Office of Lawyer Regulation v. John J. Balistrieri

Citations: 358 Wis. 2d 262; 2014 WI 104; 852 N.W.2d 1; 2014 WL 3906194; 2014 Wisc. LEXIS 542Docket: 1984AP000970-D

Court: Wisconsin Supreme Court; August 12, 2014; Wisconsin; State Supreme Court

Original Court Document: View Document

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In the Supreme Court of Wisconsin case 2014 WI 104, the court addressed the disciplinary proceedings against attorney John J. Balistrieri. The court upheld the recommendation of the referee, Attorney Richard C. Ninneman, to deny Balistrieri's petition for reinstatement to practice law. Despite the Office of Lawyer Regulation (OLR) opposing the reinstatement, they did not appeal the referee's recommendation. 

The court concluded that Balistrieri failed to meet the criteria outlined in Supreme Court Rule (SCR) 22.31(1), which requires the petitioner to prove moral character, that reinstatement would not harm justice or public interest, and full compliance with suspension terms. The requirements include demonstrating no legal practice during suspension, maintaining legal competence, exemplary conduct, and a proper understanding of professional standards.

Balistrieri was also ordered to pay the costs of the reinstatement proceedings, totaling $41,459.40 as of February 4, 2013. The ruling emphasizes the necessity for petitioners to provide clear and convincing evidence for all criteria specified in SCR 22.31(1) and SCR 22.29(4).

The petitioner has either made restitution or settled all claims from individuals harmed by their misconduct, including reimbursement to the Wisconsin lawyers' fund for client protection. If unable to do so, the petitioner must provide an explanation. Attorney Balistrieri, admitted to practice in Wisconsin in 1973 after graduating from Valparaiso University Law School, practiced law with his brother Joseph in Milwaukee. In 1981, he was indicted alongside his brother and father for conspiracy to obstruct commerce by extortion. After a six-week trial in 1984, he was found guilty, and the conviction was upheld by the Seventh Circuit Court of Appeals.

The referee attributed a lesser role in the crime to Attorney Balistrieri, primarily blaming his father Frank, described as the 'reputed head of the Mafia in Milwaukee.' The case involved threats against an undercover FBI agent attempting to start a vending business without mob permission, leading to a forced hidden ownership arrangement. The Seventh Circuit's ruling highlighted the Balistrieri brothers' active involvement in the extortion scheme, which included coercing the agent to share his business. Balistrieri was initially sentenced to eight years in prison and a $20,000 fine, later reduced to five years, and served approximately 39 months before his release in April 1989.

Attorney Balistrieri's law license was summarily suspended on June 6, 1984, due to his conviction, following an agreement with the Board of Attorneys Professional Responsibility (BAPR) that he would not contest the suspension while his appeal was pending. His license would be revoked if his conviction was upheld. After the Seventh Circuit affirmed his conviction, the court revoked his license on January 21, 1987. After serving prison time, he returned to Milwaukee, managed the Shorecrest Hotel, and inherited ownership after his brother's death in 2010, eventually selling the hotel for approximately $8 million in 2011. During his management, he also operated a laundry service at the hotel. At a reinstatement hearing, he described his role as chief operating officer, overseeing various departments and being on-call year-round. The Shorecrest's sale was recognized as a significant business achievement by The Business Journal in 2011. 

In 1995, Balistrieri filed a petition for license reinstatement, which was opposed by notable legal figures and ultimately denied by BAPR, citing concerns about his understanding of legal standards and suitability as an officer of the court. He later attempted to withdraw his petition, alleging bias against him, but this request was denied, leading to the dismissal of his petition in March 2001. In 2012, he filed a second reinstatement petition, which included a three-day hearing with 14 witnesses and numerous letters supporting his case.

Attorney Balistrieri received two letters from his sister, which criticized his character and alleged improper actions without explicitly asking for the denial of his reinstatement petition. The referee recommended reinstatement, finding that Attorney Balistrieri demonstrated a sincere desire for reinstatement, did not practice law during his suspension, complied with all order terms, and maintained legal competence. However, the reinstatement process also required proof of moral character, exemplary conduct post-suspension, proper understanding of legal standards, and suitability for client representation and justice administration. The referee acknowledged the complexity of these interrelated requirements but concluded that Attorney Balistrieri met them by clear and convincing evidence, a conclusion that was not accepted by the reviewing body.

