2014 WI 100
SUPREME COURT OF WISCONSIN
CASE NO.: 2011AP584-D
COMPLETE TITLE: In the Matter of Disciplinary Proceedings
Against Michael D. Mandelman, Attorney at Law:
Office of Lawyer Regulation,
Complainant-Respondent,
v.
Michael D. Mandelman,
Respondent-Appellant.
DISCIPLINARY PROCEEDINGS AGAINST MANDELMAN
OPINION FILED: August 1, 2014
SUBMITTED ON BRIEFS:
ORAL ARGUMENT:
SOURCE OF APPEAL:
COURT:
COUNTY:
JUDGE:
JUSTICES:
CONCURRED:
DISSENTED:
NOT PARTICIPATING:
ATTORNEYS:
For the respondent-appellant, there were briefs by Spiros
S. Nicolet and Nicolet Law Offices, Milwaukee.
For the complainant-respondent, there was a brief by Julie
M. Spoke and the Office of Lawyer Regulation.
2014 WI 100
NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2011AP584-D
STATE OF WISCONSIN : IN SUPREME COURT
In the Matter of Disciplinary Proceedings
Against Michael D. Mandelman, Attorney at Law:
Office of Lawyer Regulation, FILED
Complainant-Respondent,
AUG 1, 2014
v.
Diane M. Fremgen
Clerk of Supreme Court
Michael D. Mandelman,
Respondent-Appellant.
ATTORNEY disciplinary proceeding. Attorney's license
revoked.
¶1 PER CURIAM. Although Attorney Michael D. Mandelman
entered into a stipulation with the Office of Lawyer Regulation
(OLR), pursuant to which he pled no contest to the 221 counts of
misconduct pending against him and agreed that his license to
practice law in Wisconsin should be revoked, he has filed an
1
The parties' stipulation and the referee's report refer in
multiple places to 23 remaining counts. The lists of dismissed
and remaining counts in the stipulation clearly state, however,
that 23 counts were dismissed and 22 counts remained pending.
No. 2011AP584-D
appeal from the report and recommendation of the referee,
Attorney Christine Harris Taylor, which was based on that
stipulation. Essentially, he seeks through his appeal to
comment on certain characterizations and findings by the referee
and to provide additional support for the referee's
recommendation to make his revocation effective as of the date
of his prior suspension, May 29, 2009.
¶2 When we review a referee's report and recommendation
in an attorney disciplinary case, we affirm the referee's
findings of fact unless they are found to be clearly erroneous,
but we review the referee's conclusions of law on a de novo
basis. In re Disciplinary Proceedings Against Inglimo,
2007 WI 126, ¶5, 305 Wis. 2d 71, 740 N.W.2d 125. We determine
the appropriate level of discipline to impose given the
particular facts of each case, independent of the referee's
recommendation, but benefiting from it. In re Disciplinary
Proceedings Against Widule, 2003 WI 34, ¶44, 261 Wis. 2d 45,
660 N.W.2d 686.
¶3 After reviewing this matter and considering Attorney
Mandelman's appeal, we accept the referee's factual findings and
legal conclusions based on the parties' stipulation. We further
agree that the 22 counts of misconduct support the revocation of
Attorney Mandelman's license to practice law in this state,
which we make effective as of the effective date of his prior
suspension. Because the record is not sufficient to award
restitution to any particular person, we direct Attorney
Mandelman to work with the OLR and his former colleague,
2
No. 2011AP584-D
Attorney Jeffrey A. Reitz, to determine who is owed money from
the trust accounts utilized by Attorney Mandelman and in what
amounts. Finally, because Attorney Mandelman litigated this
matter vigorously prior to entering into the stipulation, we
order Attorney Mandelman to pay the full costs of this
proceeding, which were $16,943.16 as of April 2, 2014.
¶4 The OLR initiated this disciplinary proceeding with
the filing of a 45-count complaint. Attorney Mandelman filed an
answer, which effectively denied many of the complaint's factual
allegations and expressly denied the counts of professional
misconduct. During the pre-hearing phase of this proceeding,
the OLR dismissed 23 counts due to evidentiary problems, leaving
22 counts to be resolved.
¶5 After Attorney Mandelman had filed a summary judgment
motion on the 22 remaining counts and the OLR had filed its
response, Attorney Mandelman entered into a stipulation,
pursuant to which he withdrew his answer to the complaint and
pled no contest to the remaining 22 counts of misconduct. He
agreed in the stipulation that the referee could use the
relevant allegations of the complaint as the factual basis for
finding misconduct on those remaining 22 counts. He further
agreed with the OLR's sanction request for the revocation of his
license to practice law in this state, retroactive to May 29,
2009, the effective date for his most recent one-year
suspension. In re Disciplinary Proceedings Against Mandelman,
2009 WI 40, ¶28, 317 Wis. 2d 215, 765 N.W.2d 788 (Mandelman IV).
3
No. 2011AP584-D
¶6 The stipulation contained the necessary
representations by Attorney Mandelman and the OLR.
Specifically, the parties agreed that Attorney Mandelman's plea
of no contest and his stipulation to the OLR's requested level
of discipline was not the result of plea bargaining. Attorney
Mandelman represented that he understood the allegations of
misconduct against him and his right to contest those
allegations; that he understood the ramifications of his entry
into the stipulation; that the understood his right to consult
counsel and that he had, in fact, retained counsel in this
matter; and that his entry into the stipulation had been knowing
and voluntary.
¶7 The referee's report accepted the parties' stipulation
and Attorney Mandelman's no contest plea and determined that the
stipulated facts supported legal conclusions that Attorney
Mandelman had engaged in the remaining 22 counts of professional
misconduct. The referee's factual findings and conclusions of
law are described in the following paragraphs.
