Title: Office of Lawyer Regulation v. James E. Gatzke
Citation: N/A
Docket Number: 2013AP001918-D
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: May 17, 2016

2016 WI 37 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2013AP1918-D 
COMPLETE TITLE: 
In the Matter of Disciplinary Proceedings 
Against James E. Gatzke, Attorney at Law: 
 
Office of Lawyer Regulation, 
          Complainant-Respondent, 
     v. 
James E. Gatzke, 
          Respondent-Appellant. 
 
 
 
 
DISCIPLINARY PROCEEDINGS AGAINST GATZKE 
 
 
OPINION FILED: 
May 17, 2016 
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
February 4, 2016 
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
      
 
COUNTY: 
      
 
JUDGE: 
      
 
 
 
JUSTICES: 
 
 
CONCURRED: 
      
 
CONCURRED/DISSENTED: 
DISSENTED: 
GABLEMAN, J. concurs and dissents, joined by 
BRADLEY, R.G., J. 
 
NOT PARTICIPATING: 
         
 
 
 
ATTORNEYS: 
 
 
For the respondent-appellant there were briefs filed by 
Terry 
E. 
Johnson 
and 
Peterson, 
Johnson 
& 
Murray, 
S.C., 
Milwaukee, and oral argument by Terry E. Johnson. 
 
For the Office of Lawyer Regulation, there were briefs 
filed by Paul W. Schwarzenbart.  Oral argument by Paul W. 
Schwarzenbart. 
 
 
 
 
 
 
2016 WI 37
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.   2013AP1918-D 
 
 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
In the Matter of Disciplinary Proceedings 
Against James E. Gatzke, Attorney at Law: 
 
 
 
Office of Lawyer Regulation, 
 
          Complainant-Respondent, 
 
     v. 
 
James E. Gatzke, 
 
          Respondent-Appellant. 
 
 
 
FILED 
 
MAY 17, 2016 
 
Diane M. Fremgen 
Clerk of Supreme Court 
 
 
 
 
ATTORNEY disciplinary proceeding.    Attorney's license 
suspended.   
 
¶1 
PER CURIAM.   Attorney James E. Gatzke appeals a 
report filed by Referee Christine Harris Taylor, concluding that 
Attorney Gatzke committed 45 counts of professional misconduct 
and recommending that this court revoke his license to practice 
law in Wisconsin.  The referee further recommended that Attorney 
Gatzke make restitution totaling $551,128.32, and that he be 
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2013AP1918-D   
 
2 
 
required to pay the full costs of this proceeding, which are 
$56,879.77, as of February 24, 2016.  Attorney Gatzke asserts 
that many of the referee's findings of fact are clearly 
erroneous.  He also argues that, even assuming that this court 
finds that he committed some or all of the counts of misconduct 
found by the referee, a license suspension of less than five 
months would be an appropriate level of discipline.  
¶2 
Upon careful review of this matter, we uphold all of 
the referee's findings of fact and conclusions of law and 
conclude that a three-year suspension of Attorney Gatzke's 
license to practice law is an appropriate sanction for his 
misconduct.  We agree with the referee that Attorney Gatzke 
should be required to make restitution and that he be required 
to pay the full costs of this proceeding.  
¶3 
Attorney Gatzke was admitted to practice law in 
Wisconsin in 1994 and practices in New Berlin.  For a time he 
served as the mayor of New Berlin.  He has also been licensed as 
a real estate broker since 1981.  He has no prior disciplinary 
history.  
¶4 
On August 22, 2013, the Office of Lawyer Regulation 
(OLR) filed a complaint against Attorney Gatzke.  The referee 
was appointed on November 5, 2013.  The OLR filed an amended 
complaint on March 11, 2014, and on May 19, 2014, it filed a 
second amended complaint.  
¶5 
The bulk of the allegations in the second amended 
complaint arise out of Attorney Gatzke's representation of P.S. 
P.S.'s husband, S.W., was an investment advisor who owned a 
No. 
2013AP1918-D   
 
3 
 
number of businesses.  In late 2004, S.W.'s business partner 
filed a lawsuit alleging that S.W. had stolen $3.5 million from 
him. 
 
