Disciplinary action sought against TRF attorney
Disciplinary action sought against TRF attorney

The Office of Lawyers Professional Responsibility is seeking disciplinary action against a Thief River Falls attorney.

Susan Humiston, OLPR director, filed the petition against Kevin Duffy with the Minnesota Supreme Court. The petition alleges that Duffy failed to competently represent a client in a Chapter 7 bankruptcy proceeding and failed to properly advise her that the majority of her investment accounts weren’t qualified exemptions from bankruptcy.

Kevin Duffy
Kevin Duffy

As a result, the client filed for bankruptcy and turned over $38,081.57 from a retirement account until all of her debts, fees, and charges were subtracted. The petition alleges that the woman had earlier informed Duffy that she had wanted to settle the debts with her creditors by liquidating her investment accounts if they were exempt. The petition alleges she may have opted to have Duffy negotiate with her creditors if she were properly informed.

The petition alleges that the client had the funds to pay her creditors without filing for bankruptcy. That case led Humiston to find that Duffy allegedly failed to properly safeguard client funds in at least 17 family law cases.

Duffy has a private practice in Thief River Falls, and he has been licensed to practice law in Minnesota for 39 years. He is the father of Pennington County Attorney Seamus Duffy. We sought comment from Kevin Duffy. “The Petition for Discipline is not a complete version of all of the facts in this case. I look forward to presenting a complete and thorough explanation of all of the facts related to the various claims made in the petition,” Duffy said.

The petition was filed after Duffy waived a probable cause hearing before a Panel of Lawyers Professional Responsibility Board. Duffy has 20 days to answer the allegations. The Minnesota Supreme Court will make the final decision if any appropriate discipline will be filed.

Final action may include dismissal or discipline ranging from a reprimand to disbarment.

The petition stemmed from a Chapter 7 bankruptcy case involving a client in 2017. The woman had three investment accounts totaling about $67,000 and a Digi-Key profit-sharing plan with a vested balance at that time of about $1,700. She wanted to learn what portion of those accounts were exempt from the bankruptcy and she indicated that she would use some of the money to pay her creditors if they weren’t exempt and not file for bankruptcy.

Duffy and the client initialed a note pertaining to this conversation. Duffy told her that the three investment accounts would be protected if she filed for bankruptcy.

Later, he allegedly admitted to Humiston that he had reviewed documentation that two of the accounts weren’t tax-free. He also admitted that he reviewed documentation pertaining to the third investment account stating the account wasn’t an IRA or qualified plan, but an individual retail brokerage account.

Without communicating with the client, Duffy filed a voluntary Chapter 7 bankruptcy petition. He also failed to follow up with either firm to determine if any of the accounts were improperly rolled over 401(k) retirement accounts from her prior employer, Shooting Star Casino.

Duffy also failed to disclose one of the accounts (a Securian account valued at $33,894), which was a substantial portion of her assets. He also failed to disclose her Digi-Key 401(k) account among her assets or as exempt. Duffy allegedly incorrectly listed an account as a single 401(k) retirement account valued at $33,717.80. However, there were two accounts. One account was an IRA rollover that may have originated as a 401(k) account and the other was a transfer-on-death account valued at $17,291.77.

The latter account wasn’t exempt. The bankruptcy trustee learned about the Securian account through the woman’s bank records. Duffy filed no response to the motion. He instead sent letters from Securian and the other firm, Waddell & Reed, which indicated the amounts and natures of the three accounts. He also filed three amended schedules, including one that characterized one account as a transfer-on-death account and one of the other accounts as IRA accounts and exempt.

The petition alleges that Duffy initially failed to notify her about the amended schedules. He also failed to accurately describe why the amendments were filed. Despite being notified earlier via letters and reviewing each letter regarding each investment account, Duffy said he didn’t realize until months later that neither the Securian account nor the transfer-on-death account was qualified retirement accounts as he had represented in court filings with the bankruptcy court in June 2017, August 2017 and September 2017.

One of the accounts may have qualified for an exemption, but he failed to review the information to confirm whether this was true. The bankruptcy court granted the trustee’s motion for turnover of the year-end statements for each of her investment accounts after the trustee learned of the Securian account.

The petition alleges that Duffy met with the client at some point in late September 2017. He advised her that not all of the investment accounts were exempt. Duffy told her about the potential advantages of continuing with Chapter 7 bankruptcy, but he didn’t advise her of the potential disadvantages. She decided to move forward with the proceeding.

The trustee filed a second motion objecting to exempt property for the transfer-on-death account and the Securian account since they were not qualified retirement accounts, and a second motion for turnover, seeking funds in the accounts. Those motions were later granted by the court in November 2017.