                                                                        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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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
                                             4
                                                                 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.
                                         5
                                                           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:

                                   6
                                                    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.


                                7
                                                          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) . . .
                                  8
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    ¶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.

                                              9
                                                              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.
                                     10
                                                                          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.
                                              11
                                                                     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
                                            12
                                                                              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
                                               13
                                                                      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
                                            14
                                                                           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
                                                  15
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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


                                                 16
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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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     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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       ¶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


                                               19
                                                                         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.
                                               20
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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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    ¶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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    ¶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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