¶8 Attorney Mandelman was admitted to the practice of law
in this state in January 1980. He has been the subject of
professional discipline on six previous occasions:
In re Disciplinary Proceedings Against Mandelman,
158 Wis. 2d 1, 460 N.W.2d 749 (1990) (Mandelman
I) (one-year suspension imposed for 27 counts of
misconduct, including multiple counts of failure
to act with diligence, failing to return files to
clients promptly, simultaneously representing
multiple clients with adverse interests, settling
a client's claim without authorization, failing
to communicate with clients, and making a
4
No. 2011AP584-D
misrepresentation to the Board of Attorneys
Professional Responsibility (BAPR));
In re Disciplinary Proceedings Against Mandelman,
182 Wis. 2d 583, 514 N.W.2d 11 (1994) (Mandelman
II) (18-month suspension imposed for misconduct
that included failing to act with diligence,
failing to respond to clients' requests for
information, failing to refund a client's
retainer, violating the rules regarding client
trust accounts following his 1990 suspension, and
failing to provide complete and accurate
responses to BAPR);2
Private Reprimand 99-18 (consensual private
reprimand imposed in 1999 for making a false
statement of fact to a tribunal);
Private Reprimand 06-21 (consensual private
reprimand imposed in 2006 for drawing a check
from his business account to pay the mortgage
payment of a personal injury client);
In re Disciplinary Proceedings Against Mandelman,
2006 WI 45, 290 Wis. 2d 158, 714 N.W.2d 512
(Mandelman III) (nine-month suspension imposed
for multiple instances of misconduct, including
failure to act with reasonable diligence, failure
to utilize a written fee agreement in a medical
malpractice case, and persuading his client to
sign a prospective release of claims against him
without the client obtaining independent
representation); and
In re Disciplinary Proceedings Against Mandelman,
2009 WI 40, 317 Wis. 2d 215, 765 N.W.2d 788
(Mandelman IV) (one-year suspension imposed for
misconduct that included collecting a fee without
performing any work for the client, failing to
2
For reasons that are not disclosed, the referee omitted
the 1990 and 1994 suspensions from her report. They were listed
in the OLR's complaint, however, and therefore were subject to
Attorney Mandelman's stipulation. Moreover, in any event, this
court can take judicial notice of its prior decisions and
orders.
5
No. 2011AP584-D
provide the client with a written settlement
statement, retaining a client's funds for more
than four years, making misrepresentations to a
client, failing to obtain a client's signature on
a settlement check and to deposit the settlement
funds into the client trust account, and failing
to provide a client's file and funds to the
client).
¶9 Some general background information is necessary for a
number of the counts of misconduct in the present disciplinary
proceeding. Prior to 1999 Attorney Mandelman was the sole owner
of his own law firm. He maintained client trust accounts at
what were then known as M&I Bank and TCF Bank.
¶10 In 1999 Attorney Jeffrey Reitz joined Attorney
Mandelman's firm. From 1999 to November 2001, Attorneys
Mandelman and Reitz were co-owners of the law firm, which was
known as Reitz and Mandelman LLC. During this time, the firm
used the M&I Bank trust account exclusively. Trust account
funds remained in the open but dormant TCF Bank trust account.
¶11 Between November 2001 and May 2005, the name of the
law firm became Reitz, Mandelman & Lawent LLC. Attorney Reitz,
however, became the sole shareholder for a large part of this
time, with Attorney Mandelman becoming an employee of the firm.
In June 2004, when disciplinary actions were pending against
both Attorney Reitz and Attorney Mandelman, they formed a new
service corporation, which they named Heartland Legal Group
S.C., although they continued to practice under the name Reitz,
Mandelman & Lawent LLC.
¶12 In December 2002, the law firm opened a new trust
account with Tri City Bank. As had occurred with the TCF
6
No. 2011AP584-D
account, Attorneys Mandelman and Reitz did not close the M&I
trust account. That account simply sat dormant for
approximately the next six years, with only a few disbursements
being made from it over that span. As of December 31, 2006,
that account still held $6,307.02, with outstanding un-cashed
disbursement checks against the account of $5,542.58 and another
$994.44 in funds for which no disbursement checks had been
written.
¶13 When Attorney Reitz's license was suspended in May
2005,3 Attorney Mandelman re-acquired full ownership of the law
firm and formed another new service corporation by the name of
Mandelman & Associates, S.C. Despite the creation of this new
service corporation and the lack of any limited liability
company, Attorney Mandelman continued to refer to the law firm
as a couple of different limited liability companies,4 including
on his letterhead. In addition, Attorney Mandelman also ceased
using the Tri City Bank trust account and opened yet another new
client trust account at Pyramax Bank. As with the prior trust
accounts, the Tri City Bank trust account essentially lay
dormant for the next three years, with the exception of a few
disbursements.
3
In re Disciplinary Proceedings Against Reitz, 2013 WI 27,
346 Wis. 2d 375, 828 N.W.2d 225.
4
He referred to the firm at different times as Mandelman &
Lawent LLC or Mandelman, Georges & Lawent LLC. No such limited
liability companies were created.
7
No. 2011AP584-D
¶14 Effective July 1, 2006, Attorney Mandelman's license
was suspended. Attorney Reitz did not simply re-acquire
ownership of the existing firm at that time. Instead he formed
a new law firm, Reitz, Parker & Lawent, S.C. (RPL), and opened a
new client trust account for that firm (the RPL trust account).
The RPL firm then apparently acquired Attorney Mandelman's
existing firm. Attorney Mandelman's trust account at Pyramax
Bank apparently sat dormant for the next two years until the
majority of undistributed funds remaining in that account were
transferred to the RPL trust account.
¶15 The first count to which Attorney Mandelman pled no
contest, count two of the complaint, alleged that he had
violated Supreme Court Rule (SCR) 20:7.5(a)5 (and SCR 20:7.1(a)6)
by making false or misleading communications regarding the name
and organizational status of his law firm. The referee
concluded that the stipulated facts supported a conclusion of
misconduct on this count.
5
SCR 20:7.5(a) provides:
A lawyer shall not use a firm name, letterhead or
other professional designation that violates
SCR 20:7.1. A trade name may be used by a lawyer in
private practice if it does not imply a connection
with a government agency or with a public or
charitable legal services organization and is not
otherwise in violation of SCR 20:7.1.