In 
June 
2005, 
with 
the 
litigation 
and 
criminal 
investigations pending, S.W. committed suicide.   
¶6 
P.S.'s niece, N.S., worked for Attorney Gatzke between 
2003 and 2007.  Soon after S.W.'s death, P.S. executed an 
agreement retaining Attorney Gatzke's law firm to represent her. 
P.S. executed a specific durable power of attorney (POA) naming 
Attorney Gatzke as her attorney in fact.  In the course of 
representing P.S., Attorney Gatzke learned there were four life 
insurance policies issued by the Northwestern Mutual Life 
Insurance Company (NML) insuring S.W., with combined proceeds of 
$8.5 million, payable on his death.  
¶7 
In September 2005, following a partial settlement of 
the litigation involving S.W.'s business partner, NML wired 
$8,542,230.50 in life insurance proceeds and interest.  Over 
$2.5 million was wired to P.S. via Attorney Gatzke's trust 
account.  The remaining funds went to two of S.W.'s former 
business partners.  
¶8 
The OLR's second amended complaint alleged that 
Attorney Gatzke invested P.S.'s funds in businesses in which he 
was an investor, primarily real estate developments, without 
obtaining P.S.'s written consent to the investments after giving 
her a reasonable opportunity to seek the advice of independent 
counsel.  The second amended complaint also alleged that 
Attorney Gatzke converted P.S.'s funds, and it alleged that 
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4 
 
Attorney Gatzke failed to provide P.S. with written accountings 
or invoices relating to legal work he performed for her.   
¶9 
In addition, the second amended complaint alleged that 
at the time of his death, S.W. had a $500,000 life insurance 
policy with the Jackson National Life Insurance Company (Jackson 
National).  Between 2001 and 2004, the beneficiary of that 
policy changed from N.K., another business partner of S.W., to 
A.S., the minor daughter of S.W. and P.S.  In December 2004, 
S.W. had requested Jackson National to change the beneficiary 
back to N.K., but Jackson National never processed the request 
because certain forms were not properly completed.  
¶10 In July 2005, an attorney representing N.K. wrote to 
Jackson National claiming entitlement to the full amount of the 
policy proceeds.  Attorney Gatzke wrote to N.K.'s attorney 
asserting that he represented both P.S. and A.S.  The second 
amended complaint alleged that both P.S. and A.S. had an 
interest in the prospective settlement of the matter but that 
Attorney Gatzke did not discuss their individual and potentially 
differing interests in such a settlement with them, nor did he 
obtain P.S.'s and A.S.'s written consent to continue the 
representation following a consultation regarding the conflict.  
¶11 In April 2006, Jackson National filed an action in 
Waukesha County circuit court seeking a court order as to 
payment of the $500,000.  The litigation was resolved by a 
stipulation in April 2007.  The stipulation, which was signed by 
Attorney Gatzke as attorney for P.S. and A.S., divided the 
proceeds between N.K., A.S., and P.S.  Attorney Gatzke did not 
No. 
2013AP1918-D   
 
5 
 
seek court approval for the settlement, despite the fact that 
A.S. was a minor.  The Waukesha County clerk of courts disbursed 
a check in the amount of $325,446.25 to Attorney Gatzke's trust 
account.  Attorney Gatzke issued a $50,000 trust account check 
payable to his firm for attorney's fees.  The remaining funds 
were 
deposited 
to 
a 
preexisting 
brokerage 
account 
at 
Northwestern Mutual Investment Services entitled "Attorney James 
E. Gatzke, Conservator for P.S."  The second amended complaint 
alleged that Attorney Gatzke did not provide either P.S. or A.S. 
with written notice of his receipt of the funds.  
¶12 The 
second 
amended 
complaint 
also 
alleged 
that 
Attorney Gatzke engaged in multiple counts of professional 
misconduct with respect to his recordkeeping and handling of his 
trust account.  The second amended complaint alleged that 
Attorney Gatzke failed to hold client funds in trust and 
converted those funds to his own purposes.  The second amended 
complaint also alleged that Attorney Gatzke allowed his trust 
account to become overdrawn and as a result of those overdrafts, 
client funds were converted. 
¶13 Specifically, the second amended complaint alleged 
that Attorney Gatzke violated the following supreme court rules: 
 
¶14 Former SCR 20:1.7(b) (effective through July 1, 2007) 
(count twenty): 
A 
lawyer 
shall 
not 
represent 
a 
client 
if 
the 
representation of that client may be materially 
limited by the lawyer's responsibilities to another 
client or to a third person, or by the lawyer's own 
interests, unless: (1) the lawyer reasonably believes 
the representation will not be adversely affected; and 
(2) the client consents in writing after consultation. 
No. 
2013AP1918-D   
 
6 
 
When representation of multiple clients in a single 
matter is undertaken, the consultation shall include 
explanation 
of 
the 
implications 
of 
the 
common 
representation and the advantages and risks involved.  
 
