Office of Lawyer Regulation v. James E. Gatzke

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: GABLEMAN, J. concurs and dissents, joined by
DISSENTED: 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, FILED
Complainant-Respondent,
MAY 17, 2016
v.
Diane M. Fremgen
Clerk of Supreme Court
James E. Gatzke,

Respondent-Appellant.

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
No. 2013AP1918-D

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
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No. 2013AP1918-D

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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No. 2013AP1918-D

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
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No. 2013AP1918-D

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.
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No. 2013AP1918-D

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:

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No. 2013AP1918-D

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.

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No. 2013AP1918-D

¶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) . . .
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No. 2013AP1918-D

¶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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No. 2013AP1918-D

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.
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No. 2013AP1918-D

¶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.
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No. 2013AP1918-D

¶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
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No. 2013AP1918-D

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
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No. 2013AP1918-D

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
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No. 2013AP1918-D

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
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No. 2013AP1918-D

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

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No. 2013AP1918-D

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:

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No. 2013AP1918-D

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.

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No. 2013AP1918-D

¶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

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No. 2013AP1918-D

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.
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No. 2013AP1918-D

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.
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No. 2013AP1918-D

¶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).

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No. 2013AP1918-D.mjg

¶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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