6
SCR 20:7.1(a) provides that a lawyer shall not make a
false or misleading communication about the lawyer or the
lawyer's services, such that the communication "contains a
material misrepresentation of fact or law, or omits a fact
necessary to make the statement considered as a whole not
materially misleading."
8
No. 2011AP584-D
¶16 Count three of the complaint related to J.N., a client
of Attorneys Mandelman and Reitz in 2003 and 2004. When
Attorney Reitz's license was suspended in May 2005 and Attorney
Mandelman resumed ownership of the law firm, $700 in settlement
funds belonging to J.N. remained in the Tri City Bank trust
account. Neither Attorney Mandelman nor Attorney Reitz ever
paid the $700 sitting in the Tri City Bank trust account to J.N.
The referee concluded that Attorney Mandelman's failure to
disburse the $700 to J.N. constituted a violation of
SCR 20:1.15(d)(1).7
¶17 Counts four through seven relate to Attorney
Mandelman's representation of and appointment as guardian ad
litem for S.M. in connection with the approval and
implementation of a minor settlement. When the circuit court
approved the settlement, it directed Attorney Mandelman to
purchase an annuity for S.M. and then to place the remaining
settlement funds into his trust account. The court further
instructed Attorney Mandelman to negotiate reduced payments to
7
SCR 20:1.15(d)(1) provides:
Notice and disbursement. 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 lien, 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.
9
No. 2011AP584-D
the subrogated medical providers who had provided care to S.M.
Specifically, the court's order stated that if the remaining
settlement funds were insufficient to pay the subrogated medical
providers, Attorney Mandelman was required to reduce his fee so
that the providers could be paid first. Any balance remaining
after the payment of the subrogated medical providers' claims
and Attorney Mandelman's fee was to be paid to S.M.
¶18 On January 18, 2006, the sum of $30,870 in settlement
funds for S.M. was deposited into Attorney Mandelman's Pyramax
Bank trust account. Despite the circuit court's order, Attorney
Mandelman immediately disbursed $18,125 to himself in full
payment of his one-third contingent fee.
¶19 After Attorney Mandelman's license was suspended on
July 1, 2006, a balance of $5,770.29 remained in S.M.'s
subsidiary account. That amount was subsequently transferred to
the RPL trust account, where it remained more than two years
later. No further payments to subrogated medical providers were
paid, nor was any portion of the remaining funds paid to S.M.
¶20 The referee concluded that these facts supported four
counts of misconduct, including a lack of diligence
(SCR 20:1.3),8 a failure to pay trust account funds to their
proper recipient over the approximately six months between the
deposit of those funds in his trust account and the suspension
of Attorney Mandelman's license (SCR 20:1.15(d)(1)),
8
SCR 20:1.3 provides that "[a] lawyer shall act with
reasonable diligence and promptness in representing a client."
10
No. 2011AP584-D
disobedience of the trial court's order to pay the subrogated
parties before collecting his fee (SCR 20:3.4(c)),9 and engaging
in conduct involving dishonesty, fraud, deceit, or
misrepresentation by immediately taking his full contingent fee
before paying the subrogated parties (SCR 20:8.4(c))10.
¶21 Counts eight and nine of the complaint relate to
Attorney Mandelman's representation of A.B. in a divorce action
from 1997 through 2000. In the fall of 2000, $75,449.99
belonging to A.B. was deposited into Attorney Mandelman's trust
account. A.B. did not authorize Attorney Mandelman to use the
trust account funds to pay the law firm's $25,465 outstanding
invoice nor did he pay that invoice using other funds. For the
next four years, Attorney Mandelman did not disburse any of the
trust account funds to A.B. or anyone else; the funds simply sat
in the trust account not earning interest. Although $6,000 of
the trust account funds were disbursed to the law firm in May
2005 pursuant to a settlement, the rest of the funds still
remained in the trust account.
¶22 The referee determined that by failing to resolve the
proper division of the $75,449.99 for more than four years,
Attorney Mandelman had failed to act with reasonable diligence
9
SCR 20:3.4(c) provides that a lawyer shall not "knowingly
disobey an obligation under the rules of a tribunal, except for
an open refusal based on an assertion that no valid obligation
exists."
10
SCR 20:8.4(c) provides that it is professional misconduct
for a lawyer to "engage in conduct involving dishonesty, fraud,
deceit or misrepresentation."
11
No. 2011AP584-D
and promptness, in violation of SCR 20:1.3. She also concluded
that the multi-year delay in disbursing the funds had
constituted a violation of former SCR 20:1.15(b)11 and current
SCR 20:1.15(d)(1).
¶23 Counts 16 and 17 relate to negative balances in
subsidiary trust accounts for three clients and a company owned
by Attorney Mandelman. For example, on one occasion Attorney
Mandelman disbursed $2,500 to his law firm in payment of its
fees from a client's subsidiary trust account, although that
client only had $1,500 on deposit in the trust account, creating
a shortfall for that client of $1,000. On another occasion, he
had a check written to his law firm for $4,000 from trust
account funds allegedly belonging to a company he owned. The
company, however, had no funds in the trust account at that
time, creating a negative balance in that company's subsidiary
account of $4,000.
¶24 The referee determined that the negative balances in
the four subsidiary accounts resulting from disbursements of
11
Former SCR 20:1.15(b), effective prior to July 1, 2004,
provides:
Upon receiving funds or other property in which a
client or third person has an interest, a lawyer shall
promptly notify the client or third person in writing.
Except as stated in this rule or otherwise permitted
by law or by agreement with the client, a lawyer shall
promptly deliver to the client or third person any
funds or other property that the client or third
person is entitled to receive and, upon request by the
client or third person, shall render a full accounting
regarding such property.