¶15 Former SCR 20:1.8(a) (effective through July 1, 2007) 
(counts four, five, nine, fourteen and twenty-four): 
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; 
(2) 
the 
client 
is 
given 
a 
reasonable 
opportunity to seek the advice of independent counsel 
in the transaction; and (2) the client consents in 
writing thereto.  
 
¶16 SCR 20:1.15(b)(3) (effective July 1, 2004) (counts 
thirty-one, thirty-five, and thirty-eight): 
No funds belonging to the lawyer or law firm, except 
funds reasonably sufficient to pay monthly account 
service charges, may be deposited or retained in a 
trust account.  
¶17 SCR 20:1.15(b)(4) (effective July 1, 2004) (count 
one): 
Unearned fees and advanced payments of fees shall be 
held in trust until learned by the lawyer, and 
withdrawn pursuant to SCR 20:1.16(g). Funds advanced 
by a client or 3rd party for payment of costs shall be 
held in trust until the costs are incurred.     
 
¶18 SCRs 20:1.1.15(f)(1)a.4 and b. (effective July 1, 
2004)  (count forty-five): 
(1) Demand accounts. Complete records of a trust 
account that is a demand account shall include a 
transaction register; individual client ledgers; 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: 
No. 
2013AP1918-D   
 
7 
 
a. Transaction register. The transaction register 
shall contain a chronological record of all account 
transactions and shall include all of the following: 
. . . . 
4. the identity of the client for whom funds were 
deposited or disbursed; 
b. A subsidiary ledger shall be maintained for 
each client or matter for which the lawyer receives 
trust funds, and the lawyer shall record each receipt 
and disbursement of that client's funds and the balance 
following each transaction. A lawyer shall not disburse 
funds form the trust account that would create a 
negative balance with respect to any individual client 
or matter.  
¶19 SCR 20:1.15(f)(1)b (effective July 1, 2004) (counts 
thirty-nine, forty and forty-one): 
A subsidiary ledger shall be maintained for each 
client or matter for which the lawyer receives trust 
funds, and the lawyer shall record each receipt and 
disbursement of that client's funds and the balance 
following 
each 
transaction. 
A 
lawyer 
shall 
not 
disburse funds from the trust account that would 
create 
a 
negative 
balance 
with 
respect 
to 
any 
individual client or matter. 
 
¶20 SCR 20:1.15(f)(1)(e)(4)b (effective July 1, 2004) 
(count forty-five): 
No deposits or disbursements shall be made to or from 
a trust account by a telephone transfer of funds. This 
section does not prohibit wire transfers.  
 
¶21 SCR 20:1.15(g)(1) (effective July 1, 2004) (counts two 
and twenty-two): 
At least 5 business days before the date on which a 
disbursement is made from a trust account for the 
purpose 
of 
paying 
fees, 
with 
the 
exception 
of 
contingent fees, the lawyer shall deliver to the 
client in writing all of the following: a. an itemized 
bill 
or 
other 
accounting 
showing 
the 
services 
rendered; b. notice of the amount owed and the 
anticipated date of the withdrawal; and c. a statement 
of the balance of the client's funds in the lawyer 
trust account after the withdrawal.  
No. 
2013AP1918-D   
 
8 
 
 
¶22 SCR 20:1.15(j)(1) (effective July 1, 2004) (counts 
seven, twelve and fifteen): 
A lawyer shall hold in trust, separate from the 
lawyer's own funds or property, those funds or that 
property of clients or 3rd parties that are in the 
lawyer's 
possession 
when 
acting 
in 
a 
fiduciary 
capacity that directly arises in the course of or as a 
result of a lawyer-client relationship. When a lawyer 
is in possession of fiduciary property of a probate 
estate, the lawyer shall maintain the property in a 
separate account subject to the requirements of SCR 
10:1.15(j).  
 
¶23 SCR 20:8.4(c) (counts one, four, six, eight, nine, 
ten, eleven, thirteen, sixteen, seventeen, twenty-three, twenty-
four, 
twenty-five, 
twenty-nine, 
thirty-two, 
thirty-three, 
thirty-four, 
thirty-five, 
thirty-six, 
thirty-seven, 
forty, 
forty-one, forty-three, and forty-four): 
It is professional misconduct for a lawyer to engage 
in conduct involving dishonesty, fraud, deceit or 
misrepresentation.  
 
