¶4 Attorney Scholz was admitted to practice law in Wisconsin in 1994. He practices in Mequon. In 2011, he was privately reprimanded for failing to hold client funds in trust when he deposited a client's advance fee payment directly into his business account without giving the requisite alternative fee notices and then he used the funds to pay a personal tax obligation, and for transferring client funds from his trust account to his business account without giving notice to the client at the time of the transfer that the funds represented a fee payment. Private Reprimand, No. 2011-21.

¶5 On December 27, 2017, the OLR filed a ten-count disciplinary complaint relating to his representation of A.B. in a foreclosure/partition action between A.B. and her former daughter-in-law, K.D. The complaint alleged that Attorney Scholz converted funds that were to be held in trust, then engaged in various misrepresentations to hide his misconduct. The complaint sought a two-year license suspension and restitution of $60,975.94 paid either to the Ozaukee County Circuit Court or to opposing counsel's trust account, pending resolution of the foreclosure/partition action between Attorney Scholz's client, A.B., and K.D.

¶6 The referee conducted a two-day hearing in January 2019 and concluded that the OLR had proved, by clear and convincing evidence, all ten counts of misconduct. The referee recommended we impose a one-year suspension and costs, but did not address restitution. Attorney Scholz appeals.

¶7 This matter has a long history that will be greatly abridged for purposes of this opinion. In 1985, A.B., her husband, and their son, D.B., purchased a partially constructed home on almost 80 acres of land in Ozaukee County. Several years later, D.B. married K.D. The two couples co-owned the property until K.D. filed for divorce from D.B. in 2008. D.B. had been in prison since 1994. Attorney Scholz represented D.B. in the divorce.

¶8 The primary issue in the divorce was the division of the jointly owned residence and surrounding real estate. A.B. hired Attorney Donald Fraker, who filed a separate lawsuit to assert her interests in the shared property. Months of collateral litigation ensued. During this time, A.B.'s husband passed away. The court ruled that D.B. and K.D. (whose divorce was still pending) jointly owned a one-half interest in the property and A.B. owned the other one-half interest. Eventually, in the divorce action, K.D. was awarded the one- half interest in the property and was assigned responsibility for the outstanding mortgage.

¶9 In May 2012, a foreclosure action was filed against the property. A.B. and K.D. litigated who was responsible for the unpaid mortgage. Then, the Department of Natural Resources (DNR) purchased most of the jointly owned acreage. After the mortgagee was paid along with some other expenses, there remained approximately $180,000, plus the house and a five-acre lot. A.B. and K.D. proceeded to litigate their respective rights to this property.

¶10 In February 2013 A.B. and K.D. reached a stipulation providing that their lawyers would each hold half the disputed funds in their respective trust accounts pending the outcome of the lawsuit to partition the property. The stipulation stated, "Such funds shall continue to be held in such trust accounts, to be disbursed as later may be agreed upon in writing by the parties or ordered by the Court." The stipulation was approved by court order issued on February 22, 2013.

¶11 This brings us to Attorney Scholz's involvement in the matters giving rise to this disciplinary proceeding. In June 2013, Attorney Scholz assumed representation of A.B. from Attorney Fraker. At the time, Attorney Fraker held in trust $91,545.64 in disputed funds, pursuant to the terms of the stipulation. Attorney Fraker had "earmarked" approximately $30,000 of these funds for his own attorney fees but offered to disburse the remaining two-thirds to Attorney Scholz as part of the substitution of attorneys. When this occurred, in Attorney Scholz's own words, "[A.B.] and [Attorney Scholz] struck a deal that would enable her to continue the fight [against K.D.]."

¶12 At the ensuing disciplinary hearing Attorney Scholz revealed that he and A.B. had agreed that she would "loan" Attorney Scholz the balance of the disputed funds. In exchange, Attorney Scholz promised to represent A.B. for the duration of her case against K.D. for a $5,000 fee payable at some future date plus 10 percent of any recovery obtained for her. This "deal" was memorialized in a pair of written agreements.

