Tom Girardi firm’s CFO embezzled $10 million, spent thousand

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Litigation Funder Had Illegal Fee-Sharing Deals With Girardi Keese, Lawsuit Alleges: A bankruptcy trustee, in a lawsuit Wednesday, accused California Attorney Lending II of arranging Tom Girardi's financial agreements, illegally splitting fees and refusing to return stolen settlement funds–a possible crime.
by Amanda Bronstad
Law.com
September 01, 2022 at 06:06 PM
https://www.law.com/therecorder/2022/09 ... 1011024100

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** A bankruptcy trustee says that California Attorney Lending II’s $6.7 million claim should be disallowed or, at the very least, bumped to the end of the line of hundreds of creditors.

** The trustee is investigating whether funders knew about Tom Girardi’s $25 million in fraudulent transfers to his estranged wife, Erika Girardi.

** The lawsuit, citing a possible crime, says California Attorney Lending II never returned $1.7 million from the Lion Air settlements, despite $2 million in missing client funds.

One of Girardi Keese’s largest litigation funders had an “insider” role in managing the now-defunct Los Angeles firm’s financial affairs in the years before it imploded: arranging agreements with other financiers, illegally splitting fees and refusing to return stolen settlement funds—a possible crime.

That’s according to a new lawsuit filed on Wednesday by the trustee of the Girardi Keese bankruptcy against California Attorney Lending II, one of four litigation financing firms that have claims totaling $28 million. The trustee, Elissa Miller, says that California Attorney Lending II’s $6.7 million claim should be disallowed or, at the very least, bumped to the end of the line of hundreds of creditors whose losses total nearly $500 million.

California Attorney Lending provides financing for every major plaintiffs' firm practice area, including mass torts, personal injury cases and class actions. Our extensive in-house experience in civil litigation gives us the unique ability to understand your firm's business goals irrespective of the type of cases your firm handles.

-- CaliforniaAttorneyLending.com

California Attorney Lending II, the lawsuit says, “knew or should have known that there were irregularities involving Girardi Keese’s trust accounts and yet it continued to support Girardi Keese’s operations by providing referrals (fees split 50-50) and funding Girardi Keese’s ongoing business operations.”

The lawsuit also names affiliate Counsel Financial Services LLC and California Attorney Lending II owner Joseph DiNardo.

William F. Savino, of Woods Oviatt Gilman in Buffalo, New York, who represents California Attorney Lending II, did not respond to a request for comment.

DiNardo’s attorney, Richard Scherer, of Lippes Mathias in Buffalo, New York, wrote in an email: “Mr. DiNardo has not yet been served with the complaint filed by the trustee, but denies any wrongdoing and will aggressively defend this litigation.”

Miller, of Greenspoon Marder in Los Angeles, has been investigating whether Girardi Keese’s funders knew about Tom Girardi’s $25 million in fraudulent transfers to his estranged wife, Erika Girardi, a probe that a bankruptcy judge sanctioned earlier this year when approving her request for special counsel. Lawyers for California Attorney Lending II and two other Girardi Keese funders, Stillwell Madison and Virage SPV 1 LLC, which also have claims against the bankruptcy estate, objected to the trustee’s investigation.

The new lawsuit adds more details about Girardi’s fraud, including misappropriating what the trustee estimated was now $14 million in client settlement funds. Girardi used one client account, the suit says, as a “personal piggy bank,” depositing more than $41 million to cover checks he wrote over seven years to “support his lavish lifestyle.”

The lawsuit, which has attached emails between California Attorney Lending II and Girardi Keese, reveals a relationship beyond that of law firm and funder. At one point, California Attorney Lending II took over negotiations with the law firm’s other lenders and had fee-sharing agreements with Girardi Keese, unbeknownst to the client, that violated California’s Rules of Professional Conduct, the suit says.

The relationship began in 2005 when Girardi Keese was working with New York’s Weitz & Luxenberg on mass tort litigation over the painkillers Bextra, Celebrex and Vioxx. California Attorney Lending II, the suit says, would refer cases for a 50% cut in fees.