¶24 SCR 20:8.4(f) (count twenty-one): 
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. 
 
¶25 SCR 22.03(6) as enforced by 20:8.4(h) (counts twenty-
six, twenty-seven and twenty-eight):  
SCR 22.03(6): In the course of the investigation, the 
respondent's 
wilful 
failure 
to 
provide 
relevant 
information, to answer questions fully, or to furnish 
documents and the respondent's misrepresentation in a 
disclosure are misconduct, regardless of the merits of 
the matters asserted in the grievance. 
SCR 20:8.4(h): It is professional misconduct for a 
lawyer 
to . . . . fail 
to 
cooperate 
in 
the 
investigation of a grievance filed with the office of 
lawyer regulation as required by SCR 21.15(4), SCR 
22.001(9)(b), SCR 22.03(2), SCR 22.03(6), or SCR 
22.04(1) . . .  
No. 
2013AP1918-D   
 
9 
 
¶26 SCR 20:1.15(b)(1) (effective July 1, 2004) (counts 
sixteen, seventeen, nineteen, twenty-nine, thirty-two, thirty-
three, 
thirty-four, 
thirty-five, 
thirty-six, 
thirty-seven, 
thirty-nine, forty, forty-one, forty-three, and forty-four):  
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.  
 
¶27 SCR 20:1.15(d)(1) (effective July 1, 2004) (counts 
eighteen, thirty, and forty-two): 
Upon receiving funds or other property in which a 
client has an interest, or in which the lawyer has 
received notice that a 3rd party has an interest 
identified by a client, court order, judgment, or 
contract, the lawyer shall promptly notify the client 
or 3rd party in writing. Except as stated in this rule 
or otherwise permitted by law or by agreement with the 
client, the lawyer shall promptly deliver to the 
client or 3rd party any funds or other property that 
the client or 3rd party is entitled to receive.   
¶28 In March 2015, the parties filed a partial stipulation 
of facts.  A four-day evidentiary hearing was held before the 
referee in April 2015.  Attorney Gatzke testified that he 
recommended that P.S. invest the proceeds from her late 
husband's life insurance policies in investments at NML, such as 
mutual funds, but that P.S. told him she was skeptical of 
investments in the stock market because she had seen what 
happened to similar investments that her husband handled.  
Attorney Gatzke testified P.S. told him she felt confident 
having tangible investments such as real estate and that she did 
not like paper investments such as mutual funds.  He said P.S. 
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2013AP1918-D   
 
10 
 
knew of his prior successful experience with real estate 
investments and wanted to be part of it.  Attorney Gatzke said 
P.S. told him she did not want to be publicly listed as the 
owner of the investments because she was concerned that her late 
husband's creditors would find out what she owned and try to 
take it.  
¶29 Attorney Gatzke testified there were net profits from 
the real estate properties in 2007 and 2008 and those went back 
into the projects.  He said as he would sell condominium units 
and deposit the money back into his trust account, funds would 
be made available for P.S. and he would write her checks.  
¶30 With respect to the Jackson National insurance policy, 
Attorney Gatzke said he did not obtain a written consent from 
P.S. and A.S. to represent both of them and he took no steps to 
have a guardian ad litem appointed for A.S.  He noted that the 
circuit court approved the settlement in the Jackson National 
case and the court never suggested there was a need for a 
guardian ad litem.  
¶31 Attorney Gatzke said he provided P.S. with transaction 
logs that described her investments and that he would typically 
meet with her once a week between 2006 and 2010.  He said P.S. 
moved to Arizona and after the move he would talk to her on the 
phone about her investments.  Attorney Gatzke acknowledged that 
in late 2009 his trust account ran a deficit because he had 
overpaid expenses on behalf of P.S.  He said in order to bring 
the trust account back into balance, he had someone loan P.S. 
$140,000 and put that money back into the trust account.  
No. 
2013AP1918-D   
 
11 
 
¶32 P.S. testified she never asked that the $2.5 million 
initially on deposit at NML be removed from NML.  She denied 
telling Attorney Gatzke she was concerned about investing in the 
stock market because of how her late husband had dealt with his 
investment clients.   
¶33 Mary Hoeft Smith, the OLR's trust account program 
administrator, testified at length about her review of Attorney 
Gatzke's records, and she explained how she calculated the 
amounts of restitution due to P.S. and A.S.  
¶34 P.S's niece testified that after P.S.'s husband died, 
P.S. seemed to need a lot of help with her financial affairs and 
paying bills.  P.S.'s niece testified that Attorney Gatzke would 
write P.S. a trust account check every month for her living 
expenses.  P.S.'s niece said she recalled sitting in on meetings 
where P.S.'s legal business was discussed and in the course of 
those meetings there was discussion about the real estate 
investments P.S. was involved in with Attorney Gatzke. 
¶35 Attorney Gatzke's office manager testified that she 
would make deposits into the firm's trust account and would 
prepare checks as directed by Attorney Gatzke.  She said on two 
occasions she warned Attorney Gatzke that funds in P.S.'s 
account were getting low and there would not be sufficient funds 
to 
make 
more 
disbursements 
to 
P.S. 
 
