Court Opinion

ID: 4275488
Source: CourtListenerOpinion
Date Created: 2018-05-16 12:55:17.084318+00
Date Added: 2024-06-11T14:33:46.150759
License: Public Domain

2018 WI 49

                  SUPREME COURT          OF   WISCONSIN
CASE NO.:               2016AP1259-D
COMPLETE TITLE:         In the Matter of Disciplinary Proceedings
                        Against Michael R. Bauer, Attorney at Law:

                        Office of Lawyer Regulation,
                                  Complainant-Respondent,
                             v.
                        Michael R. Bauer,
                                  Respondent-Appellant.

                             DISCIPLINARY PROCEEDINGS AGAINST BAUER

OPINION FILED:          May 16, 2018
SUBMITTED ON BRIEFS:
ORAL ARGUMENT:

SOURCE OF APPEAL:
   COURT:
   COUNTY:
   JUDGE:

JUSTICES:
   CONCURRED:
   DISSENTED:
   NOT PARTICIPATING:

ATTORNEYS:

       For the respondent-appellant, there was a brief filed by
Michael J. Short and Short Law Office, Madison.

       For the complainant-respondent, there was a brief filed by
Paul W. Schwarzenbart and Office of Lawyer Regulation, Madison.
                                                                          2018 WI 49
                                                                  NOTICE
                                                    This opinion is subject to further
                                                    editing and modification.   The final
                                                    version will appear in the bound
                                                    volume of the official reports.
No.     2016AP1259-D

STATE OF WISCONSIN                             :             IN SUPREME COURT

In the Matter of Disciplinary Proceedings
Against Michael R. Bauer, Attorney at Law:

Office of Lawyer Regulation,                                             FILED
            Complainant-Respondent,
                                                                  MAY 16, 2018
       v.
                                                                     Sheila T. Reiff
                                                                  Clerk of Supreme Court
Michael R. Bauer,

            Respondent-Appellant.

       ATTORNEY    disciplinary       proceeding.          Attorney's          license

suspended.

       ¶1   PER CURIAM.       We review the report and recommendation

of    Referee   John   B.   Murphy   that    Attorney       Michael      R.    Bauer's

license to practice law in Wisconsin be suspended for a period

of one year for professional misconduct and that he pay the full

costs of this proceeding, which are $15,727.40 as of April 25,

2018.

       ¶2   Upon   careful    review    of    the     matter,       we    adopt     the
referee's findings of fact and conclusions of law.                            We agree
                                                                               No.    2016AP1259-D

that a one-year suspension of Attorney Bauer's license is an

appropriate sanction for his misconduct.                          We also agree that the

full costs of this proceeding should be assessed against him.

       ¶3         Attorney     Bauer       was     admitted        to        practice    law    in

Wisconsin in 1988.                He has not previously been disciplined.                        At

the time pertinent to this case he was a member of Bauer & Bach,

LLC    in    Madison.          He    now    practices       as     Bauer       Law     Office   in

Madison.

       ¶4         Bauer & Bach maintained both a trust account and a

business       account        at    Capitol      Bank.       Attorney          Bauer     was    the

attorney primarily responsible for the record keeping for both

the trust and business accounts.                       T.P., a paralegal assistant at

the firm, assisted the attorneys by preparing business and trust

account       checks        and      by    making       entries         in     the    QuickBooks

bookkeeping program used by the firm for the purpose of, among

other       things,        serving    as     the       transaction       register       for     the

accounts.          At no time during the pertinent time frame at issue

here    did       the      trust    account      ever      have    a     negative       balance.
Attorney      Bauer        also    maintained          accounts    for       Sports     Advisors,

Inc., a business he owned, at Capitol Bank and at US Bank.

       ¶5         On   June   24,     2016,      the    Office     of    Lawyer       Regulation

(OLR)       filed      a   complaint       against       Attorney       Bauer        alleging   28

counts       of     misconduct.            The   complaint         alleged       that    between

December 2013 and October 2014, Attorney Bauer misused seven

clients'      trust        funds     and    mismanaged       his    trust        account.       On

numerous occasions he transferred client funds from one account
to another without permission of the clients, failed to make
                                                   2
                                                           No.     2016AP1259-D

notations of the transfers, transferred trust account funds to

fill gaps created in other client accounts to avoid detection,

transferred trust funds to his office account and to the account

of his subsidiary business, Sports Advisors, Inc., and borrowed

money to reestablish correct account balances.            It is undisputed

that all of the clients received all monies due them.                   It is

also undisputed that none of the clients consented to the use of

their money to fund disbursements that benefitted others.

    ¶6     Attorney Bauer filed an answer on August 16, 2016,

admitting some allegations in the complaint and denying others.