¶13 On July 8, 2013, Attorney Fraker disbursed $60,975.94 of the disputed funds to Attorney Scholz. Attorney Scholz deposited the disputed funds into his business account – not a trust account. Attorney Scholz then began spending the money, mostly for his own benefit, and by mid-August, it was gone. We will not recount all the transactions. Summarized, the OLR alleged that Attorney Scholz disbursed at least $60,343.40 of the $60,975.94 for his own purposes, or for the benefit of other clients or third parties, thereby converting at least $60,343.40 as of August 12, 2013.

¶14 Meanwhile, A.B. and K.D. were still litigating ownership of these funds. Commencing in August 2013, their lawyers participated in a mediation and reached a written one-page "Interim Agreement" whereby K.D.'s lawyer could "release funds in her trust account to her client [K.D.]." There was no written agreement that A.B.'s lawyers could disburse any of the disputed funds. During this mediation Attorney Scholz did not disclose that he had already disbursed nearly all of the disputed funds he was supposed to be holding in trust.

¶15 In December 2013, following another mediation session, Attorney Scholz told Attorney Fraker that he could disburse to himself the $29,069.73 he had earmarked for attorney fees, and Attorney Fraker did so.

¶16 In February 2014, Attorney Scholz filed an amended cross-claim in the civil property/partition dispute on behalf of A.B. The pleading states that $183,091.29 of disputed funds had not been divided and remained to be partitioned. Attorney Scholz did not advise the court that these funds were no longer in trust.

¶17 On January 29, 2015, mediation having failed, the court appointed a Special Master to decide A.B.'s and K.D.'s rights and interests in the disputed funds and property. In June 2015, the Special Master advised the attorneys that he was awaiting more information from K.D.'s attorney and that he had received "no information or accounting" from Attorney Scholz. The Special Master informed both attorneys that he expected that "full accountings with supporting documents would be in [his] office no later than July 1, 2015." Attorney Scholz did not provide the accounting. On July 1, 2015, the Special Master wrote to the attorneys, stating, as relevant here: "As to Mr. Scholz I have heard nothing further regarding documentation." Attorney Scholz asked for more time to respond but then failed to do so.

¶18 On July 15, 2015, the Special Master issued a report determining that K.D. was entitled to 97 percent of the proceeds of any sale of the home and property. K.D.'s lawyer then asked the Special Master to explicitly resolve the allocation of the disputed funds. The Special Master forwarded this email to Attorney Scholz and requested a response by July 30, 2015. Attorney Scholz did not respond. On August 4, 2015, the Special Master sent a follow-up letter asking if Attorney Scholz had any response or disagreement. Again, Attorney Scholz did not respond.

¶19 On August 6, 2015, the Special Master filed an amended report with the court, which allocated 97 percent of the disputed funds to K.D. The Special Master added that when the acreage had been sold, certain expenses had been paid from the sale proceeds that were A.B.'s obligations. These amounts included some $28,034.97 in legal fees paid to Attorney Scholz for D.B.'s divorce. The Special Master ordered that K.D. should be reimbursed for these expenditures before the remaining disputed funds were distributed between A.B. and K.D.

¶20 Attorney Scholz filed a formal objection to the Special Master's amended report. A.B. filed for bankruptcy.

¶21 In January 2016, Attorney Scholz and K.D.'s lawyer told the circuit court that the remaining property had been sold, subject to bankruptcy court approval, and disclosed that they no longer held in trust any of the disputed funds from the DNR sale. The circuit court expressed consternation, stating: "You two are going to get in a lot of trouble on this. There's a court order that said that was to be maintained in the trust accounts, and you cannot just disregard a court order."

