "common sense 
dictates that a loan without terms greatly prejudices the lender 
as enforceability is greatly hampered, if not diminished or even 
extinguished."  Moreover, although Attorney Phillips argues that 
such terms are appropriate between friends, Attorney Phillips 
never offered any evidence that R.M. had expressly agreed that 
Attorney Phillips could have the $20,000 for over a year, 
interest-free, without collateral, and without any repayment.  
The most Attorney Phillips can allege is that R.M. never 
subsequently objected to his failure to pay any interest or 
principal for more than a year. 
¶43 On its face, borrowing such a substantial amount of 
money without any provision for payment of interest or for a 
specified term of the loan is certainly not fair and reasonable 
to a lender.  Attorney Phillips admitted as much during the 
disciplinary hearing when, in response to a question asking what 
advice he would give to a potential lender client facing such a 
loan request, he stated that it would be prudent to document the 
terms of the loan in writing.  If a client, having been fully 
informed and with the opportunity to consult independent 
counsel, nonetheless expressly chose in writing to forego 
interest, one could argue that the client's express statement 
showed that the client considered the interest-free term to be 
fair and reasonable to the client.  In the absence of any such 
No. 
2004AP1914-D   
 
21 
 
written expression of R.M.'s intent here, the lack of any terms 
for the initial loan was not fair and reasonable to R.M. 
¶44 Attorney Phillips also argues that the terms of the 
promissory note show that the loans were fair and reasonable to 
R.M.  Attorney Phillips again claims that this court can 
substitute its own judgment because the referee's finding was 
based on documentary evidence.  See State ex rel. Sieloff, 80 
Wis. 2d at 241.  Attorney Phillips argues that, on its face, a 
five-year note providing for 7 percent interest and requiring 
only the payment of interest is fair and reasonable.  Although 
one can imagine situations in which a lender might agree to make 
such an interest-only loan, the lender would compensate for 
having its money tied up for such a lengthy period of time by 
charging a higher interest rate and obtaining collateral to 
protect the principal.  Neither was done here.  In addition, 
Attorney Phillips' reliance on just the face of the note is 
misplaced because the referee also considered and credited 
R.M.'s testimony that he did not understand at the time of the 
loan that the note provided for payment of interest only.  This 
factual finding, based on the referee's firsthand view of the 
testimony, will not be overturned. 
¶45 Attorney Phillips also argues that basic contract law 
requires a party to read a contract and to take reasonable steps 
to protect one's own interests.  See State Farm Fire & Cas. Co. 
v. Home Ins. Co., 88 Wis. 2d 124, 129, 276 N.W.2d 349 (Ct. App. 
1979).  Attorney Phillips claims that the transaction cannot be 
deemed unfair because R.M. chose not to read the note, 
No. 
2004AP1914-D   
 
22 
 
investigate Attorney Phillips' financial situation and ask for 
collateral.  This is a primary theme of Attorney Phillips' 
argument that the transaction was fair because it was between 
long-standing friends. 
¶46 Attorney Phillips' reliance on general contract law 
misses the intent of SCR 20:1.8(a).  That rule is designed to 
make transactions between lawyer and client subject to higher 
standards 
than 
general 
contract 
law. 
 
It 
imposes 
these 
additional safeguards to protect clients precisely because they 
often rely on their attorney to look after their interests.  
Attorney Phillips' argument fails to grasp this difference. 
¶47 Attorney Phillips' reliance on his friendship also 
underlies his argument that he sufficiently disclosed his 
financial situation to R.M.  He asserts that R.M. knew he was in 
financial straits because it is undisputed that Attorney 
Phillips said he needed the money to pay back taxes.  He claims 
that R.M. simply chose not to ask for any more financial 
information.  Thus, he argues that whether R.M. was placed 
No. 
2004AP1914-D   
 
23 
 
behind a long line of prior creditors in terms of priority of 
repayment is irrelevant.10 
¶48 The referee found, however, that Attorney Phillips' 
financial 
situation 
was 
significantly 
more 
desperate 
than 
Attorney Phillips disclosed.  The referee credited R.M.'s 
testimony that Attorney Phillips told him the second loan would 
make Attorney Phillips debt-free.  This was an issue of fact and 
the referee's findings are supported by record evidence. 
¶49 Attorney 
Phillips 
also 
challenges 
the 
referee's 
finding that he did not advise R.M. to seek independent counsel.  
Attorney Phillips relies on the April 11, 1998, and March 23, 
1999, letters as proof that he did tell R.M. to have another 
attorney review the loans.  He argues that the referee stated 
his factual finding in terms of the letters not being sent.  
Attorney Phillips therefore claims that the referee did not find 
that the letters were after-the-fact fabrications by Attorney 
Phillips.  Because the letters purport to confirm Attorney 
Phillips' statements to R.M. that he should consult another 
                                                 