12
No. 2011AP584-D
more funds from those subsidiary accounts than were present in
those accounts had resulted in the improper use of other
clients' funds, in violation of former SCR 20:1.15(a),12 current
12
Former SCR 20:1.15(a), effective prior to July 1, 2004
provides:
A lawyer shall hold in trust, separate from the
lawyer's own property, that property of clients and
third persons that is in the lawyer's possession in
connection with a representation or when acting in a
fiduciary capacity. Funds held in connection with a
representation or in a fiduciary capacity include
funds held as trustee, agent, guardian, personal
representative of an estate, or otherwise. All funds
of clients and third persons paid to a lawyer or law
firm shall be deposited in one or more identifiable
trust accounts as provided in paragraph (c). The
trust account shall be maintained in a bank, savings
bank, trust company, credit union, savings and loan
association or other investment institution authorized
to do business and located in Wisconsin. The trust
account shall be clearly designated as "Client's
Account" or "Trust Account" or words of similar
import. No funds belonging to the lawyer or law firm,
except funds reasonably sufficient to pay or avoid
imposition of account service charges, may be
deposited in such account. Unless the client
otherwise directs in writing, securities in bearer
form shall be kept by the attorney in a safe deposit
box in a bank, savings bank, trust company, credit
union, savings and loan association or other
investment institution authorized to do business and
located in Wisconsin. The safe deposit box shall be
clearly designated as "Client's Account" or "Trust
Account" or words of similar import. Other property
of a client or third person shall be identified as
such and appropriately safeguarded. If a lawyer also
licensed in another state is entrusted with funds or
property in connection with an out-of-state
representation, this provision shall not supersede the
trust account rules of the other state.
13
No. 2011AP584-D
SCR 20:1.15(e)(5)(a),13 and current SCR 20:1.15(f)(1)(b).14 The
referee also determined that Attorney Mandelman's payment to his
law firm of money from his firm's trust account that the law
firm was not entitled to receive had constituted a violation of
SCR 20:8.4(c).
¶25 Counts 18 and 21 also relate to Attorney Mandelman's
trust account records. In connection with Attorney Mandelman's
petition for reinstatement from the nine-month suspension
imposed in 2006, the OLR asked Attorney Mandelman to produce
bank statements and other trust account records. Attorney
Mandelman and his accountant, Constance Hackbarth, produced only
some of the requested records. The electronic ledgers provided
by Hackbarth were incomplete and showed that there had still
been funds in the Pyramax Bank trust account just before it had
been closed. In addition, Attorney Mandelman did not file with
the OLR any overdraft reporting agreement for the Pyramax Bank
13
SCR 20:1:15(e)(5)(a) provides that "[a] lawyer shall not
disburse funds from any trust account unless the deposit from
which those funds will be disbursed has cleared, and the funds
are available for disbursement."
14
SCR 20:1.15(f)(1)(b) provides:
A subsidiary ledger shall be maintained for each
client or 3rd party for whom the lawyer receives trust
funds that are deposited in an IOLTA account or any
other pooled trust account. The lawyer shall record
each receipt and disbursement of a client's or 3rd
party's funds and the balance following each
transaction. A lawyer shall not disburse funds from
an IOLTA account or any pooled trust account that
would create a negative balance with respect to any
individual client or matter.
14
No. 2011AP584-D
trust account. He also did not report the existence of any
trust accounts on his Fiscal Year 2006 State Bar Dues Statement
that he filed in August 2005.
¶26 The referee found two ethical violations based on
these facts. First, he determined that Attorney Mandelman had
failed to create and retain complete and accurate trust account
records, in violation of SCR 20:1.15(e)(6).15 He also concluded
that Attorney Mandelman's failure to list his active trust
accounts on his dues statement and to certify that he was in
compliance with his record-keeping and overdraft reporting
requirements had constituted a violation of SCR 20:1.15(i)(1)
and (2).16
15
SCR 20:1.15(e)(6) provides that "[a] lawyer shall
maintain complete records of trust account funds and other trust
property and shall preserve those records for at least 6 years
after the date of termination of the representation."
16
SCR 20:1.15(i)(1) and (2) provides:
(1) Annual requirement. A member of the state
bar of Wisconsin shall file with the state bar of
Wisconsin annually, with payment of the member's state
bar dues or upon any other date approved by the
supreme court, a certificate stating whether the
member is engaged in the practice of law in Wisconsin.
If the member is practicing law, the member shall
state the account number of any trust account, and the
name of each financial institution in which the member
maintains a trust account, a safe deposit box, or
both, as required by this section. The state bar
shall supply to each member, with the annual dues
statement, or at any other time directed by the
supreme court, a form on which the certification must
be made.
(2) Trust account record compliance. Each state
bar member shall explicitly certify on the state bar
15
No. 2011AP584-D
¶27 Counts 26 and 28-30 relate to the commingling of
Attorney Mandelman's personal and business funds with client
funds in his client trust accounts and the failure to report
certain income on the tax returns of Attorney Mandelman or his
businesses. In the years that they practiced together,
Attorneys Mandelman and Reitz personally carried significant
amounts of debt, as did the law firm that they owned. The law
firm's business accounts were also frequently overdrawn. Those
firm business accounts, as well as personal accounts belonging
to Attorneys Mandelman and Reitz, were subject to liens and
garnishments at various points in this time period.
¶28 In May 2003 Attorney Mandelman incorporated Heartland
Holding Group, Inc. (Heartland) for the purpose of investing in
real estate. Attorney Mandelman's co-owner of Heartland was an
individual by the name of Steve Weston. Attorney Mandelman
reported in a May 2007 deposition in his reinstatement
proceeding that many of his assets were actually titled in
Weston's name. Attorney Reitz was listed as the registered
agent for Heartland.
¶29 In October 2004, Attorney Mandelman endorsed and
deposited a check in the amount of $189,451 payable to Heartland
into the law firm's Tri City Bank trust account. Over the next
three months, $188,451 of this amount was disbursed from the
trust account via 32 separate trust account checks. Although
certificate described in par. (1) that the member has
complied with each of the record-keeping requirements
set forth in subs. (f) and (j)(5).