Attorney  
Gatzke's response was that he did not think the office manager's 
numbers were accurate.  The office manager said P.S. would 
usually come to the office to pick up a $15,000 check for her 
monthly expenses written from the firm's trust account.   
No. 
2013AP1918-D   
 
12 
 
¶36 The referee issued her report and recommendation on 
August 27, 2015.  The referee found that the OLR had met its 
burden of proof with respect to all 45 counts of misconduct 
alleged in the second amended complaint.  The referee concluded 
that revocation of Attorney Gatzke's license to practice law was 
warranted because the misconduct was serious and there was a 
clear need to impress upon him the seriousness of his misconduct 
and to protect the public.  The referee found that Attorney 
Gatzke converted a significant amount of funds belonging to 
multiple clients over a period of years.  The referee said 
Attorney Gatzke claimed ignorance of trust account rules, but 
ignorance of an attorney's duties as a trustee of client funds 
is not a defense.  The referee found that Attorney Gatzke failed 
to document his business transactions with P.S. and failed to 
obtain her written, informed consent to his personal conflict of 
interest in investing with a client in complex and speculative 
transactions.   
¶37 The 
referee 
also 
found 
that 
Attorney 
Gatzke 
disregarded the conflict of interest in representing both P.S. 
and A.S. in the Jackson National lawsuit. The referee said 
Attorney Gatzke's misconduct evinces a disregard for the rules 
of conduct and a disregard for client welfare.  The referee 
noted that Attorney Gatzke acknowledged that he failed to comply 
with the technical procedural rules regarding his firm's trust 
account.  The referee said Attorney Gatzke's behavior far 
exceeded mere sloppiness.  The referee said Attorney Gatzke's 
trust account records were in a serious state of disarray and 
No. 
2013AP1918-D   
 
13 
 
the 
factual 
findings 
detailed 
numerous 
discrepancies 
and 
negative balances.  The referee found that Attorney Gatzke used 
client funds to pay personal and firm obligations.  The referee 
said, 
"he 
took 
advantage 
of 
unsophisticated 
clients, 
particularly [P.S.], and used her money as his personal 
checkbook and to support his interests in commercial real 
estate.  These are not slight miscalculations or technical 
errors, but egregious violations of supreme court rules.  This 
behavior is misleading and harmful."  The referee concluded that 
Attorney Gatzke's intentional and reckless disregard of supreme 
court rules necessitated revocation of his license to practice 
law.  
¶38 The referee also adopted the OLR's computation of the 
amount of restitution due to P.S. and A.S., and found that 
Attorney Gatzke should be responsible for the full costs of the 
proceeding.  The referee said in the event Attorney Gatzke is 
reinstated to the practice of law, the OLR should monitor all 
trust account activity under Attorney Gatzke's control for a 
period of three years.  
¶39 Attorney Gatzke has appealed.  He admits that he made 
mistakes in recordkeeping and the handling of his trust account, 
but he characterizes these failings as largely technical in 
nature.  He strenuously argues that the OLR failed to meet its 
burden of proof that he converted any of P.S.'s funds or any 
other client's funds.  He says to the extent that P.S. lost any 
money associated with her investment relationship with him, that 
was a result of the risk inherent in her real estate investments 
No. 
2013AP1918-D   
 
