Judge bans lawyer from bankruptcy court

Concluding that a Richmond lawyer continued to practice in the U.S. Bankruptcy Court after being suspended by the Virginia State Bar, a bankruptcy judge has exiled the lawyer from that court permanently.

The judge found that attorney Kenneth W. Paciocco used another lawyer’s e-filing credentials to not only continue work on existing cases, but to file new bankruptcy petitions after Paciocco’s law license was suspended.

“Paciocco prepared the petitions and schedules for the debtors without disclosing his involvement in the underlying cases, provided the debtors with legal advice while suspended from the practice of law, and filed pleadings and other documents with the Court by forging another lawyer’s official electronic signature,” wrote Judge Kevin R. Huennekens.

While Huennekens enjoined Paciocco from any bankruptcy work, judges of the Richmond Circuit Court could revoke his license altogether at a two-day bar discipline hearing scheduled for Jan. 21.

Huennekens’ Sept. 3 opinion is In re: Kenneth W. Paciocco (VLW 015-4-027).

Paciocco has appealed his banishment to the U.S. District Court.

Ongoing practice

Paciocco is a veteran bankruptcy and personal injury lawyer in Richmond. With an office near Broad Street and Libbie Avenue in Richmond’s West End, he has been a member of the bankruptcy court bar since 1983.

Last year, the Virginia State Bar used an expedited discipline procedure to bring Paciocco under scrutiny. Bar lawyers accused him of disregarding the rules for handling client money. A Richmond Circuit Court panel suspended him for three years beginning Sept. 15, 2014.

Instead of notifying clients and closing his shop, however, Paciocco sought to use lawyer acquaintances to stay in practice, the VSB and the bankruptcy court contended.

The U.S. Trustee’s office began an inquiry in May of this year, according to bankruptcy court records. Huennekens heard evidence at a July 15 hearing. Paciocco responded with a July 21 letter.

Testifying against Paciocco at the bankruptcy court hearing was Goochland lawyer Keith H. Waldrop, who had known Paciocco since law school. Waldrop said he had agreed to help Paciocco conclude pending cases, even though he was a novice to bankruptcy practice.

Paciocco “took full advantage of Waldrop’s bankruptcy naivety,” Huennekens said.

Paciocco needed Waldrop because Paciocco’s electronic filing access had been cut off, the judge said. Paciocco obtained filing credentials for Waldrop, who had never practiced before in bankruptcy court, Huennekens said.

Waldrop said he had agreed only to help Paciocco wind down pending bankruptcy cases, so that clients would not be “left in the lurch,” in the judge’s words.

Until Waldrop received a call from a Paciocco client in July, he was not aware Paciocco was continuing to file new bankruptcy cases using his court credentials.

Evidence at the hearing included letters on Waldrop’s stationery that identified Paciocco as a Waldrop paralegal. Waldrop testified he never authorized the use of his letterhead and never employed Paciocco as a paralegal.

The Huennekens order described three clients who said they received bankruptcy legal advice from Paciocco at his office after his suspension.

“As a result of their dire financial condition, the debtors were desperate to escape the stress that confronted them. Each was particularly vulnerable and readily fell prey as an easy mark to Paciocco’s manipulative deceit,” Huennekens wrote.

Paciocco claimed he never represented himself as a lawyer to any of the three debtors.

“I purposely and carefully limited my role to that of a legal assistant/paralegal so as to not violate the terms of my suspension. It is my sincere hope to practice Law again when my suspension is over,” Paciocco wrote in a post-hearing submission.

Paciocco said Waldrop was “well aware” of all bankruptcy filings and business being conducted through his e-filing account.

Huennekens concluded Paciocco did provide legal advice to all three of the complaining debtors and also perpetrated a fraud on the court by systematically using Waldrop’s e-filing account as his own.

Court records showed Waldrop as counsel in 16 bankruptcy cases since Aug. 18, 2014.

“Such conduct is totally unbecoming of any member of the bar of this Court and simply will not be tolerated,” Huennekens said of Paciocco’s “scheme.”

“While Waldrop may have been negligently complicit, he was not motivated by ill will, but rather by a misguided desire to help an old friend,” the judge wrote.

Besides banning Paciocco from bankruptcy work in the Eastern District, Huennekens also ordered him to pay nearly $14,000 in refunds and damages to the three clients and a fine of $10,000.

Paciocco’s appeal was filed Sept. 18 and assigned to U.S. District Judge John A. Gibney Jr.

VSB inquiry

The U.S. Trustee’s allegations against Paciocco triggered an investigation by the VSB which produced additional allegations.

The bar claims Paciocco did not fully respond to VSB inquiries, misled another debtor about his role in her case and used contacts with Waldrop and another lawyer acquaintance to negotiate and settle eight personal injury cases.

The VSB certification of charges also recites the allegations considered in bankruptcy court.

Bar Counsel Edward L. Davis said bar rules prohibited his office from commenting on pending cases.

A three-judge Richmond Circuit Court panel is scheduled to hear the ethics charges against Paciocco on Jan. 21-22 at the John Marshall Courts Building.