16
No. 2011AP584-D
Attorney Mandelman was not an owner of the law firm at this time
and Attorney Reitz had no ownership interest in Heartland, 25 of
these trust account checks were made payable to Attorney Reitz
personally and another six checks were made payable to the law
firm. One such check was paid to Paul J. Stein "for Payroll
Account." The last portion of these funds was disbursed to
Attorney Mandelman personally via a June 2, 2005 check.
¶30 The OLR later asked Attorney Mandelman about how the
Heartland real estate transaction and the subsequent
disbursements had been reported for income tax purposes.
Attorney Mandelman initially responded by claiming that the
Heartland real estate transaction had been a "possible 1031
exchange" so there would have been no taxable gain, but the way
that the proceeds were deposited into and disbursed from the law
firm's trust account was not compatible with that provision of
the federal tax code. Attorney Mandelman never provided the OLR
with income tax information for Heartland regarding this
transaction, and his personal 2004 federal income tax return did
not report any capital gain or loss from the transaction.
¶31 The referee concluded that the failure to report the
Heartland real estate transaction and any accompanying gains or
losses on any corporate or personal income tax return had
constituted a violation of SCR 20:8.4(c) and the standard of
conduct set forth in case law such as In re Disciplinary
Proceedings Against Owens, 172 Wis. 2d 54, 56-57, 492 N.W.2d 157
(1992), which is enforced via SCR 20:8.4(f).
17
No. 2011AP584-D
¶32 Attorney Mandelman also deposited other funds
belonging to another business he owned, Liberty Holding Company
Ltd. (Liberty Holding), into the law firm trust account and then
transferred those funds to the law firm via trust account
checks. In addition, the firm's trust account records showed
that there was a "Mandelman" subsidiary account in the client
trust account. Between May 2005 and November 2006, Attorney
Mandelman deposited over $110,000 into the firm's Pyramax Bank
trust account that was recorded in the "Mandelman" subsidiary
account. Most of that money, approximately $83,000, was
subsequently disbursed from the trust account via what were
labeled on the firm's trust account ledgers as "cashiers." No
payees for these "cashiers" were identified. Further, when the
OLR asked for a list of cashier's checks that had been purchased
with these funds, Attorney Mandelman did not produce them.
Finally, a number of automated payments were disbursed from the
Mandelman subsidiary account for bank fees and credit card fees,
which resulted in a negative balance in the subsidiary account
at times. Attorney Mandelman never explained how he had
subsequently covered those negative balances or to what
businesses those fees had related.
¶33 The referee determined that these facts supported
three counts of misconduct. First, he found that Attorney
Mandelman had twice violated SCR 20:1.15(b)(3)17—one violation
17
SCR 20:1.15(b)(3) provides that "[n]o 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."
18
No. 2011AP584-D
for depositing and disbursing the funds belonging to his Liberty
Holding business and one violation for deposits and
disbursements related to the "Mandelman" subsidiary account. In
addition, the referee found that the deposit of over $110,000
from unknown sources into the "Mandelman" subsidiary account and
the disbursements out of that subsidiary account to unknown
payees for unknown purposes, without having created any records
identifying the source, payee, or purpose of the transactions,
had violated SCR 20:8.4(c).
¶34 Count 34 relates to another "Mandelman" subsidiary
account that was created in the RPL trust account following
Attorney Mandelman's suspension in July 2006. Over the next
approximately 18 months, there was a relatively large number of
transactions attributed to this "Mandelman" subsidiary account.
Some of these transactions do not appear to have related to any
particular client and some did not appear on the RPL trust
account ledgers. In addition, more funds were withdrawn from
this subsidiary account than were deposited into it, resulting
in a negative balance. The referee concluded that by using the
RPL client trust account to make unrecorded and unexplained
personal and business deposits and withdrawals after his 2006
suspension, Attorney Mandelman had violated SCR 20:8.4(c).
¶35 Count 40 relates to Attorney Mandelman's claiming of
$122,000 in business expenses related to "accrued bills" on his
2005 income tax returns. When the OLR discussed these claimed
expenses with Hackbarth, she asserted that $84,616 of this
amount represented "prepaid expenses," which she described as
19
No. 2011AP584-D
costs incurred for clients prior to settlement of their personal
injury cases or prior to billing, which had been accumulating
over the years but had never previously been claimed as
expenses. The firm's records showed, however, that the firm had
indeed been reimbursed for many of these "prepaid expenses"
during the time period when Attorney Reitz had been the owner
and had been obligated to report firm income and expenses for
tax purposes. Attorney Mandelman tried to provide an
explanation to the OLR as to why he had deducted these allegedly
accumulated expenses from his 2005 income, but his response did
not correspond to what Hackbarth had told the OLR or to what was
shown on the firm's financial records.
¶36 The referee determined that recklessly claiming a
$122,000 business expense for "accrued bills" on his federal
income tax return, when many of the claimed "prepaid expenses"
had been previously reimbursed to the firm or could not be
substantiated, had violated a standard of conduct set forth in
Owens, 172 Wis. 2d at 56-57, contrary to SCRs 20:8.4(f)18 and
20:8.4(c).
¶37 Count 42 also relates to inaccurate information on
Attorney Mandelman's federal tax return, although this time for
the 2006 tax year. Specifically, the referee found that
Attorney Mandelman had reported $33,888.89 in residual income
18
SCR 20:8.4(f) provides 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."
20
No. 2011AP584-D
paid to him from the RPL law firm after his July 2006
suspension, when the RPL trust account records showed that he
had been paid at least $65,614.93 in legal fees during this
time. The referee determined that this underreporting of
income, which she found to have been reckless, had also violated
the standard set forth in Owens, 172 Wis. 2d at 56-57, contrary
to SCRs 20:8.4(f) and 20:8.4(c).
¶38 Counts 43 and 44 relate to the representation of B.R.,
who had been injured in a motorcycle accident in April 2005.
Shortly after B.R. had retained the law firm, Attorney Reitz had
left the firm due to his disciplinary suspension and Attorney
Mandelman worked on B.R.'s case. When Attorney Mandelman's
license was suspended, he did not inform B.R. of his suspension
or advise him that he should find another attorney of his
choosing.