14 
 
with Attorney Gatzke, a risk which caused losses to both of them 
because of the downturn in the economy.  He argues that P.S. is 
not a reliable witness and, by contrast, he was a very reliable 
witness.  He complains that the OLR failed to call several 
witnesses 
at 
the 
evidentiary 
hearing, 
including 
P.S.'s 
daughters, who were present for some meetings P.S. had with 
Attorney Gatzke and who presumably could have shed light on the 
inconsistencies between P.S.'s deposition and hearing testimony 
and P.S.'s failure to recall the facts and circumstances of 
Attorney Gatzke's representation and her involvement with 
Attorney Gatzke in investments.  Attorney Gatzke argues the 
referee should have concluded that if P.S.'s daughters had 
testified, their testimony would have been adverse to the OLR.   
¶40 Attorney Gatzke also argues that he and independent 
witnesses confirmed he gave P.S. several banker's boxes of 
documents near the end of his representation of her but P.S. 
produced only one banker's box of materials as part of these 
proceedings.  Attorney Gatzke says that records contained in the 
materials he produced to P.S. were no longer available to be 
used in his defense because she failed to produce them.  He 
argues the referee should have concluded that those materials 
existed and would not have supported P.S.'s accusations against 
him.   
¶41 Attorney Gatzke argues that because the OLR failed to 
meet its burden of proving that he converted any of P.S.'s 
funds, he should not be responsible for restitution to P.S.  
Attorney Gatzke argues that he credibly testified that he was 
No. 
2013AP1918-D   
 
15 
 
authorized to make payments to invest in real estate holdings on 
behalf 
of 
P.S., 
that 
he 
explained 
everything 
about 
the 
investments to P.S., and P.S. was fully aware that the payments 
were being made on her behalf for investments she approved and 
wanted to have made.  He argues the referee's conclusion that he 
should 
pay 
restitution 
to 
P.S. 
relies 
solely 
on 
P.S.'s 
credibility, and he asserts P.S.'s position that she was unaware 
of the investments simply cannot be believed.  Attorney Gatzke 
argues once the investments are properly understood, it is 
apparent there is no basis for a restitution award to P.S. and 
in fact, P.S. was overpaid some $76,000.   
¶42 Attorney Gatzke also argues that he should not be 
responsible to A.S. for any restitution stemming from the 
Jackson National proceeds.  He says the proceeds obtained from 
Jackson National were ultimately disbursed to P.S. and she 
subsequently used that money for her own personal expenses and 
benefit.  Attorney Gatzke argues in the event those proceeds 
belonged to A.S., P.S. was unjustly enriched by receiving and 
using them for her own benefit.  Attorney Gatzke also argues 
that there is a dispute as to whether P.S. or A.S. would be 
entitled to the proceeds and there is a question of who should 
be responsible to pay A.S. in the event she is entitled to some 
of the proceeds.  Attorney Gatzke says even if he bears some 
responsibility to pay A.S., P.S. certainly bears responsibility 
as well.  He suggests that the complete picture of who bears 
such responsibility should be addressed in a separate civil 
proceeding in which all parties interested can be joined and the 
No. 
2013AP1918-D   
 
16 
 
extent of their liability and entitlement to any proceeds can be 
adjudicated.   
¶43 Attorney Gatzke strenuously argues that the referee's 
recommendation for license revocation is wholly unwarranted.  He 
points out that none of the counts asserted by the OLR allege 
that Attorney Gatzke's legal representation was deficient in any 
matter.  He asserts the fact that he has not been previously 
disciplined, that his entire career has been an effort to 
benefit 
his 
community, 
and 
that 
he 
has 
been 
extremely 
cooperative with the OLR throughout the disciplinary process are 
significant mitigating factors that the referee should have 
weighed in determining what discipline is appropriate.  He 
suggests that a suspension of less than five months is the 
maximum discipline warranted.  He agrees that it would be 
appropriate for the court to require him to have his trust 
account reviewed by an accountant on a quarterly basis for a 
period of one year.  
¶44 The OLR argues that Attorney Gatzke has failed to show 
that any of the referee's findings of fact are clearly 
erroneous.  The OLR also notes that where testimony is 
conflicting, the referee is the ultimate arbiter of credibility.  
See In re Disciplinary Proceedings Against Lister, 2010 WI 108, 
¶32, 329 Wis. 2d 289, 787 N.W.2d 820.  The OLR asserts that 
Attorney Gatzke's attack on P.S.'s credibility does not show 
that any of the referee's findings of fact are clearly 
erroneous, and it says an assessment of Attorney Gatzke's 
No. 
2013AP1918-D   
 