The lawsuit claims Weitz & Luxenberg founding partners Perry Weitz and Arthur Luxenberg, neither of whom is named in the lawsuit, are owners of California Attorney Lending II, alongside DiNardo.

Weitz & Luxenberg’s Gary Klein said Weitz and Luxenberg declined to comment about the lawsuit.

In 2011, California Attorney Lending II provided a $5 million loan to Girardi Keese after negotiating the transfer of cases from bankrupt Masry & Vititoe, the firm made famous from the 2000 movie “Erin Brockovich.” California Attorney Lending II now has an $8.7 million unsecured claim tied to those cases.

In 2018, California Attorney Lending II became more directly involved in Girardi Keese’s financial affairs. To keep the law firm afloat, DiNardo insisted hiring Robert Cohan, of Simba Capital, as its chief restructuring officer, while he helped renegotiate agreements with other lenders.

“The emails evidence that DiNardo had assumed complete control of the negotiations regarding various workout scenarios, and was the only person engaged in those discussions on behalf of Girardi Keese, save and except for input by Cohan,” the suit says.

Elissa Miller of Greenspoon Marder. Courtesy photo
In fact, the suit continues, Girardi Keese already was insolvent by the time the first lawsuit was filed over the 2018 crash of Lion Air 610 in Indonesia. Yet Girardi Keese represented 22 families in that litigation, which Boeing settled in 2020.

At least $2 million of the Lion Air settlements remained missing later that year, when a federal judge issued a contempt order against Girardi and his firm, freezing their assets. The trustee’s lawsuit says Girardi and California Attorney Lending II, under a fee-sharing agreement that violated court orders, had instructed Boeing to wire the firm’s entire $3.5 million fee to the funder.

California Attorney Lending II later reduced its share to half the fees but never returned $1.7 million from those settlements, even though clients were owed $2 million and Girardi Keese’s co-counsel, Edelson, hadn’t been paid $2.5 million in fees, the trustee’s lawsuit says.

Keeping that money “constitutes a crime under California law,” the suit says.

Edelson, earlier this year, filed a racketeering lawsuit that names California Attorney Lending II, as well as two former Girardi Keese partners, the law firm’s former bookkeeper, a consultant and Erika Girardi. Although the racketeering allegations don’t specifically target California Attorney Lending II, the lawsuit alleges the funder had access to Girardi Keese’s books and records and received money from the Lion Air settlements.

Savino, at the time, called Edelson’s lawsuit “truly offensive” and a “smear campaign.”

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Girardi Bankruptcies Lay Bare Life of Excess at Others’ Expense
by Joyce E. Cutler and Daniel Gill
Bloomberg News
Nov. 9, 2022, 3:30 AM
https://news.bloomberglaw.com/product-l ... rs-expense

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** Nearly a half-billion dollars in claims filed against Girardi Keese firm

** Individual estate’s trustee selling off pricey baubles and assets

Thomas V. Girardi helped win jury awards for people whose lives and bodies were ravaged by plane crashes, explosions, chemicals, and prescription drugs.

But while presenting himself as a premier plaintiffs’ lawyer, the man who helped make Erin Brockovich famous was said to be helping himself to some of the millions of dollars he’d won for others to support a lavish lifestyle including an opulent estate filled with antiques, art and finery.

Girardi regularly used client trust funds “as his personal piggy bank,” said one of two bankruptcy trustees sorting through the more than $700 million in claims filed against the man and his now shuttered law firm. The fund into which client settlement monies are held in trust is at least $23 million short, despite Girardi’s $41 million in deposits, the firm’s trustee Elissa Miller said in court papers.

Over just one decade in his five-decade career, Girardi pilfered at least $14 million in settlement funds alone for himself and for his celebrity ex-wife, Erika Jayne Girardi, the trustee alleged.

In December 2020, the attorney and the Real Housewives of Beverly Hills star were accused in a Chicago federal lawsuit of embezzling money meant for those Girardi Keese LLP was representing in litigation over the 2018 crash of a Lion Air Boeing 737 off the coast of Indonesia. A contempt finding soon followed.