¶22 K.D.'s lawyer clarified that she had relied on the written interim agreement prepared by their mediator as "written agreement by the parties." The court then addressed Attorney Scholz: "[I]t certainly looks like there was an agreement that [K.D.'s lawyer] could release the funds in her trust account to her client. It doesn't say anything about [A.B.] releasing those funds. She better find a way to restore them, or there's going to be contempt proceedings." The court continued addressing Attorney Scholz:

¶23 Notably, the circuit court assumed Attorney Scholz had disbursed the funds to A.B. Attorney Scholz did not inform the court that he had "borrowed" the money from A.B. or that he had arranged to reimburse A.B. in part with services-in-kind. He also told the court that parts of the mediator's interim agreement were missing, implying the missing pages would confirm his right to disburse funds. The interim agreement was a one-page document.

¶24 The circuit court directed Attorney Scholz to submit an "accounting" of his disbursement of the disputed funds. Attorney Scholz submitted a one-page document that the referee later found was a misrepresentation of what had transpired. Attorney Scholz also provided the court with a "receipt" purportedly signed by A.B. on December 23, 2013, which stated that she had received $50,975.94 "as the balance of her share of the proceeds . . . " and purported to authorize Attorney Scholz to retain $10,000 toward past and future expenses related to the representation. As of December 23, 2013, Attorney Scholz had not made any such payment to A.B. and he was no longer holding any of the disputed funds in trust.

¶26 The referee found that Attorney Scholz was "careless and negligent" and described his misconduct as "serious" stating:

However, the referee apparently accepted many of Attorney Scholz's explanations, characterizing the conversion as an "improper loan" and finding that Attorney Scholz "repaid it quickly." The referee observed: "[i]n this case, Attorney Scholz's conduct did not injure his client, and he did not appear to manipulate or steal from his client, rather he took an improper loan, and repaid that quickly. He did not breach a client's trust . . .."

¶27 The referee deemed a one-year license suspension sufficient and recommended that Attorney Scholz should be required to pay the full costs of this proceeding. The OLR's statement of costs discloses that these costs were $16,804.30 as of March 17, 2020. The report does not mention restitution.

¶28 We turn to the merits of Attorney Scholz's appeal. He explains that:

¶30 We turn to the referee's conclusions of law. Attorney Scholz questions the conclusion that he violated SCR 20:1.3 (Diligence), as alleged in Count 7:

¶33 We turn to considering the appropriate sanction for Attorney Scholz's misconduct. We are free to impose discipline more or less severe than that recommended by the referee. In re Disciplinary Proceedings Against Krill, 2020 WI 20, ¶54, 390 Wis. 2d 466, 938 N.W.2d 589, (citing In re Disciplinary Proceedings Against Elliott, 133 Wis. 2d 110, 394 N.W.2d 313 (1986); In re Disciplinary Proceedings Against Reitz, 2005 WI 39, 279 Wis. 2d 550, 694 N.W.2d 894). The OLR requested a two- year suspension. The referee recommended we impose a one-year suspension.

¶34 On this appeal, Attorney Scholz asks the court to impose a still more lenient suspension. He emphasizes that A.B. was not a grievant and maintains that she was "a knowing and consenting participant in the transaction." He argues that certain disciplinary cases support a more lenient sanction, citing In re Disciplinary Proceedings Against Tobin, 2007 WI 50, 300 Wis. 2d 250, 730 N.W.2d 896 (imposing four month suspension for nine counts of misconduct, including converting funds belonging to a number of third parties for personal use in violation of SCR 20:1.15(b) (1) and SCR 20:8.4(c)) and In re Disciplinary Proceedings Against Bartz, 2015 WI 61, 362 Wis. 2d 752, 864 N.W.2d 881 (imposing a 60-day suspension on an attorney who committed five counts of misconduct, including conversion of third-party funds in violation of SCR 20:1.15(b)(1) and SCR 20:8.4(c), and who failed to cooperate with the OLR's investigation).