10 Attorney 
Phillips 
also 
argues 
that 
his 
financial 
situation was really not so bad.  His brief to this court 
states, "Phillips' finances, while not sparkling, were not in 
such disarray that [R.M.'s] loan could even be considered a high 
risk 
venture. 
 Had Phillips been 
unable 
to 
borrow the 
$145,000.00 principle [sic] amount from a lending institution 
after the five (5) year term of the note, the sale of his two 
(2) parcels of real estate contained sufficient equity to repay 
[R.M.] in full."  This again appears to be inconsistent with the 
federal plea agreement, in which Attorney Phillips admitted that 
he could not even use the loan proceeds to pay his outstanding 
back taxes, but had to use the borrowed money to pay his 
personal living expenses. 
No. 
2004AP1914-D   
 
24 
 
attorney, Attorney Phillips claims that the referee should have 
concluded 
that 
Attorney 
Phillips 
gave 
R.M. 
a 
reasonable 
opportunity for independent counsel pursuant to SCR 20:1.8(a).  
He argues that even if the letters were not sent, they prove 
that Attorney Phillips did make the necessary oral statements to 
R.M. 
¶50 We agree with the OLR's response that this was an area 
of disputed fact resolved by the referee against Attorney 
Phillips.  The referee's findings are not clearly erroneous.  
R.M. testified that he knew nothing about the letters until he 
received them from the OLR during its investigation years later.  
In addition, Attorney Phillips never produced these letters 
during R.M.'s malpractice action against Attorney Phillips.  
Also, Attorney Phillips testified during the malpractice trial 
that he could not specifically remember telling R.M. to seek 
independent advice.  Finally, even if the referee had found the 
letters had been sent, the first letter would have been sent 46 
days after the original $20,000 loan had been made.   
B. Violation of SCR 20:1.3 Regarding Closing of Estate 
¶51 Next, 
Attorney Phillips argues that 
the referee 
erroneously charged him with the responsibility for filing an 
estate tax return.  He argues that this was to be the 
responsibility of the accountant.   
¶52 Attorney Phillips also argues that the evidence shows 
that the delay in closing the estate was due to R.M.'s failure 
to 
provide 
Attorney 
Phillips 
with 
complete 
and 
accurate 
information regarding R.M.'s father's assets, rather than due to 
No. 
2004AP1914-D   
 
25 
 
Attorney Phillips' delay in acting after he had received the 
information.  As support for his claim, Attorney Phillips points 
out that R.M. had been handling his father's financial affairs 
for more than 3 1/2 years prior to his father's death.  The 
initial inventory, prepared by Attorney Phillips based on 
information R.M. provided, showed assets of $595,080.21, just 
under the $600,000 limit at the time for imposing estate taxes.  
Attorney Phillips argues that R.M. initially hid assets from 
Attorney Phillips in the hope of avoiding estate taxes.  
Attorney Phillips claims that R.M. consciously delayed providing 
information to Attorney Phillips, trickling the information in 
little by little over the next 2 1/2 years.  Ultimately, when 
Attorney Phillips was in possession of all of the information, 
he prepared a final inventory that listed over $1.1 million in 
assets.  Attorney Phillips cites statutes and cases that 
describe a personal representative's duties as including the 
marshalling of assets and overseeing the actions of the 
professionals 
(lawyers 
and 
accountants) 
the 
representative 
hires.  Attorney Phillips argues that it is undisputed that R.M. 
never 
complained 
during 
the 
probate 
process 
because 
he 
recognized that he was the sole heir and the delay was due to 
his own foot-dragging.  Attorney Phillips points to 11 notices 
that R.M. received from the probate court concerning the probate 
process. 
¶53 Attorney Phillips also points out that R.M. failed to 
file any complaint with the OLR until three years after the 
estate was filed.  Although he does not claim that the OLR is 
No. 
2004AP1914-D   
 
26 
 
barred by a form of laches, he does argue that this delay 
prejudiced his defense and should be a mitigating factor for the 
referee, resulting in more deference being given to the lawyer's 
recollection of events. 
¶54 Even if R.M. may have been partially responsible for 
some of the delay, Attorney Phillips' claims do not undercut the 
referee's conclusion that Attorney Phillips did not act with 
reasonable diligence.  First, Attorney Phillips states that the 
referee found that R.M. gave Attorney Phillips all of the 
necessary financial information in the summer and fall of 1997, 
but that Attorney Phillips simply sat on the information without 
taking action for nearly three years.  This is not an accurate 
characterization of the referee's findings. 
¶55 The referee did not specifically find that it was 
Attorney Phillips' responsibility to file the estate tax returns 
personally.11  Rather, the referee found that, given the November 
1997 initial inventory showing assets approaching the $600,000 
limit and the knowledge that there was at least one other 
annuity not included on the inventory that was producing a 
monthly payment in the thousands of dollars, Attorney Phillips 
had enough information that he "should have advised the client 
and his accountant of the likely need to file a Federal Estate 
Tax Return."  Because it appears that Attorney Phillips did not 
say anything to R.M. or the accountant about the need to file an 
                                                 