¶39 After his suspension, Attorney Mandelman submitted an
affidavit to the OLR pursuant to SCR 22.26(1)(e), which requires
a suspended attorney to certify that the attorney has provided
written notice of the suspension to all clients with pending
matters. Attorney Mandelman submitted this affidavit despite
not having informed B.R. of his suspension and not identifying
B.R. on an attached list of pending clients.19
19
As noted above, Attorney Reitz's RPL law firm apparently
acquired Attorney Mandelman's law firm following Attorney
Mandelman's 2006 suspension. Consequently, Attorney Reitz took
over responsibility for B.R.'s matter. B.R., however, was never
informed of this change in law firms or asked to consent to the
change.
21
No. 2011AP584-D
¶40 The referee concluded that Attorney Mandelman's
failure to notify B.R. of his July 1, 2006 suspension and to
advise B.R. to seek representation of his choice elsewhere had
constituted a violation of SCR 22.26(1),20 which is enforced via
20
SCR 22.26(1) provides:
On or before the effective date of license
suspension or revocation, an attorney whose license is
suspended or revoked shall do all of the following:
(a) Notify by certified mail all clients being
represented in pending matters of the suspension or
revocation and of the attorney's consequent inability
to act as an attorney following the effective date of
the suspension or revocation.
(b) Advise the clients to seek legal advice of
their choice elsewhere.
(c) Promptly provide written notification to the
court or administrative agency and the attorney for
each party in a matter pending before a court or
administrative agency of the suspension or revocation
and of the attorney's consequent inability to act as
an attorney following the effective date of the
suspension or revocation. The notice shall identify
the successor attorney of the attorney's client or, if
there is none at the time notice is given, shall state
the client's place of residence.
(d) Within the first 15 days after the effective
date of suspension or revocation, make all
arrangements for the temporary or permanent closing or
winding up of the attorney's practice. The attorney
may assist in having others take over clients' work in
progress.
(e) Within 25 days after the effective date of
suspension or revocation, file with the director an
affidavit showing all of the following:
(i) Full compliance with the provisions of the
suspension or revocation order and with the rules and
22
No. 2011AP584-D
SCR 20:8.4(f). In addition, Attorney Mandelman's filing of an
affidavit that falsely claimed that he had notified all clients
with pending matters and that a list of all clients with pending
matters was attached to the affidavit violated SCR 20:8.4(c) and
SCR 22.26(1)(e), which is enforced via SCR 20:8.4(f).
¶41 Finally, Count 45 relates to Attorney Mandelman's
representation of G.W., a six-year-old boy who had been burned
by a hot fudge dispenser in a restaurant. G.W.'s mother
retained Attorneys Reitz and Mandelman in January 2002 to pursue
a claim on G.W.'s behalf against the restaurant and its insurer.
¶42 The referee concluded that Attorney Mandelman's
failure over a period of four and a half years to obtain and
present a settlement offer21 to G.W.'s parents, to initiate a
procedures regarding the closing of the attorney's
practice.
(ii) A list of all jurisdictions, including
state, federal and administrative bodies, before which
the attorney is admitted to practice.
(iii) A list of clients in all pending matters
and a list of all matters pending before any court or
administrative agency, together with the case number
of each matter.
(f) Maintain records of the various steps taken
under this rule in order that, in any subsequent
proceeding instituted by or against the attorney,
proof of compliance with the rule and with the
suspension or revocation order is available.
21
A June 2006 note from Attorney Mandelman's paralegal
showed that there had been a $5,000 settlement offer from the
restaurant or its insurer. This settlement offer, however, was
never communicated to G.W.'s mother.
23
No. 2011AP584-D
civil action, or to advise the parents that he did not believe
G.W.'s claims were worth pursuing had demonstrated a failure to
act with reasonable diligence and promptness, in violation of
SCR 20:1.3.
¶43 The referee recommended that Attorney Mandelman's
license be revoked, but that the effective date of the
revocation should be concurrent with the start of Attorney
Mandelman's most recent one-year suspension. In addition to
relying on the parties' stipulation, the referee determined that
revocation was supported by prior decisions containing similar
violations. See, e.g., In re Disciplinary Proceedings Against
Gedlen, 2007 WI 121, 305 Wis. 2d 34, 739 N.W.2d 274; In re
Disciplinary Proceedings Against Sheehan, 2007 WI 3,
298 Wis. 2d 317, 725 N.W.2d 627; In re Disciplinary Proceedings
Against Weigel, 2012 WI 124, 345 Wis. 2d 7, 823 N.W.2d 798. The
referee also took into account this court's endorsement of the
concept of progressive discipline. See, e.g., In re
Disciplinary Proceedings Against Nussberger, 2006 WI 111, ¶27,
296 Wis. 2d 47, 719 N.W.2d 501. The referee further considered
a number of aggravating and mitigating factors. Aggravating
factors included Attorney Mandelman's significant disciplinary
history, the fact that the trust account violations in this
proceeding had been part of a pattern of misconduct, the
presence of a dishonest or selfish motive (using the client
trust accounts to conceal personal income and recklessly filing
tax returns that misrepresented his income), the large number of
violations in this proceeding, Attorney Mandelman's intentional
24
No. 2011AP584-D
failure to provide information or documents that were requested
by the OLR, and the harm suffered by Attorney Mandelman's
clients.
¶44 On the mitigating side, the referee acknowledged
Attorney Mandelman's claim that he had been suffering from
chronic fatigue due to having Hepatitis C. The referee further
acknowledged that during the time period relevant to this
proceeding, Attorney Mandelman had undergone another round of
therapy that had not worked. She also considered the affidavit
of a doctor that Attorney Mandelman had submitted. The referee
stated, however, that while the affidavit had addressed the
effects of Hepatitis C in general, it had failed to aver that
Attorney Mandelman had actually suffered from those side effects
during the relevant time period.
