Girardi can’t discharge over $200M in debt, bankruptcy court rules

Suspended attorney Thomas V. Girardi cannot discharge over $200 million worth of debt after a default judgment was entered against him Tuesday in an adversary bankruptcy action accusing him of transferring, destroying or concealing assets.

Entered late Tuesday after Girardi failed to respond to the Chapter 7 action by Monday, the judgment will render his assets non-dischargeable, which means the embattled attorney could be on the hook for a great deal of money.

In six claims for relief, Chapter 7 Trustee Jason M. Rund of Sheridan & Rund PC in El Segundo, asked U.S. Bankruptcy Judge Barry Russell in Los Angeles not to discharge any of Girardi's debts since he, "with the intent to hinder, delay, or defraud a creditor or an officer of the estate ... transferred, removed, destroyed, mutilated, or concealed ... property" within one year before the involuntary bankruptcy petition was filed against him.

The bankruptcy of Girardi unfolded late last year after Chicago attorney Jay Edelson of Edelson PC filed a lawsuit accusing Girardi and his now-defunct firm Girardi Keese of misappropriating millions of dollars in client funds. Creditors quickly forced the law firm and Girardi into Chapter 11 bankruptcy in Los Angeles in December 2020.

A year later, Rund was appointed as the Chapter 7 trustee, tasked with investigating Girardi's assets. Rund discovered that in March 2020, Girardi, in an effort to secure a loan, provided a financial statement, which he signed under penalty of perjury, to one or more lenders. According to the financial statement, Girardi owned within a year of the bankruptcy, real properties worth $89.09 million, cash on hand of $116.6 million, securities totaling $44.9 million, and household items, including jewelry, worth $12 million.

However, after Rund continued investigating Girardi's financial affairs, he found many of the items listed on the 2020 financial statement could not be found or located, court filings allege. Rund said Girardi, "with the intent to hinder, delay, or defraud" concealed or transferred the assets and "failed to keep or preserve any recorded information, including books, documents, records, and papers," from which Girardi's financial condition or business transactions might be ascertained. Jason M. Rund v. Thomas Vincent Girardi, 20-bk-21020. (C.D. Bankruptcy Ct., filed Oct. 29, 2021).

"Were you lying to the lender or were you lying to us?" Beverly Hills attorney Ronald Richards said Wednesday, summarizing Rund's case against Girardi.

Until recently, Richards represented Trustee Elissa D. Miller of SulmeyerKupetz in Girardi's Chapter 11 bankruptcy, which can involve a negotiated settlement of debts based on assets. Miller has been attempting to track the assets of Girardi and his defunct firm and to deal with clients and other creditors.

"The default against Thomas Gerardi will permanently deprive him of any discharge of any current or future claims by any creditor or victim," Richards said. "If it's later discovered that he's been hiding assets, none of those parties will be prevented from pursuing him directly."

Girardi is a defendant in numerous lawsuits accusing him of stealing millions of dollars in client funds or attorney fees owed to other lawyers.

In January, after stating Thomas Girardi, 82, could no longer care for himself, his dentist brother, Dr. Robert J. Girardi, was appointed temporary conservator by the Los Angeles County Superior Court. Robert Girardi has filed at least one motion in the bankruptcy case but has missed deadlines in proceedings leading to numerous default judgments against his brother.

In March, the State Bar of California filed disciplinary charges against Girardi for, among other things, "failure to maintain funds in a trust account, misappropriation, failure to cooperate in State Bar investigation, and misrepresentation," according to the complaint.

On Nov. 10, the State Bar Office of Chief Trial Counsel filed a petition with the bar court for Girardi's disbarment "after default for failure to file timely response." No ruling on the petition has been issued.

As a result of his or his brother's inaction, Girardi now has several major default judgments against him, including the Edelson action, involving allegations of fraud, deceit or manipulation in a fiduciary capacity. With Thomas Girardi defaulting in Rund's adversary bankruptcy suit, he won't be able to discharge any of his potential liabilities.