¶35 Tobin is inapposite. The four- month suspension we imposed there reflected "numerous mitigating factors" including a lack of disciplinary history, Attorney Tobin's admission of misconduct, and Attorney Tobin's voluntary payment of restitution to his trust account. Id., ¶33. We are similarly unpersuaded by Bartz. There, the lawyer stipulated that he failed to timely disburse a few thousand dollars to one medical provider, but he ultimately paid the bill. Attorney Scholz, by contrast, committed ten counts of misconduct, converted tens of thousands of dollars via a "loan" of funds that he knew or should have known his client was not entitled to make, ignored court orders, and then systematically misrepresented what he did to hide his misconduct, resulting in a significant loss to K.D.

¶36 We conclude that the facts of this case and our case law indicate a two-year suspension is appropriate. See In re Disciplinary Proceedings Against Krezminski, 2007 WI 21, 299 Wis. 2d 152, 727 Wis. 2d 492 (imposing two-year suspension for misconduct that included conversion of $37,094.42 entrusted to the lawyer as personal representative of an estate, and the filing of a document containing false information with the probate court). The referee apparently considered the Krezminski case distinguishable, noting that Attorney Krezminski stole from his own client. Attorney Scholz may not have stolen from his client, but the record indicates he colluded with that client, making an improper agreement to avail himself of disputed funds that were not the client's to loan, at the expense of K.D. As the referee found, while Attorney Scholz's conduct might not have harmed his client, it did harm K.D. "who lost out on the funds he improperly distributed to himself, and later his client." See also In re Disciplinary Proceedings Against Goldstein, 2010 WI 26, 323 Wis. 2d 706, 782 N.W.2d 388 (imposing two-year license suspension for various trust account violations and conversion of approximately $70,000 in client funds despite the referee's finding of "no harm" because the attorney had reimbursed his clients).

¶37 Attorney Scholz's misconduct reflects a callous disregard for the rights of the opposing party, and his fundamental obligation as an officer of the court to honor and obey circuit court orders. He lied to opposing counsel, the mediator, the circuit court judge, a court-appointed special master and to the OLR, all in an effort to conceal his conversion. He fabricated documents that he submitted to the court to try to conceal his misconduct. Considering the precedent cited by the OLR, coupled with a number of aggravating factors, including his prior discipline, we have no difficulty concluding that a suspension of two years is appropriate. Indeed, a lengthy suspension is necessary to impress upon Attorney Scholz and other lawyers in this state the seriousness of the professional misconduct at issue here, and to protect the public from similar misconduct in the future. See In re Disciplinary Proceedings Against Roitburd, 2016 WI 12, ¶20, 368 Wis. 2d 595, 882 N.W.2d 317 (stating that "it is ultimately this court's responsibility" to determine appropriate disciplinary sanctions).

¶39 Finally, we reserve our final ruling regarding the issue of restitution pending receipt of supplemental briefing as ordered by this court. Upon receipt of the OLR's memorandum and any response from Attorney Scholz, an order resolving the restitution question will issue in due course. Therefore,

¶40 IT IS ORDERED that the license of Carl Robert Scholz to practice law in Wisconsin is suspended for a period of two years, effective December 22, 2020.

¶41 IT IS FURTHER ORDERED that Carl Robert Scholz shall comply with the requirements of SCR 22.26 concerning the duties of a person whose license to practice law in Wisconsin has been suspended.

¶42 IT IS FURTHER ORDERED that within 60 days of the date of this order Carl Robert Scholz shall pay to the Office of Lawyer Regulation the costs of this proceeding, which are $16,804.30 as of March 17, 2020.

¶43 IT IS FURTHER ORDERED that the court reserves the question of restitution pending consideration of court ordered briefing as set forth in this court's order dated November 10, 2020.

¶44 IT IS FURTHER ORDERED that compliance with all conditions of this order is required for reinstatement. See SCR 22.29(4)(c).