11 R.M. admitted in his testimony at the disciplinary 
hearing that he retained the accountant to handle the filing of 
all of the tax returns related to his father and the estate.  
No. 
2004AP1914-D   
 
27 
 
estate tax return and because he did not take reasonable steps 
to move the estate toward closing, the referee concluded that 
Attorney Phillips violated SCR 20:1.3. 
¶56 The referee's factual findings and legal conclusion 
are supported by the hearing transcript.  As the referee pointed 
out at the hearing, Attorney Phillips knew, based on the initial 
inventory, that the estate was at least $595,000, only $5000 
under the triggering amount at the time for an estate tax 
return.  A memorandum by Attorney Phillips' paralegal also 
informed Attorney Phillips that there was at least one other 
annuity not listed on the inventory.  Even if it had been the 
accountant's responsibility to prepare and file the return, as 
R.M. admitted, Attorney Phillips should at least have warned 
R.M. and the accountant of the need to file a return and that 
they should be working on the return.  Instead, the filing of 
the return slipped through the cracks until August 2000 when the 
client learned of more than $155,000 in penalties and interest 
caused by the late filing of the return.  Moreover, in the 
malpractice case, a jury found Attorney Phillips 35 percent 
negligent in the failure to file the return.  Thus, the 
referee's finding that Attorney Phillips did not act with 
reasonable diligence is amply supported by the record. 
C. Violation of SCR 20:1.16(d) 
¶57 Attorney Phillips does not dispute the facts as found 
by the referee regarding the timing of his return of R.M.'s 
files. Indeed, in the conclusion to his appeal brief, he now 
admits that he violated SCR 20:1.16(d) by failing to return 
No. 
2004AP1914-D   
 
28 
 
R.M.'s files for the two months after R.M.'s second written 
request in October 2003. 
¶58 Attorney 
Phillips' 
argument 
on this 
point 
seems 
addressed solely to the severity of discipline.  Attorney 
Phillips argues that already during the malpractice lawsuit in 
2000, Attorney Phillips told R.M.'s counsel that they could pick 
up all of R.M.'s files.  R.M. waited three years until 2003 to 
request his files.  Attorney Phillips points to his letter of 
August 19, 2003, in which he promised to return all of R.M.'s 
files within the next few weeks and told R.M. to contact him if 
that was not acceptable.  Attorney Phillips emphasizes that 
these were all closed files and that R.M. did not respond for 
two months.  By the time R.M. responded, Attorney Phillips 
claimed that he needed the files to review in response to the 
OLR's investigation.  Attorney Phillips points out that when the 
OLR told him that his retention of the files violated SCR 
20:1.16(d), he returned the files to R.M. the very next day.  
Thus, Attorney Phillips argues that his violation was not 
substantial and that R.M. was not harmed by the delay in any 
way. 
¶59 The 
record again 
supports 
the referee's factual 
findings.  R.M. requested the files in August 2003.  Although 
Attorney Phillips promised to return the files within a few 
weeks, it does not appear that he took any action to do so until 
R.M. made another demand.  There does not appear to be any 
reason to upset the referee's findings or conclusion on this 
count. 
No. 
2004AP1914-D   
 
29 
 
D. Violation of SCR 20:8.4(f) Regarding Tax Returns 
¶60 Again, Attorney Phillips does not expressly challenge 
the referee's factual finding or his legal conclusion that 
Attorney Phillips violated SCR 20:8.4(f) when he failed to file 
timely tax returns.  He merely points out that he told the 
referee that he has paid all of the original back taxes, leaving 
only the penalties and interest outstanding.  He also notes that 
his and his wife's accounts and earnings have been garnished for 
the last four years. 
¶61 First, Attorney Phillips provides no record citation 
for his claim that he has repaid the original back taxes.  
Moreover, even if true, that fact does not change the referee's 
findings, which were admitted by Attorney Phillips. 
E. Level of Discipline 
¶62 Attorney 
Phillips 
argues 
that 
the 
referee's 
recommended level of discipline is excessive.  He emphasizes 
that he has practiced law in the Milwaukee area for over 24 
years and competently represented hundreds of clients during 
that time.  He also points out that even R.M. did not say 
anything derogatory about Attorney Phillips' handling of the 
many other matters he undertook for R.M.'s business and personal 
interests.   
¶63 Attorney Phillips correctly notes that a primary 
concern in disciplinary proceedings is protecting the public 
from attorneys that are unfit to practice law.  He argues that 
his lengthy career and lack of prior discipline indicate this 
No. 
2004AP1914-D   
 