The ensuing downfall was swift. The man and his firm were hauled into bankruptcy. Among the petitioners filing an involuntary bankruptcy against Girardi and the firm was its other name partner, Robert Keese. A California Superior Court judge in June 2021 deemed Girardi incompetent to manage his own affairs, and the following year he was disbarred.

Now two bankruptcy trustees are trying to recover whatever money is left, tied up in assets, or capable of being clawed back to pay victims ranging from widows and orphans to lawyers and accountants harmed by his decades-long spree. To do so, at least in part, they’re liquidating a lifetime of trophies including real estate, jewelry, rare books, a Steinway piano and a Pokemon card.


Bloomberg Law graphic by Jonathan Hurtarte

More than $495 million in claims were filed against the defunct Girardi Keese firm, and another $243 million against Girardi himself. Any funds the trustees obtain will be dwarfed by the hundreds of millions in claims and by the oversight failure that enabled a prominent attorney to continue to practice even as more than 100 grievances were lodged against him.

Last week, in response to a lawsuit from The Times, the State Bar revealed it had received more than 205 complaints against Girardi over four decades; the agency did not take public action until his firm was forced out of business, the records show.

-- Tom Girardi firm’s CFO embezzled $10 million, spent thousands on escort and real estate, prosecutors say, by Matt Hamilton, Harriet Ryan

“When conduct is this awful, it speaks for itself,” said Robert Hillman, a University of California, Davis law professor and authority on legal ethics.

The $8 million obtained in the sale of Girardi’s 10,000-square-foot, seven-bath home on a nearly two-acre Pasadena estate will net about $551,000 after fees, deeds, taxes, and secured claims, Jason Rund, trustee for the individual bankruptcy estate, estimated in a court filing.

The holographic Pokemon card fetched $2,812.50 in a Sept. 21 auction. A 1675 edition of The Famous Works of Nicolas Machiavelli sold for $3,250 and Blackstone’s Commentaries on the Laws of England went for $1,000. A pair of men’s Gucci leather shoes sold for $1,062.50. Those items and more brought in $493,341, according to John Moran Auctioneers.

A pair of diamond stud earrings—each six carats—Girardi allegedly bought for his wife with a $750,000 check drawn on a law firm trust account is among the bling and baubles the bankruptcy court approved to be auctioned off on Dec. 7, with an opening bid of $200,000. Erika Girardi is appealing the ruling that permitted the earrings’ sale. The trustee for the firm’s estate has sued Erika Girardi alleging the firm improperly funneled to her $25 million.

[The firm’s trustee Elissa] Miller, in an adversary proceeding, said the ex-lawyer was worse than a “two-bit crook.”


Bloomberg Law graphic by Jonathan Hurtarte

“The $2,000,000 Thomas [V. Girardi] stole from the Lion Air Case plaintiffs, while shocking and unconscionable, is only the tip of the iceberg,” the trustee said.

Dozens of lawyers, including former partners, and law firms are suing Girardi Keese as well as Tom and Erika Girardi, seeking funds owed to them as professionals and their clients. Edelson PC, the Chicago-based law firm that was local counsel in the Lion Air litigation, in July filed a racketeering lawsuit against Girardi Keese, some of its former attorneys, litigation funders, and the Girardis, alleging they operated a long-running Ponzi scheme.

“The Complaint paints a picture of a reverse Robin Hood,” Nora Freeman Engstrom, a Stanford Law School professor who specializes in legal ethics, said in an email. “It depicts a firm stealing from the injured, grieving, and destitute to give to the rich, to fund Tom and Erika Girardi’s lavish lifestyle.”

To contact the reporters on this story: Joyce E. Cutler in San Francisco at [email protected]; Daniel Gill in Washington at [email protected]

To contact the editors responsible for this story: Rob Tricchinelli at [email protected]; Andrew Harris at [email protected]; Maria Chutchian at [email protected]

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Wrecked Cars, Biomedical Specimens, Radio Shows: Girardi Keese's Vendors Now Owed Millions: Nearly $15 million in claims against the Girardi Keese bankruptcy estate come from vendors, including Rest Your Case Evidence Storage, which still had four wrecked cars unclaimed by the firm's clients.
by Amanda Bronstad
law.com
October 10, 2022 at 06:51 PM
https://www.law.com/therecorder/2022/10 ... -millions/

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Tom Girardi, appearing in a video interview called “Schmoozin’ with Forouzan.” Courtesy of Daniel Forouzan

** The vendors are a hodgepodge of businesses including court reporters, scientific experts, landscapers, engineers and radio stations.