The referee considered the impact of Attorney Balistrieri's prior misconduct and a serious 1984 conviction on his reinstatement petition. Although he recognized the conviction's seriousness, he did not believe it should bar Attorney Balistrieri from practicing law. The Office of Lawyer Regulation (OLR) submitted a letter from former U.S. Attorney Thomas Schneider detailing the criminal background of the Balistrieri family, along with supporting documents, but the referee minimized its significance, citing a lack of evidence regarding Schneider’s involvement during the original prosecution and deeming references to organized crime as inflammatory and misdirected.

Conversely, the referee placed significant emphasis on the fact that Attorney Balistrieri was not present during a threatening incident involving his father and an undercover FBI agent and noted the family's loyalty dynamics, which he interpreted as one-sided.

The court acknowledges the passage of time since Attorney Balistrieri's conviction in the 1980s but emphasizes the importance of demonstrating moral character and a commitment to ethical legal practice for reinstatement of his law license. The record indicates that Balistrieri has not convincingly shown he possesses the necessary moral character or attitude toward compliance with laws and ethical standards required for practicing law. Evidence points to a longstanding pattern of failing to accept responsibility for his actions, exemplified by his claims of bias against him based on his Italian heritage instead of addressing his criminal conduct.

During a 2002 deposition related to a lawsuit, Balistrieri's responses reflected an unchanged attitude towards his convictions and law enforcement, dismissing the seriousness of his conviction and implying disdain for the legal process. Despite claiming to have accepted the federal court's judgment, he only acknowledges the conviction itself without expressing genuine remorse or understanding of its implications. Balistrieri's history and current assertions raise significant doubts about his fitness to practice law and his respect for the ethical standards of the bar.

The individual acknowledges a mistake and admits to breaking the law but does not specify the nature of the mistake. Despite accepting the conviction, he maintains that he did nothing wrong, suggesting he views the conviction as somewhat illegitimate. He references an indictment claiming a conspiracy to extort linked to a threat made by his father to an undercover FBI agent regarding their control of the vending and amusement industry in Milwaukee.

In the context of reinstating his law license, it is emphasized that a full confession is not required, but the applicant must demonstrate good moral character and a proper attitude towards legal standards. The individual’s reluctant acceptance of his conviction, combined with a history of disparaging those involved in his prosecution, does not satisfy the necessary criteria for reinstatement.

Concerns are raised regarding his failure to report significant income from his brother and the Shorecrest Hotel. He described his partnership with his brother as one where they worked together, yet in the reinstatement hearing, he claimed he had no ownership interest in the hotel, which was solely owned by his brother. He served as the operations manager, dealing with various daily management tasks and stating he was available around the clock for any issues.

In compensation for his role, he received numerous benefits, including living rent-free and having various living expenses covered, but did not receive a regular salary. Instead, he received substantial "draws" from the Shorecrest's revenues, which were shared equally with him by his brother.

The draws taken by Attorney Balistrieri from 1997 to 2007 varied annually between $5,000 and $31,000, totaling approximately $200,000 over eleven years. The decision-making process for these draws involved discussions between Balistrieri and his brother about their cash situation, leading to a mutual agreement on the amount to draw, which was shared equally. Balistrieri acknowledged that the draws represented compensation for services rendered at the hotel. Although he claimed these draws were often treated as loans or loan repayments, he did not provide evidence to support this assertion. His accountant testified that the draws were not reported as income, suggesting they were gifts since Joseph Balistrieri, the owner, had no legal obligation to pay him. Upon further questioning, Attorney Balistrieri revised his statement, admitting the payments could be characterized as gifts. An expert witness for the OLR, with a background in tax law, contended that these payments could not be classified as gifts without a comprehensive analysis of the circumstances. He maintained that there was insufficient evidence to support the gift characterization and emphasized that Balistrieri would need to prove he relied on his accountant’s advice in good faith.

An expert from the Office of Lawyer Regulation (OLR) concluded that there was insufficient evidence to substantiate claims that certain payments to Attorney Balistrieri were gifts, implying that reliance on any contrary determination by his accountant could not be made in good faith. During the evidentiary hearing, the referee questioned the relevance of tax implications concerning these payments, expressing concern that such inquiries could shift the focus from reinstatement to taxation. The OLR clarified that its primary interest lay in the accuracy and sufficiency of Balistrieri's disclosures about the payments rather than their tax treatment. 

The referee acknowledged a discrepancy between the testimonies of Balistrieri's accountant and the OLR's expert but opted not to resolve the disagreement. He concluded that tax issues should not be central to the reinstatement process, especially since the IRS had not contested Balistrieri's tax returns, and thus suggested disregarding the payments' tax ramifications. 