30 
 
conduct will not recur.  Attorney Phillips requests that the 
court impose only a 60-day suspension. 
¶64 In support of his argument for a shorter suspension, 
Attorney Phillips points to a number of prior disciplinary cases 
in which less severe discipline was imposed than is currently 
recommended by the referee.  The primary case he relies on is In 
re Disciplinary Proceedings Against Gilbert, 2004 WI 144, 276 
Wis. 2d 395, 689 N.W.2d 50.12  In that case, Attorney Gilbert 
represented a husband and wife in some real estate matters.  He 
requested and obtained from the couple a loan in the amount of 
$10,500.  The loan was documented only by a promissory note.  
Attorney Gilbert did not obtain any written consent from the 
clients, did not offer any collateral, and did not give the 
clients an opportunity to seek the advice of independent 
counsel.  When Attorney Gilbert defaulted on the note, the 
clients obtained a money judgment, which Attorney Gilbert did 
not satisfy.  The referee also found that Attorney Gilbert 
failed to forward the clients' files to their new attorney and 
failed to respond to the OLR's grievance inquiries.  For this 
conduct, the court imposed a six-month suspension. 
¶65 Attorney Phillips asserts that he should receive even 
less discipline than Attorney Gilbert.  He claims again that he 
                                                 
12 Attorney Phillips cites several other cases, but those 
cases involve facts that are dissimilar from the present case.  
We have considered them, but do not believe it necessary to add 
to 
the 
length 
of 
this 
opinion 
by 
distinguishing 
them 
individually. 
No. 
2004AP1914-D   
 
31 
 
did advise R.M. to obtain independent counsel and did offer 
collateral.   
¶66 Attorney Phillips' arguments are contradicted by the 
referee's factual findings, which we have found to be supported 
by the record.  Moreover, in the present case, Attorney Phillips 
obtained not just one, but two loans from a client.  The first 
loan was completely undocumented.  Even the subsequent note was 
unfairly one-sided in Attorney Phillips' favor, not requiring 
any repayment of principal, although not informing the client of 
that fact.  In addition, the amount of money that Attorney 
Phillips borrowed from R.M. is $145,000, compared to the $10,500 
Attorney Gilbert borrowed from his clients.  Finally, unlike the 
facts in Gilbert, in the present case Attorney Phillips 
consistently ignored his obligation to file tax returns and pay 
income taxes.  As the OLR points out, we have imposed a 60-day 
suspension merely for the failure to file tax returns.  See 
Owens, 172 Wis. 2d 54.   
¶67 In summary, in view of the referee's findings of fact 
and conclusions of law, which we approve and adopt, we conclude 
that 
the 
seriousness 
of 
Attorney 
Phillips' 
professional 
misconduct in the present case requires that his license to 
practice law in Wisconsin be suspended for one year.  In 
addition, we agree that Attorney Phillips should be required to 
pay to R.M. the January 2001 judgment in the original amount of 
$148,511.37, plus interest to the date of payment.  We also 
conclude that Attorney Phillips should be required to satisfy 
the January 2003 punitive damage judgment in the original amount 
No. 
2004AP1914-D   
 
32 
 
of $28,571.35, plus interest to the date of payment.  Finally, 
we determine that Attorney Phillips must pay the costs of this 
disciplinary proceeding, which were $9911.79 as of December 12, 
2005. 
¶68 IT IS ORDERED that the license of Attorney Mark A. 
Phillips to practice law in Wisconsin is suspended for a period 
of one year, effective the date of this order.   
¶69 IT IS FURTHER ORDERED that within 30 days of the date 
of this order, Attorney Phillips shall pay restitution to R.M. 
by satisfying the January 2001 judgment in the original amount 
of $148,511.37 plus interest to the date of payment, and by 
satisfying the January 2003 judgment in the original amount of 
$28,571.35 plus interest to the date of payment.  If restitution 
to R.M. is not paid within the time specified and absent a 
showing to this court of his inability to pay the restitution 
amounts within that time, the license of Attorney Phillips to 
practice law in Wisconsin shall remain suspended until further 
order of this court. 
¶70 IT IS FURTHER ORDERED that within 60 days of the date 
of this order, Attorney Phillips shall pay to the Office of 
Lawyer Regulation the costs of this proceeding.  If the costs 
are not paid within the time specified and absent a showing to 
this court of his inability to pay those costs within that time, 
the license of Attorney Phillips to practice law in Wisconsin 
shall remain suspended until further order of this court. 
¶71 IT IS FURTHER ORDERED that if he has not already done 
so, Attorney Phillips shall comply with the provisions of SCR 
No. 
2004AP1914-D   
 
33 
 
22.26 concerning the duties of a person whose license to 
practice law in Wisconsin has been suspended. 
No. 
2004AP1914-D   
 
 
 
1