** Claimants include KABC-AM Radio Inc., where Tom Girardi hosted a Los Angeles radio show for years, and the Jonathan Club, a downtown Los Angeles private club that he regularly frequented.

** In a Chapter 7 case, vendors, as general unsecured creditors, are

Two years after Girardi Keese collapsed, four wrecked cars ostensibly used in accident lawsuits remain housed at Rest Your Case Evidence Storage in Irwindale, California.

In an Aug. 25 motion, the company’s attorney, Pauline White, said she’d grown “completely frustrated” after failing to identify the owners of the four vehicles, including contacting the Girardi Keese bankruptcy trustee, other attorneys and insurance companies, and checking the registers of actions for all courts. Rest Your Case needed a judge’s permission to sell the cars—a request that was granted on Sept. 28.

“Perhaps the cases or claims associated with these vehicles were settled and no one told my client, so all our effort may have been for nothing,” White wrote in an email to Law.com. “But, we will sleep better knowing we tried to ‘save’ evidence for a client of Girardi Keese, who may otherwise be prejudiced.”

Rest Your Case is among dozens of vendors picking up the pieces of Tom Girardi’s defunct Los Angeles law firm, both held in contempt for stealing $2 million from clients. More than $500 million in claims are pending against the Girardi Keese estate. Girardi, whose wife stars on “The Real Housewives of Beverly Hills,” had an opulent lifestyle, but his firm had only $4.1 million in the bank at the time of its collapse. Bankruptcy trustees have held auctions of items at his law office in downtown Los Angeles and in his home, which together have fetched nearly $1 million. His home, in Pasadena, California, is set to be sold for $7.5 million.

Nearly $15 million in claims come from Girardi Keese’s vendors, which represent a hodgepodge of businesses, many of them small companies in the Southern California area, according to a bankruptcy trustee’s list of claimants filed earlier this year. They include court reporters, scientific experts, landscapers, engineers and radio stations. There are firms that provide office supplies, shred documents or make video presentations for trials.

KABC-AM Radio Inc., where Girardi hosted a Los Angeles radio show for years, has a claim for $163,750. The Jonathan Club, a downtown Los Angeles private club that Girardi regularly frequented, has a $3,633 claim.

Nevada-based Weather Extreme Ltd. provides research on fires, floods and climate change. Steelgate, based in Florida, offers biomedical specimen storage. Some of the claims are fairly large: Integrated Resource Management, a water resources consulting firm, has a claim for $551,300, and marketing and advertising firm CT3Media Inc. has a claim for $333,731.

Some bigger firms, like court reporting agency Veritext and Wells Fargo Vendor Financial Services, which provided leased office equipment, brought their own lawsuits against Girardi Keese for hundreds of thousands of dollars each. KCC Class Action Services, which provides settlement administration, has two claims totaling more than $1.3 million and obtained a $7.5 million judgment after Girardi stopped paying his bills in 2019.

Representatives who filed the claims either did not respond or declined to comment.

‘Back of the Line’

But, when compared to other bankruptcy claimants—such as litigation funders, former clients and other lawyers—vendors might never get repaid. In a Chapter 7 case, vendors, as general unsecured creditors, are “at the back of the line,” said Daniel Bussel, a bankruptcy professor at the University of California, Los Angeles, School of Law.

“Unlike in the Chapter 11 context, where the debtor and other parties may be trying to save an operating business and maintain good trade relations, in the Chapter 7 context, unsecured vendors are usually unable to obtain favorable treatment on their pre-bankruptcy claims unless they delivered goods within 20 days of the Chapter 7 filing,” he said. “Moreover, in some circumstances, unsecured creditors may be forced to turn over payments as ‘preferences’ if received in the 90-day period prior to the bankruptcy filing.”