However, the document argues against this perspective, asserting that the way Balistrieri reported income on his tax returns and his disclosures during the reinstatement process are crucial to evaluating his moral character and fitness to practice law. Historical cases indicate that failure to report income accurately has led to disciplinary actions against attorneys. There remains a significant question regarding Balistrieri's failure to report substantial income from draws on Shorecrest's accounts, and merely classifying the payments as gifts without a legal obligation does not adequately address this issue.

Payments made to Attorney Balistrieri over two decades were purportedly for his work at a hotel, not merely gifts from a family member. His accountant stated these payments were not reported as income, but if they were indeed gifts, Balistrieri bore the burden of proving this with clear and convincing evidence. The lack of IRS challenge to his tax returns does not validate that these payments were gifts, as the court rather than the IRS determines the standards for attorney reinstatement. 

Balistrieri's conduct since the revocation of his license raises significant questions regarding whether it has been "exemplary and above reproach," a standard he failed to meet. Additionally, he did not adequately disclose his involvement in civil actions when responding to the Office of Lawyer Regulation (OLR)'s reinstatement questionnaire. Despite the questionnaire's request for detailed information on any lawsuits in which he was involved, Balistrieri initially claimed no recollection of judgments against him. It was only after prompting during his deposition that he cited involvement in lawsuits with his maternal relative and siblings, attributing his name's inclusion to his brother. At the evidentiary hearing, he ultimately acknowledged his participation in six lawsuits since his first reinstatement petition.

Attorney Balistrieri was involved in two separate lawsuits against Jennie Alioto. In the first lawsuit, he and his brother Joseph were co-plaintiffs, but they lost. Subsequently, Attorney Balistrieri filed a second lawsuit as the sole plaintiff. Additionally, one of his sisters initiated a lawsuit against Attorney Balistrieri, Joseph, and their other sister. The Office of Lawyer Regulation (OLR) criticized Attorney Balistrieri for not disclosing these lawsuits in his reinstatement questionnaire or initial deposition, suggesting his conduct was not exemplary. However, the referee concluded that Attorney Balistrieri had simply forgotten about the lawsuits and did not intentionally provide false information. This finding was upheld due to the standard of review regarding the referee's assessment of his mental state.

The first lawsuit involving Balistrieri and his brother against Alioto presented further concerns. The court of appeals upheld the dismissal of their claim to enforce a purchase option and awarded costs to Alioto. Alioto had a long-standing personal and professional relationship with the Balistrieri brothers, who provided her with legal assistance without charge and helped manage her business affairs. In 1991, Alioto expressed her intention not to sell a property she owned, but agreed to give the Balistrieri brothers a right of first refusal if she decided to sell. However, the subsequent 1992 agreement between them did not include a right of first refusal, instead granting them an option to purchase the property for $125,000 within ten years.

Alioto testified that she did not read the agreement before signing it but later discovered it granted a specific purchase option for the Jackson Street property. Concerned about discrepancies between the contract and prior discussions, she contacted Attorney Balistrieri, who reassured her not to worry about the contents. In 2002, as the option period ended, the Balistrieri brothers attempted to exercise their purchase option, but Alioto refused, leading to a lawsuit for specific performance. The circuit court found a fiduciary relationship between Alioto and Attorney Balistrieri, established intentional misrepresentation by Balistrieri, and ruled that Alioto justifiably relied on his assurances. Consequently, the court deemed the option contract unenforceable, dismissed the brothers' claims, and awarded costs to Alioto. The court of appeals upheld the trial court's decision, and the supreme court denied further review. In a subsequent reinstatement hearing for Attorney Balistrieri’s license, a referee questioned the credibility of Alioto's testimony and the admissibility of a recording of her conversation with Balistrieri but ultimately decided that the circuit court's findings should not hinder Balistrieri's license reinstatement. The appeal regarding the recording's admission was not resolved, but the court of appeals concluded that any potential error did not affect the trial's outcome, given Alioto's independent testimony.

The admission or exclusion of the tape recording does not affect the conclusions reached by the circuit court and the court of appeals regarding the reinstatement proceeding. Attorney Balistrieri denied any conversation until the tape was produced. The courts found that both he and his brother owed a fiduciary duty to Alioto, stemming from their previous legal relationship and her reliance on his advice. The circuit court determined that Balistrieri violated this duty through intentional misrepresentation, specifically by failing to disclose that an agreement with Alioto granted them an option to purchase a property at their discretion. This behavior was characterized as taking advantage of a less sophisticated person in a fiduciary context, which does not align with the moral character required for practicing law in the state. Although Balistrieri provided supporting testimonials and evidence of charitable work, these did not satisfy the necessary standards for reinstatement. Ultimately, he failed to demonstrate by clear and convincing evidence that he possesses the moral character required to practice law.