¶45 With respect to her recommendation for a May 2009
effective date, the referee noted that the misconduct at issue
here occurred primarily during 2004-2007, which was the same
time period as the misconduct that was at issue in Mandelman IV.
Moreover, Attorney Mandelman's license has remained suspended
well past the one-year period of suspension imposed in that
case. See In re Disciplinary Proceedings Against Cooper,
2013 WI 55, ¶25, 348 Wis. 2d 266, 833 N.W.2d 88. The referee
concluded that under these circumstances the period of
revocation should run concurrently with the one-year suspension
that began on May 29, 2009.
¶46 The referee further recommended that Attorney
Mandelman should be required to pay the full costs of this
25
No. 2011AP584-D
proceeding. The OLR's statement of costs indicates that as of
April 2, 2014, the costs of this proceeding were $16,943.16.
¶47 The referee did not make any recommendation with
respect to restitution. The OLR filed a statement on
restitution, which did not ask for any restitution award. With
respect to the representations of B.R. and G.W., the OLR notes
that there was no allegation or finding that Attorney Mandelman
had misappropriated or misapplied client funds. As to the
various trust account violations, the OLR asserts that there is
not a readily ascertainable amount that would meet its criteria
for restitution and that it could ask this court to award to
specific payees. It states that it has not been able to
determine whether the funds in the various trust accounts were
or were not ultimately disbursed to the rightful owners. The
OLR notes that in the Reitz decision, this court ordered
Attorney Reitz to distribute all funds in his trust accounts to
the rightful owners, or if the rightful owners could not be
identified, to transfer the funds to the state treasurer's
office as unclaimed or unidentifiable property.
346 Wis. 2d 375, ¶42. The OLR states that Attorney Mandelman
has agreed to work with Attorney Reitz and the OLR to accomplish
the same task for his clients.
¶48 We now turn to Attorney Mandelman's appeal, which is
somewhat strange in that he is not asking this court to overturn
any of the legal conclusions of misconduct nor is he requesting
a less severe sanction than that recommended by the referee.
26
No. 2011AP584-D
¶49 Attorney Mandelman specifically does not challenge any
of the factual findings that underlie the counts of misconduct
or the legal conclusions of misconduct. In light of Attorney
Mandelman's stipulation to those facts, we accept the referee's
findings of fact based on the remaining allegations of the
complaint. We further determine that those findings adequately
support the legal conclusion that Attorney Mandelman did engage
in the 22 ethical violations alleged in the remaining counts of
the complaint.
¶50 The primary focus of Attorney Mandelman's appeal is
essentially a number of arguments urging this court to consider
additional information regarding his accountant and the effects
of his Hepatitis C infection as mitigating factors that would
lessen his culpability for his violations without changing the
end result recommended by the referee. He contends that the
referee's discussion of mitigating factors contained erroneous
findings of fact and did not give sufficient consideration to
these two mitigating factors.
¶51 With respect to the actions of Hackbarth, Attorney
Mandelman relies extensively on opinions from the OLR's
accountant expert, who disputed Hackbarth's analysis of certain
issues and the way that certain items had been reported on
Attorney Mandelman's income tax returns. Attorney Mandelman
asserts that he expected Hackbarth, as a certified public
accountant, to make a proper evaluation of the records that he
and the law firm submitted to her so that she could compile
accurate accounting records for the law firm and prepare his
27
No. 2011AP584-D
personal income tax returns. He further contends that it was
Attorney Reitz's responsibility to ensure that Hackbarth had all
of the information she needed to do both the accounting and the
tax return preparation. If Hackbarth did not have all of the
necessary information, Attorney Mandelman argues that it was her
responsibility to make this fact known to him so that he could
get her everything she needed.
¶52 We agree with the OLR's contention that Attorney
Mandelman never explicitly argued to the referee that his
reliance on Hackbarth should be considered a mitigating factor.
In his statement in support of the stipulation, which was
provided to the referee before she prepared her report, Attorney
Mandelman did discuss generally his view of how things had
operated with respect to the law firm's trust accounts and the
preparation of his income tax returns and his view that
Hackbarth's record-keeping and preparation of his tax returns
had been substandard. This discussion, however, occurred in the
context of providing "background information" about the trust
account violations and of arguing that the referee should
conclude that his conduct with respect to the false income tax
returns was not intentionally fraudulent.22 Attorney Mandelman
did not mention his reliance on Hackbarth as a mitigating factor
in the section of his memorandum discussing mitigating factors.
Thus, the referee did not err in failing to include an explicit
22
The referee did issue an amendment to her report that
clarified that Attorney Mandelman's filing of false tax returns
was reckless rather than intentional.
28
No. 2011AP584-D
discussion of Hackbarth's shortcomings in the section of her
report dealing with mitigating factors. Moreover, the limited
information included in Attorney Mandelman's memorandum in
support of the stipulation did not demonstrate that his reliance
on Hackbarth had been reasonable and in good faith.
¶53 Attorney Mandelman also argues that the referee failed
to give proper consideration to the affidavit of Dr. Michael G.
Karos regarding the effects of Hepatitis C. In particular,
Attorney Mandelman challenges the referee's statement that while
Dr. Karos' affidavit described the effects of the condition in
general, it failed to state directly that Attorney Mandelman had
suffered from those effects during the relevant time period.
¶54 We acknowledge that Dr. Karos' affidavit not only
discussed generally the side effects of the condition and the
treatments, but also indicated that the disabling fatigue that
accompanies the condition and its treatments did afflict
Attorney Mandelman. Nonetheless, the affidavit did not provide
all of the necessary evidence to prove that the Hepatitis C
should be a mitigating factor. "A medical condition will not be
considered in mitigation of discipline unless that condition is
explicitly found to have caused the misconduct." In re
Disciplinary Proceedings Against Schwartz, 134 Wis. 2d 18, 22,
397 N.W.2d 98 (1986). Dr. Karos did not state when Attorney
Mandelman had suffered the fatigue and the other side effects
(i.e., whether at the time of some or all of the misconduct).