17 
 
credibility also does not show that any of the findings are 
clearly erroneous.   
¶45 While Attorney Gatzke argues that the referee should 
have drawn a negative inference from the fact that important 
witnesses, such as P.S.'s daughters, were not called at the 
evidentiary hearing, the OLR says Attorney Gatzke waived this 
issue by failing to raise it at trial.  The OLR also asserts 
Attorney Gatzke failed to show that OLR controlled those 
witnesses, and it says if Attorney Gatzke seriously believed 
P.S.'s daughters had information material to his defense, he had 
every opportunity to conduct discovery and depose them.  The OLR 
points out that in fact Attorney Gatzke did depose one of P.S.'s 
daughters.  It says because the daughter is a resident of 
Arizona, Attorney Gatzke could have used that deposition at 
trial, but chose not to do so.  
¶46 The OLR also says that Attorney Gatzke's claims about 
the alleged missing boxes of documents is nothing more than 
another diversionary "straw man" argument.  The OLR says 
Attorney Gatzke makes no showing, beyond mere speculation, that 
P.S. received and destroyed any records and more importantly, 
Attorney Gatzke fails to show that the materials he speculates 
were in the "missing boxes" have any bearing on the conversion 
claims alleged in the second amended complaint.  The OLR goes on 
to argue that there was ample evidence before the referee to 
support the referee's findings of conversion.  The OLR notes 
that this court has described conversion as: 
No. 
2013AP1918-D   
 
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The unauthorized use of a client's funds for the 
lawyer's own purpose.  It includes temporary use, and 
it extends to use that does not result in personal 
gain or benefit to the lawyer.  Paying one client out 
of money due another, keeping an unearned advanced 
fee, holding onto unused escrow funds, and applying 
client funds to the client's bill are all examples of 
conversion.  
In re Disciplinary Proceedings Against Mulligan, 2015 WI 96, 
¶36, 365 Wis. 2d 43, 870 N.W.2d 233.   
 
¶47 The OLR asserts there is overwhelming evidence in this 
case that Attorney Gatzke converted client funds systematically 
over a period of years and the misconduct cannot be explained 
away by ignorance or sloppy recordkeeping.  The OLR says the 
referee appropriately noted that the ABA standards for imposing 
lawyer 
sanctions 
provide 
that 
"disbarment 
is 
generally 
appropriate when a lawyer knowingly converts client property and 
causes injury or potential injury to a client," and where "a 
lawyer engages in any other intentional conduct involving 
dishonesty, fraud, deceit, or misrepresentation that seriously 
adversely reflects on the lawyer's fitness to practice."  ABA 
Standards, §§ III.C.4.11 and III.C.5.11(b).  The OLR says in 
concluding that the multiple instances of conversion of client 
funds required revocation, the referee pointed to aggravating 
factors, including a pattern of misconduct, multiple offenses, 
refusal to acknowledge wrongdoing, the vulnerability of the 
victims, together with Attorney Gatzke's substantial experience 
in the practice of law and his indifference to making 
restitution.  Thus, the OLR argues that revocation is an 
appropriate sanction.  
No. 
2013AP1918-D   
 
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¶48 The OLR also asserts that this court should adopt the 
referee's recommendation as to restitution.  It notes that in In 
re Disciplinary Proceedings Against Nussberger, 2009 WI 103, 
¶20, 321 Wis. 2d 576, 775 N.W.2d 525, this court acknowledged 
the OLR's policy to seek restitution where the grievant's or 
respondent's rights in a collateral proceeding will not likely 
be prejudiced; the funds to be restored do not constitute 
incidental or consequential damages; the funds to be restored 
were in the respondent lawyer's direct control; and there is a 
reasonably ascertainable amount.  The OLR argues that these 
factors are satisfied both as to P.S. and as to A.S.  
 
¶49 A referee's findings of fact are affirmed unless 
clearly erroneous.  Conclusions of law are reviewed de novo.  
See In re Disciplinary Proceedings Against Eisenberg, 2004 WI 
14, ¶5, 269 Wis. 2d 43, 675 N.W.2d 747.  The court may impose 
whatever sanction it sees fit, regardless of the referee's 
recommendation.  See In re Disciplinary Proceedings Against 
Widule, 2003 WI 34, ¶44, 261 Wis. 2d 45, 660 N.W.2d 686. 
 
¶50 After careful review of this matter, we conclude that 
there has been 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 
Gatzke violated all of the supreme court rules set forth above.  
 
