Referee: Madison lawyer used trust account like “slush fund”

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A referee is recommending that the Wisconsin Supreme Court find that a Madison lawyer committed 19 counts of misconduct out of the 28 he had been charged with.

The recommendation stems from a complaint filed more than a year ago by the Office of Lawyer Regulation alleging Michael Bauer had mishandled more than $700,000 that he should have been holding in trust. The 30-page complaint detailed 28 charges of misconduct involving several of the clients he had while working at Bauer & Bach in Madison. The firm dissolved in 2015.

In the complaint, the OLR had asked the Wisconsin Supreme Court to suspend Bauer’s license for three years.

The OLR and Bauer reached a stipulation in May in which Bauer admitted to 14 counts of misconduct and the OLR agreed to dismiss seven charges. Bauer contested seven of the remaining charges, all of which involved allegations that Bauer had broken a rule prohibiting lawyers from engaging in conduct involving dishonesty, fraud, deceit or misrepresentation.

Bauer contended that the facts did not support the charges. Because the OLR had already charged him with trust-account violations for the same conduct, he argued that neither the state nor federal constitution would make open to those charges.

In a report filed on Aug. 8, the referee in the case, John Murphy, accepted the stipulation and rejected Bauer’s arguments but found that Bauer had committed only five of those seven contested charges.

Murphy found Bauer’s mishandling of more than $29,000 in a condemnation case to be the result of an “honest mistake.” He also found that the accounting was unclear as to whether Bauer had mishandled more than $11,000 in an eminent-domain case.

The five misconduct charges Murphy found Bauer to have committed included making nearly a dozen withdrawals from his trust account after receiving a client’s $400,000 settlement. To ensure the client’s settlement check would clear, Bauer then went on toreplacing the nearly $130,000 he had withdrawn with money from a third-party source.

Murphy noted that Bauer saw his trust-account violations as related to nothing more than “sloppy business practices,” yet the facts presented at a May hearing showed that Bauer removed money from his trust account without permission and constantly was “robbing Peter to pay Paul.”

“The facts contained in the counts for which Bauer has now been found guilty suggest something well beyond sloppy work,” Murphy wrote. “They strongly support the belief that Bauer saw his Trust Account as a something akin to a slush fund. … Such behavior is unacceptable at any level and especially onerous when carried out by a person licensed to practice law.”

Murphy will issue a separate recommendation for how Bauer ought to be disciplined as well as what costs Bauer must pay for the proceeding.

The Wisconsin Supreme Court will review Murphy’s recommendations and issue a final decision in the matter. Follow @erikastrebel