The referee was appointed on October 8, 2016.             On May 15, 2017,

the parties entered into a stipulation whereby Attorney Bauer

did not contest 13 of the counts; the OLR agreed to dismiss four

counts;   the   parties    agreed   that   four   other   counts    could   be

amended to conform to the evidence; and Attorney Bauer contested

seven counts that alleged he had converted client funds.

    ¶7     A brief evidentiary hearing was held on May 22, 2017.

At the hearing, Attorney Bauer admitted mishandling the trust
account but described what happened as being sloppy and the

result of neglect.        He blamed some of the problems on the fact

that "starting probably late 2014 up through mid-2015"1 he spent

a lot of time in Washington, D.C.          He said:

    I neglected it. I mean, in the end, I mean, I thought
    that -- it was one of those deals that I thought it
    was all going to be over the next day. So I thought,
    1
       The mishandling of the         trust    account    occurred    between
December 2013 and October 2014.

                                     3
                                                                   No.   2016AP1259-D

      well, I'm going to get this over and get back and get
      things straight. The next day went into the next day,
      and I was still not around.

      So all of a sudden the focus came on making sure that
      -- I guess more making sure -- I didn't have access to
      QuickBooks when I was out there, but I did have access
      on-line to the bank account.   So then I was suddenly
      more focused on just making sure that there was always
      money in the appropriate accounts to cover any checks
      that were being cut.
      ¶8    Attorney Bauer said that things came to a head when

the firm's paralegal looked at the bank statements and saw the

problems with the trust account.                She then notified Attorney

Bach, who confronted Attorney Bauer.                   Attorney Bauer said he

apologized to Attorney Bach and admitted, "I should have asked

for some help whether from him or the accountant when I knew I

wasn't taking care of it properly."

      ¶9    The parties subsequently filed briefs discussing the

seven contested counts.       On August 8, 2017, the referee issued a

report accepting the stipulation and finding that the OLR had

met   its   burden   of   proof   with       respect   to   five    of   the   seven

contested counts.         The referee found that Attorney Bauer had

converted $376,818.63.       The referee found that the OLR had not

met its burden of proof on the other two contested counts.                       The

referee said:

      During the period between December 2, 2013 and October
      16, 2014, Bauer carried out the unauthorized use of
      client trust funds for his own purposes.    He did so
      knowingly and with clear disregard for the rules of
      trust account maintenance.      The funds improperly
      handled were used to fill gaps in other clients'
      account balances or to infuse money into the firm
      business account and the account of Sports Advisors,
      Inc.

                                         4
                                                                 No.     2016AP1259-D

     Bauer appears to see his offenses regarding the Trust
     Account as being related to sloppy business practices
     and nothing more.   The facts contained in the counts
     for which Bauer has now been found guilty suggest
     something well beyond sloppy work.       They strongly
     support the belief that Bauer saw his Trust Accounts
     as something akin to a slush fund.    He removed funds
     without permission and clearly seemed to constantly be
     in the process of "robbing Peter to pay Paul" and, in
     some cases, to pay Michael Bauer.     Such behavior is
     unacceptable at any level and especially onerous when
     carried out by a person licensed to practice law.
     ¶10     The referee found that the OLR met its burden of proof

on   17     trust    account        violations     and   five    violations       of

SCR 20:8.4(c).           Attorney    Bauer     stipulated,   and       the   referee

agreed,     that    he   violated    the   following     trust   account     rules:

SCR 20:1.15(b)(1);2          former          SCR    20:1.15(b)(3);3           former

SCR 20:1.15(f)(1)a.;4 and former SCR 20:1.15(e)(4)c.5                   Most rules
     2
          SCR 20:1.15(b)(1) provides:

          A lawyer shall hold in trust, separate from the
     lawyer's own property, that property of clients and
     3rd parties that is in the lawyer's possession in
     connection with a representation. All funds of clients
     and 3rd parties paid to a lawyer or law firm in
     connection with a representation shall be deposited in
     one or more identifiable trust accounts.
     3
       Effective July 1, 2016, substantial changes were made to
Supreme Court Rule 20:1.15, the "trust account rule."      See S.
Ct. Order 14-07, (issued Apr. 4, 2016, eff. July 1, 2016).
Because the conduct underlying this case arose prior to July 1,
2016, unless otherwise indicated, all references to the supreme
court rules will be to those in effect prior to July 1, 2016.