As for Rest Your Case, the $50,000 owed in transport and storage fees, included in its bankruptcy claim, reflected only some of the costs. The four cars, which had all been in “major accidents,” were taking up storage space that could be used for paying customers.

“I meet many attorneys almost daily when they come for inspections or contact me for storage,” said Dave Galassi, managing member of Rest Your Case, in a declaration attached to the motion. “I have had some success in identifying new counsel for some stored evidence. Likewise, some attorneys have called me to say they are now handling a claim involving a particular piece of evidence Girardi Keese stored. However, as to the four wrecked vehicles listed here, I have been unable to determine if any claim or case is still being pursued, and if pursued which attorney or law firm is handling such claim or case.”

The cars are a 2006 Toyota Corolla, a Kia Sedona, a 2015 MB S550 and a 2017 Volkswagen Jetta. The motion estimated the four abandoned vehicles would generate less than $1,000 when sold as scrap metal. That’s hardly enough, but the proceeds could be used to pay past-due storage fees, Galassi said in his declaration.

That is, if no one claims the cars first.

“The only real ‘value’ these four wrecked vehicles have is either to prove, or disprove, some element of a claim or litigation,” his declaration says. “Since litigation can result in big awards, any attorney or law firm handling cases associated with these vehicles may highly value them.”

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Girardi Keese Lawyers Escape Contempt in Lion Air Funds Case (1)
by Joyce E. Cutler
Bloomberg News
Nov. 2, 2022, 11:47 AM; Updated: Nov. 2, 2022, 4:34 PM
https://news.bloomberglaw.com/us-law-we ... theft-case

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** Edelson’s suit, insurance repayment, bar probes aim for justice

** Separate RICO case continues in San Francisco federal court

Former Girardi Keese attorneys David Lira and Keith Griffin will not be held in contempt for their involvement in the Lion Air crash litigation during which millions of dollars due to victims was stolen, a Chicago federal judge said, adding that Edelson PC, prosecutors, and the state bars will “bring bad actors to account.”

Judge Thomas M. Durkin, US District Court for the Northern District of Illinois on Wednesday denied in a contempt motion filed by Chicago-based Edelson—Girardi Keese’s local counsel in the class-action litigation in the 2018 crash of a Boeing Co. 737 Max 8 airliner that killed 189 passengers and crew.

The court held a three-day hearing in December on the motion as it pertained to Lira and Griffin one year after issuing an order finding since-disbarred plaintiffs lawyer Thomas Girardi and his firm in contempt and entering a judgment against them in the amount of the outstanding payments.

“Girardi took advantage of vulnerable people at their most vulnerable moments, and he used the prestige of his profession, the reputation of American courts, and the imprimatur of this Court to do it,” Durkin said. “It is nearly impossible to mend such a breach of trust.”

“The best we can do is demonstrate that the legal system Girardi besmirched has the ability to rectify its errors and bring bad actors to account. With the hearings and settlements initiated by the Edelson firm, a step has been taken in that direction,” Durkin said.

Durkin already found Girardi in contempt for taking clients’ money. Girardi has since been disbarred in California. The man and the firm are in involuntary bankruptcy. The Edelson firm earlier this year brokered a settlement with its insurance carrier resulting in the clients being paid in full.

“Evaluation of counsel’s conduct is now left to more proper authorities, whether they be a state bar, criminal prosecutors, or one of the several ongoing civil proceedings addressing the relationship between these parties specifically or Girardi’s actions more generally,” the judge said.

Attorneys’ Response

While the court didn’t grant all the relief the Edelson firm sought, “we are gratified that the Court found that we proved that Girardi was ‘operating a Ponzi scheme with client money,’” Jay Edelson said in an email.

“We look forward to continuing to do our part, through our civil cases and public advocacy, to usher in some badly needed reform,” Edelson said. “We do hope that, at some point, the California bar stops being a shield protecting those who participated in Tom’s criminal scheme and instead does the job it was established to do.”.

Edelson separately sued the firm, Girardi, Erika Girardi, attorneys David Lira, and Keith Griffin and others alleging they engaged in a Ponzi scheme that stole more than $100 million from clients, co-counsel, and others.