He also never opined that the fatigue or the other side effects
had been a cause of Attorney Mandelman's misconduct. Thus, the
29
No. 2011AP584-D
referee did not err in refusing to rely on the Hepatitis C
infection as a reason to recommend a less severe sanction,
especially where Attorney Mandelman had stipulated to the level
of discipline.
¶55 Attorney Mandelman also challenges on appeal the
referee's statement that his misconduct was as serious, if not
more so, than the misconduct described in the Gedlen, Sheehan,
and Weigel decisions.
¶56 It is true that not all of the misconduct that
occurred in Gedlen, Sheehan, and Weigel is also present in this
case. That is not unusual, however. Rarely do two attorney
discipline cases involve precisely the same set of facts or the
exact same list of violations. What is important is that in
those decisions, the attorney's license to practice law in this
state was revoked, and their misconduct was not clearly more
serious than the misconduct committed by Attorney Mandelman.
¶57 In the present case, Attorney Mandelman did commingle
his personal and business funds with client trust funds, he did
convert the trust funds of clients by engaging in trust account
transactions that left negative balances in his own subsidiary
accounts, he did fail to deliver trust funds to clients for many
years, he did keep incomplete and inaccurate trust account
records (such that determining who is still owed money is a very
difficult task), and he did on multiple occasions file income
tax returns that were recklessly false, whether because of
failing to report income or because of claiming expenses to
which he was not entitled. He showed a multi-year lack of
30
No. 2011AP584-D
diligence in one matter, failed to notify a client of his
suspension in another, and also gave a false affidavit to the
OLR. Moreover, this is not the first time that Attorney
Mandelman is being disciplined for his misconduct. It is the
seventh time, and the fifth time that his misconduct has been
serious enough to warrant having his license to practice law
suspended. We think that it is not improper to say that
Attorney Mandelman's conduct is as serious as the misconduct in
Gedlen, Sheehan, and Weigel, and that, in light of his lengthy
disciplinary history, he should receive the same sanction that
they did, namely the revocation of their licenses to practice
law in this state.
¶58 We further conclude that a retroactive effective date
of Attorney Mandelman's suspension would be appropriate under
these circumstances. We have previously stated, including in a
prior decision involving Attorney Mandelman, that retroactive
effective dates of suspensions and revocations may be
appropriate where the "'misconduct occurred prior to the
[earlier] disciplinary proceeding and [the attorney's] license
has remained suspended well beyond the period of suspension
previously imposed.'" Cooper, 348 Wis. 2d 266, ¶25 (quoting
Mandelman II, 182 Wis. 2d at 592). The misconduct at issue in
this case did occur before the prior proceeding and Attorney
Mandelman's license has remained suspended from May 2009 to the
present time, a much longer period than the one-year suspension
imposed in Mandelman IV.
31
No. 2011AP584-D
¶59 Attorney Mandelman does not object to the referee's
recommendation that he should bear the full costs of this
proceeding. Although he ultimately stipulated to the remaining
22 ethical violations, he had vigorously litigated this matter
up to that point, which necessitated the expenses incurred by
the OLR and the referee. Consequently, we see no reason to
depart in this case from our general policy of imposing full
costs upon an attorney who engaged in misconduct.
¶60 Finally, we address the issue of restitution.
Although it does appear that there were funds in the various
trust accounts Attorney Mandelman or his firm maintained that
were never disbursed to the proper clients or third parties
before those trust accounts were closed, there is a lack of
records from which the OLR or this court can determine what
amounts are owed and to whom. Consequently, we conclude that
there is not a sufficient basis upon which we could order
restitution in favor of any particular client or third party.
¶61 Because our inability to order restitution to specific
persons stems from the lack of records caused by Attorney
Mandelman and/or his colleagues, we are unwilling simply to
disregard the issue of restitution completely. First, we note
that in order for Attorney Mandelman to petition for
reinstatement, he will be required to allege in good faith and
then to prove that he "has made restitution to or settled all
claims of persons injured or harmed by [his] misconduct . . . .
or, if not, [his] explanation of the failure or inability to do
so." SCR 22.29(4m). We also conclude that we should follow the
32
No. 2011AP584-D
path we took with Attorney Reitz in his disciplinary proceeding,
where we ordered him to disburse all funds in his trust account
to their rightful owners or to transfer the funds to the state
treasurer's office if the rightful owner cannot be identified or
located. Reitz, 346 Wis. 2d 375, ¶¶40, 42. The OLR states that
Attorney Reitz has been working with that agency to determine
the former law firms' restitution obligations and that Attorney
Mandelman has agreed to work with the OLR and Attorney Reitz to
complete that endeavor. We formalize that obligation here.
¶62 IT IS ORDERED that the license of Michael D. Mandelman
to practice law in Wisconsin is revoked, effective May 29, 2009.
¶63 IT IS FURTHER ORDERED that Michael D. Mandelman shall
work with the Office of Lawyer Regulation and Jeffrey A. Reitz
to determine whether any of the funds in the client trust
accounts he controlled should have been paid to particular
individuals or entities and, if so, in what amounts. If such a
determination is made, Michael D. Mandelman shall pay the amount
owed to the applicable individual or entity.
¶64 IT IS FURTHER ORDERED that within 60 days of the date
of this order, Michael D. Mandelman shall pay to the Office of
Lawyer Regulation the costs of this proceeding.
¶65 IT IS FURTHER ORDERED that, if Michael D. Mandelman is
able to determine that restitution is owed to a particular
individual or entity, the payment of restitution shall occur
before the payment of costs to the Office of Lawyer Regulation.
¶66 IT IS FURTHER ORDERED that, to the extent he has not
already done so, Michael D. Mandelman shall comply with the
33
No. 2011AP584-D
provisions of SCR 22.26 concerning the duties of any attorney
whose license to practice law has been revoked.
34
No. 2011AP584-D
1
Office of Lawyer Regulation v. Michael D. Mandelman
Court: Wisconsin Supreme Court
Date filed: 2014-08-01
Citations: 358 Wis. 2d 179, 2014 WI 100
Copy CitationsCombined Opinion