     Former SCR 20:1.15(b)(3) provided: "No funds belonging to
a lawyer or law firm, except funds reasonably sufficient to pay
monthly account service charges, may be deposited or retained in
a trust account."
     4
          Former SCR 20:1.15(f)(1)a. provided:
                                                                        (continued)
                                           5
                                                                  No.    2016AP1259-D

were violated multiple times.                  The five counts that Attorney

Bauer had contested and the referee ultimately found had been

proven by the OLR all involved violations of SCR 20:8.4(c).6

Attorney Bauer had argued that the five SCR 20:8.4(c) counts

were       subsumed   into   the   trust       account   counts    and    that   the

            Complete records of a trust account that is a
       draft account shall include a transaction register;
       individual client ledgers for IOLTA accounts and other
       pooled trust accounts; a ledger for account fees and
       charges, if law firm funds are held in the account
       pursuant to sub. (b)(3); deposit records; disbursement
       records;   monthly   statements;   and   reconciliation
       reports, subject to all of the following:

            a. The transaction register shall contain a
       chronological record of all account transactions, and
       shall include all of the following:

               1. the date, source, and amount of all deposits;

            2. the date, check or transaction number, payee
       and amount of all disbursements, whether by check,
       wire transfer, or other means;

            3. the date and amount of every other deposit or
       deduction of whatever nature;

            4. the identity of the client for whom funds were
       deposited or disbursed; and

            5. the       balance     in        the   account   after      each
       transaction.
       5
       Former SCR 20:l.15(e)(4)c. provided: "A lawyer shall not
make deposits to or disbursements from a trust account by way of
an Internet transaction."
       6
       SCR 20:8.4(c) provides: "It is professional misconduct for
a lawyer to engage in conduct involving dishonesty, fraud,
deceit or misrepresentation."

                                           6
                                                                              No.    2016AP1259-D

evidence        was   insufficient             to    support       the    allegations.        The

referee found otherwise.

       ¶11      On     October          13,         2017,     the        referee     issued     a

recommendation as to discipline.                           While the OLR sought a two-

year suspension and Attorney Bauer suggested a 60-day suspension

would      be    an     appropriate            sanction,          the    referee     ultimately

concluded that a one-year suspension was in order.

       ¶12      The referee said while, in the end, Attorney Bauer

made good on all of the accounts and no client lost any money,

this    did     nothing       to    excuse          Attorney       Bauer's    behavior    since

"Bauer had no right to use his client's funds without permission

and the fact that he avoided getting caught for his behavior by

'robbing Peter to pay Paul' in no way lessens the seriousness of

these offenses."

       ¶13      The     referee         noted        that     Attorney       Bauer     was     an

experienced attorney, having practiced law since 1988, so he

could not claim he was not familiar with the supreme court rules

regarding the management of trust accounts.                                 The referee said
Attorney Bauer himself asserted that he appropriately managed

his trust accounts before and after 2014 so he could not suggest

he   did      not     understand         how        to    handle    trust    account      issues

appropriately.           The referee commented that "[t]here was little

or no explanation from Bauer as to WHY the 'wheels came off' his

trust account management practices in 2014."

       ¶14      The    referee          said    once        confronted,      Attorney     Bauer

admitted        guilt    as        to    many        of     the    allegations;      he   fully
cooperated with the OLR investigation; and he expressed remorse
                                                     7
                                                                No.    2016AP1259-D

for his misbehavior.          However, the referee went on to say, "That

said, he did continue to suggest that his behavior was more in

the    nature      of    technical    bookkeeping      errors   as    opposed   to

intentional acts.          The facts . . . suggest otherwise."

       ¶15   The        referee    termed       Attorney   Bauer's     violations

"extensive and long-lasting."           The referee said Attorney Bauer:

       Had numerous opportunities to stop his inappropriate
       manipulation of the trust accounts and yet he failed
       to do so.    He not only shifted funds around between
       clients but he moved funds completely out of the trust
       account and "made whole" his business account and
       Sports Advisor, Inc., accounts while borrowing money
       to fill the trust account gaps which he had created.
       Finally, he failed to seek help from those around him
       who could have, if asked, given him the guidance and
       expertise needed to put an end to what had become a
       downward spiral of misbehavior.
       ¶16   The referee said the 60-day suspension suggested by

Attorney Bauer was clearly inadequate, but on the other hand the

two-year suspension sought by the OLR was excessive under the

theory of progressive discipline given that Attorney Bauer had

no    previous     disciplinary      history.       Accordingly,      the   referee
recommended a one-year license suspension and also recommended

that Attorney Bauer be ordered to pay the full costs of the

proceeding.

       ¶17   Attorney Bauer appealed the referee's recommendation

for a one-year suspension but after all briefs were filed he

voluntarily dismissed his appeal.

       ¶18   A referee's findings of fact are affirmed unless they

are clearly erroneous.            Conclusions of law are reviewed de novo.
See In re Disciplinary Proceedings Against Eisenberg, 2004 WI
8
                                                                                No.    2016AP1259-D

14, ¶5, 269 Wis. 2d 43, 675 N.W.2d 747.                          This court may impose

whatever    sanction        it   sees       fit,     regardless            of    the       referee's

recommendation.            See   In    re     Disciplinary            Proceedings            Against

Widule, 2003 WI 43, ¶44, 261 Wis. 2d 45, 660 N.W.2d 686.