Attorney Balistrieri has been found to possess a proper understanding of the ethical standards expected of legal professionals, leading to a recommendation for his reinstatement. However, the Office of Lawyer Regulation (OLR) has submitted costs totaling $41,459.40 for the reinstatement proceedings as of February 4, 2013, and has recommended that he bear these costs, consistent with the court's policy of imposing costs on petitioning attorneys. Balistrieri contends he should not pay these costs, arguing that the referee’s recommendation for reinstatement is akin to a finding of no misconduct, referencing SCR 22.24(1m), which stipulates costs are typically imposed only upon findings of misconduct. He further asserts that the OLR's failure to appeal the referee's recommendation makes it unjust to impose costs on him.

The referee disagrees with Balistrieri’s position, highlighting that costs can be imposed even when reinstatement is recommended, as the court ultimately makes the final determination, which in this case resulted in a denial of his petition. The court's practice has been to charge the full costs of reinstatement proceedings to the attorney, regardless of the referee’s recommendations. Balistrieri also argues for a reduction in the assessed costs, claiming that a substantial amount of the OLR's time was spent on issues deemed minimal. The referee concurs with this aspect of Balistrieri's argument regarding the excessiveness of the claimed costs.

The referee recognizes that the current rules allow for a recommendation on the parties' submissions regarding costs. He concludes that the Office of Lawyer Regulation (OLR) improperly approached the case as a tax court hearing, leading to unnecessary expenses related to document requests, expert witness preparation, and depositions. Since the IRS did not challenge Attorney Balistrieri's tax returns, the referee recommends eliminating costs associated with tax issues, including expert witness fees and court-reporting fees for depositions, and suggests reducing the OLR's counsel fees by half, resulting in a total recommended cost of $19,215.51.

However, the court disagrees with the referee's assessment of the significance of the tax issues for reinstatement, thus deciding against reducing the costs. Attorney Balistrieri's objections regarding the excessiveness of the OLR's costs lack specific justifications, as he does not define what he considers reasonable fees or hours spent. Consequently, the court will not reduce the cost assessment based on these objections.

Balistrieri also requests a reduction due to financial hardship, stating that he is not wealthy and has incurred substantial attorney fees. The court generally does not reduce costs for limited financial resources, as doing so would unfairly shift the burden onto other attorneys who support the regulatory system through their annual assessments. Instead, the court advises Balistrieri to provide financial information to the OLR and negotiate a payment plan.

The petition for the reinstatement of John J. Balistrieri's law license in Wisconsin is denied. Balistrieri is ordered to pay the full costs of the reinstatement proceeding to the Office of Lawyer Regulation within 120 days. Justice Patience Drake Roggensack abstained from participating, while Justice Ann Walsh Bradley dissented. The dissent emphasizes that the referee, as the finder of fact, properly assessed witness credibility and determined that Balistrieri met the necessary criteria for reinstatement, which included demonstrating moral character, compliance with suspension terms, and an understanding of professional standards. The referee received substantial support for reinstatement, including testimony from 13 witnesses and seven letters, leading to a "strong" recommendation for reinstatement. The dissent critiques the majority for failing to adequately explain their rejection of the referee's findings and for reassessing credibility, stating that the majority's conclusions are not supported by the evidence presented. The majority indicates a belief that Balistrieri shows a pattern of lacking responsibility since his conviction, referencing past responses to recommendations against reinstatement.

Balistrieri acknowledged his past mistakes and expressed a transformation in his perspective, stating he no longer harbors feelings of anger or resentment regarding his criminal conviction. He accepted the court's judgment and recognized personal responsibility for his actions, committing to rehabilitate his career and reputation in the remaining years of his life. The referee highlighted a significant contrast between the 1996 and 2012 reinstatement proceedings. In 1996, support for Balistrieri was minimal, with only his brother testifying and opposition from various legal authorities. In contrast, the 2012 hearing featured thirteen distinguished witnesses supporting his reinstatement, alongside additional letters of endorsement. The referee found the 2012 record overwhelmingly favorable, with testimonies emphasizing Balistrieri's exemplary post-conviction life and moral character. Based on this evidence, the referee concluded that Balistrieri met the reinstatement criteria under SCR 22.31 and recommended granting his petition, which prompted a dissenting opinion regarding the decision.