“Tom Girardi’s conduct and treatment of the Lion Air clients is inexcusable. He should be held accountable for his actions as the sole owner and principal of Girardi Keese,” Ryan Saba, with Rosen Saba LLP representing Griffin, said in an email. “Mr. Griffin is grateful that the victims of the Lion Air crash have been made whole and is sympathetic for the ordeal imposed upon them.”

Michael D. Monico, with Monico & Spevack representing Girardi, didn’t immediately respond to an email seeking comment.

Durkin said Wednesday that it wasn’t credible Griffin and Lira, who is Girardi’s son-in-law, “were so completely unaware of the prior disputes over client payments that they had no suspicions of Girardi’s conduct and motives.”

“In short, it is difficult to believe Griffin and Lira were unaware that Girardi was running a Ponzi scheme with client money, which in fact he was,” the court said.

Edith R. Matthai, with Robie & Matthai representing Lira, said “we are not making comments on the court proceedings involving David.”

The case is In re Lion Air Flight JT 610 Crash, N.D. Ill., No. 1:18-cv-07686, opinion 11/2/22.

(Updates to add Matthai remark in 16th paragraph. A previous update corrected the headline and story top to show the ruling specified two attorneys, and not the firm or its principal who had already been held in contempt)

To contact the reporter on this story: Joyce E. Cutler in San Francisco at [email protected]

To contact the editors responsible for this story: Rob Tricchinelli at [email protected]; Maya Earls at [email protected]; Andrew Harris at [email protected]

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Top FBI official in L.A. silent about his and mom's connection to Tom Girardi
by Matt Hamilton
Los Angeles Times
Tue, November 15, 2022 at 7:20 PM

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Thomas Girardi in 2014.(Al Seib / Los Angeles Times)

The FBI’s Los Angeles field office, which is leading the high-profile investigation into rampant corruption at Tom Girardi’s now-defunct law firm, is refusing to answer questions about the relationship among the agency’s top local official, his mother and the disgraced legal legend.

Donald Alway, the assistant director in charge of the field office, is the son of Girardi’s former girlfriend and secretary. His mother, Michelle Alway, received hundreds of thousands of dollars from Girardi and his law firm during the mid-1990s, according to court papers.

By that period, Girardi had already started misappropriating clients’ settlement money for his own purposes, a practice that continued into recent years, according to court filings from a bankruptcy trustee.

Beyond the cash transfers, Girardi paid more than $131,000 toward the mortgage of Michelle Alway’s home in Carmel-by-the-Sea between 1993 and 1998, according to court filings in Girardi’s divorce from his second wife. Monterey County real estate records show that Donald Alway currently co-owns the residence with his mother, and the property is valued at more than $1.2 million.

Alway, a former L.A. county sheriff’s deputy who became head of the local FBI office this summer, refused an interview request through an FBI spokeswoman, Laura Eimiller.

In a statement, Eimiller said Alway "has not been involved in this investigation, which largely predates his time in the Los Angeles Division."

The timing and duration of the relationship between Michelle Alway and Girardi is unclear, and she could not be reached for comment. She was identified as Girardi’s former girlfriend in a forensic accountant’s report in Girardi’s second divorce. The attorney has been married three times, most recently to “Real Housewives of Beverly Hills” star Erika Girardi.

Eimiller said the investigation into Girardi’s firm is led by the U.S. attorney's office in L.A. and FBI Special Agent in Charge Brian Gilhooly. Gilhooly reports to Alway. Asked whether Alway has recused himself, the FBI spokeswoman did not respond.

Federal law enforcement, including the FBI, have been conducting an investigation into the Girardi Keese law firm for years. The first public prosecution in the case was revealed last week, when federal authorities filed a wire fraud charge against former Girardi Keese Chief Financial Officer Chris Kamon.

In court, prosecutors described Kamon's alleged embezzlement of $10 million at the firm as a "side fraud" on a $100-million fraud perpetrated by multiple people connected with the law firm.

Times staff writer Harriet Ryan contributed to this report.

This story originally appeared in Los Angeles Times.