    ¶19     There is no showing that any of the referee's findings

of fact are clearly erroneous.                     Accordingly, we adopt them.                      We

also agree with the referee's conclusions of law that Attorney

Bauer violated the supreme court rules set forth above.

    ¶20     With respect to the appropriate level of discipline,

upon careful review of this matter, we agree with the referee's

recommendation       for    a    one-year      suspension             of    Attorney         Bauer's

license     to     practice      law     in        Wisconsin.              Although         no    two

disciplinary proceedings are identical, we find support for the

referee's        recommended      sanction          in     our    decision             in    In     re

Disciplinary       Proceedings         Against       Goldstein,            2010 WI 26,    323
Wis. 2d 706, 782 N.W.2d 388.

    ¶21     Attorney Goldstein converted nearly $70,000 from three

estates    where     he    had    served       as     a    special         administrator           or
personal        representative.               Like        Attorney          Bauer,          Attorney

Goldstein's clients sustained no actual loss.                                    Like Attorney

Bauer, Attorney Goldstein had no prior discipline over what had

been an otherwise distinguished 33-year legal career.

    ¶22     Attorney        Goldstein        was     found       to    have       committed        21

counts     of     misconduct,         including           six    counts           of       violating

SCR 20:8.4(c).         Attorney        Goldstein's          situation            involved         some

aggravating circumstances that are not present here.                                        Attorney
Goldstein paid both personal and business expense and financed
                                               9
                                                                                   No.     2016AP1259-D

his personal real estate investments out of the converted funds.

Attorney Goldstein's actions actually deprived his clients of

money     until         he     repaid        the        funds.            Attorney        Goldstein's

conversions took place over a long period of time.                                            Attorney

Goldstein lied in his statements to the OLR, and he refused to

acknowledge the wrongful nature of his misconduct.                                       Due to these

aggravating         factors,          which    are           not     present       here,      Attorney

Goldstein received a two-year license suspension.

       ¶23    Although the amounts of the conversions at issue in

this    case       far       exceed      those          in     Goldstein,          Attorney      Bauer

cooperated         with       the     OLR,     and        he        entered      into     a    partial

stipulation.              Unlike       the     situation             in    Goldstein,         none     of

Attorney     Bauer's           clients      lost        any    money.           Thus,     a   two-year

suspension         is        not     warranted.                However,          Attorney      Bauer's

misconduct         is    nonetheless          very        serious         and     does     warrant      a

significant sanction.

       ¶24    The referee found that Attorney Bauer committed five

violations of SCR 20:8.4(c).                            As the referee noted, Attorney
Bauer   made       numerous          improper       transfers             of    multiple      clients'

funds   between          his       firm's    trust       account,          the    firm's      business

account,       and       accounts        belonging             to     Attorney       Bauer's         side

business, Sports Advisors, Inc.                              These labyrinthine transfers

support the referee's comments that Attorney Bauer saw his trust

account      "as     something         akin        to    a     slush       fund"    and       that    the

transfers "seemed to constantly be in the process of 'robbing

Peter to pay Paul' and, in some cases, to pay Michael Bauer."
The transfers continued for nearly one year. Attorney Bauer was
                                                   10
                                                                No.    2016AP1259-D

an experienced attorney who should have known that the transfers

were improper.          We agree with the referee that Attorney Bauer's

repeated acts of dishonesty, fraud, deceit and misrepresentation

in converting $376,000 in client funds, along with his failure

to   comply    with     multiple   supreme     court    rules   regarding      trust

account management, warrant a one-year suspension.                     As is our

usual custom, we also find it appropriate to assess the full

costs of the proceeding against Attorney Bauer.

      ¶25     IT IS ORDERED that the license of Michael R. Bauer to

practice law in Wisconsin is suspended for a period of one year,

effective June 27, 2018.

      ¶26     IT IS FURTHER ORDERED that within 60 days of the date

of this order, Michael R. Bauer shall pay to the Office of

Lawyer   Regulation        the    costs   of   this     proceeding,    which     are

$15,727.40 as of April 25, 2018.

      ¶27     IT   IS   FURTHER    ORDERED     that   Michael   R.    Bauer    shall

comply with the provisions of SCR 22.26 concerning the duties of

an attorney whose license to practice law has been suspended.
      ¶28     IT   IS    FURTHER    ORDERED      that    compliance     with    all

conditions of this order is required for reinstatement.                          See

SCR 22.29(4)(c).

                                          11
    No.   2016AP1259-D

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