¶51 Turning to the appropriate level of discipline, 
although Attorney Gatzke's misconduct is serious, we do not find 
that it rises to the level of requiring revocation of his 
No. 
2013AP1918-D   
 
20 
 
license to practice law in Wisconsin.  Instead, we conclude that 
a lengthy suspension is an appropriate sanction.  
¶52 Attorney 
Gatzke's 
recordkeeping 
and 
his 
cavalier 
handling of his trust account, which included overdrafts and 
comingling non trust account funds to bring it back into 
balance, are serious deficiencies.  The recordkeeping and trust 
account violations were not mere technical problems, as Attorney 
Gatzke has tried to portray them.   
¶53 Much more troubling than the recordkeeping and trust 
account deficiencies are Attorney Gatzke's failure to obtain 
written 
conflict 
waivers 
before 
entering 
into 
business 
transactions with P.S. and his conversion of P.S.'s funds.  We 
acknowledge that Attorney Gatzke's lack of previous disciplinary 
history warrants some consideration.  However, the number of 
counts of misconduct at issue in this case requires a serious 
sanction. We find this case somewhat analogous to In re 
Disciplinary Proceedings Against Cooper, 2007 WI 37, 300 
Wis. 2d 61, 729 N.W.2d 206.  In Cooper, an attorney who was 
found to have committed multiple violations of SCR 20:8.4(c) as 
well as multiple trust account violations received a three-year 
suspension.  We find a three-year suspension to be an 
appropriate sanction in this case as well.   
¶54 Upon careful consideration, we agree with the referee 
that Attorney Gatzke should be required to make restitution, in 
the amounts sought by the OLR, to both P.S. and A.S.  We note 
again that we will affirm the referee's findings of fact unless 
they are clearly erroneous on the basis of the record before us.  
No. 
2013AP1918-D   
 
21 
 
The referee's findings of fact as to restitution have not been 
shown to be clearly erroneous.  We recognize that Attorney 
Gatzke disputes the referee's restitution award, particularly 
the amount owed to A.S.  We emphasize that our holding as to 
restitution is not intended to preclude a future civil suit to 
determine if someone other than Attorney Gatzke should be 
responsible for the restitution awarded to A.S.  However, the 
only parties before us in this proceeding are the OLR and 
Attorney Gatzke, and given the applicable standard of review, we 
cannot resolve the potential claims between any other parties.  
We also agree that Attorney Gatzke should be required to pay the 
full costs of this disciplinary proceeding, as is the court's 
general practice.  
¶55 Finally, we agree that in the event his license to 
practice law is reinstated, Attorney Gatzke should be required 
to submit to trust account monitoring by the OLR for a period of 
three years.  
¶56 IT IS ORDERED that the license of James E. Gatzke to 
practice law in Wisconsin is suspended for a period of three 
years, effective June 20, 2016. 
¶57 It IS FURTHER ORDERED that James E. Gatzke comply with 
the provisions of SCR 22.26 concerning the duties of a person 
whose license to practice law in Wisconsin has been suspended.  
¶58 IT IS FURTHER ORDERED that within 60 days of the date 
of this order, James E. Gatzke shall make restitution to P.S. in 
the amount of $275,682.07 and to A.S. in the amount of 
$275,446.25. 
No. 
2013AP1918-D   
 
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¶59 IT IS FURTHER ORDERED that within 60 days of the date 
of this order, James E. Gatzke pay to the Office of Lawyer 
Regulation the costs of this proceeding, which are $56,879.77.  
If the costs are not paid within the time specified, and absent 
a showing to this court of his inability to pay the costs within 
that time, the license of James E. Gatzke to practice law in 
Wisconsin shall remain suspended until further order of the 
court.  
¶60 IT IS FURTHER ORDERED that the restitution specified 
above is to be completed prior to paying costs to the Office of 
Lawyer Regulation.  
¶61 IT IS FURTHER ORDERED that in the event James E. 
Gatzke's license to practice law is reinstated, he should be 
required to submit to trust account monitoring by the Office of 
Lawyer Regulation for a period of three years.  
¶62 IT IS FURTHER ORDERED that compliance with all 
conditions of this order is required for reinstatement.  See SCR 
22.29(4)(c). 
 
 
 
No.  2013AP1918-D.mjg  
 
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¶63 MICHAEL 
J. 
GABLEMAN, 
J.   (concurring 
in 
part, 
dissenting in part).  I concur in the portion of the opinion 
suspending Attorney Gatzke's license to practice law for three 
years, 
imposing 
full 
costs, 
and 
requiring 
him, 
upon 
reinstatement, to submit to trust account monitoring.  I dissent 
from the portion of the opinion ordering Attorney Gatzke to make 
restitution to P.S. and A.S.  I believe the issue of restitution 
should be addressed in a separate civil proceeding. 
¶64 I am authorized to state that Justice REBECCA G. 
BRADLEY joins this concurrence/dissent.   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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