Lawsuit accuses lawyer and his ‘Real Housewives’ wife of stealing plane crash settlement funds
Girardi’s Companies Default In Suit Over Boeing Settlements
A Chicago federal judge on Friday held in default two companies owned by Girardi Keese founder Tom Girardi and his estranged wife, reality show star Erika Jayne, after they failed to respond to a December complaint alleging they wrongfully took millions of dollars from a plane crash settlement.
Jan 20, 2021
Girardi Doesn’t Need Guardian In Bankruptcy, Edelson Says
Embattled celebrity attorney Tom Girardi is clearly not mentally incompetent and doesn’t need a guardian, Edelson PC told a California bankruptcy court Tuesday, pointing to recent video footage of Girardi giving a coherent interview and speaking on a panel for the Consumer Attorneys of California.
LIT Update; Jan 16, 2021
Lawyer Tom Girardi and his celebrity wife, Erika Jayne of The Real Housewives of Beverly Hills, are accused in a lawsuit of embezzling settlement money as they struggle to bolster their celebrity image of “obscene wealth.”
The Dec. 2 suit, filed by the Edelson law firm, contends that Girardi and his Los Angeles law firm are “locked in a downward spiral of mounting debts and dwindling funds,” putting them on the verge of financial collapse.
To continue funding his and Jayne’s “lavish Beverly Hills lifestyles,” the suit alleges, Girardi resorted to embezzling settlement proceeds intended for widows and orphans who lost loved ones in the October 2018 crash of a Boeing 737 Max. All 189 people aboard Indonesia’s Lion Air Flight 610 died in the incident.
Boeing agreed to a settlement in early 2020. Edelson was local counsel in the litigation and settlement process, and it is also owed money, according to the suit, filed in federal court in Chicago.
The suit notes that Jayne filed for divorce this month but alleges that it is “a sham attempt” to protect the couple’s money. The suit also says Girardi has taken “massive litigation loans,” and he is apparently using settlement money to pay them down. Two litigation funders are among the defendants.
The suit seeks an accounting of the funds, the transfer of funds to the appropriate recipients, and, after the money is paid, the payment of contractually required attorney fees to Edelson.
Judge To Refer Girardi To Prosecutors Over Missing $2M
December 14, 2020
An Illinois federal judge on Monday froze the assets of the insolvent plaintiffs firm Girardi Keese and its famed founder Tom Girardi after finding them in contempt for taking at least $2 million from a settlement fund for widows and orphans of plane crash victims, saying he was referring the case to prosecutors.
“This isn’t that difficult: You learned in law school, we all did, in Ethics 101, that when you get money that belongs to a client you put it in an escrow fund and you don’t touch it,” U.S. District Judge Thomas Durkin said during a telephonic hearing. “No matter what your personal financial situation is, no matter what kind of pressures you’re under, if you touch client money you’re going to be disbarred and quite possibly charged criminally.”
Judge Durkin said he would place Girardi and his firm under a trustee and issued a $2 million judgment against them to shield the funds from numerous other creditors circling the insolvent firm. Defense attorneys said during the hearing that the firm’s operating account contains just $15,000 and Girardi, 81, appears to be mentally incompetent.
The emerging details point to an inglorious career end for a widely lauded trial lawyer who launched to fame after winning a $333 million toxic tort settlement in 1996. That victory inspired the 2000 film “Erin Brockovich,” and he has since appeared on the “Real Housewives of Beverly Hills” with his 49-year-old wife and series star Erika Jayne.
On Monday, Girardi attended the hearing but only identified himself as being present when the judge asked him to. His attorney, Los Angeles-based criminal defense attorney Evan Jenness, said her client appeared to be mentally incompetent and unable to help her discover what happened to the funds and that she did not believe he was faking it.
Judge Durkin said he is also mulling contempt penalties for two other attorneys who departed Girardi Keese earlier this year.
David Lira, who left June 13 to form Johnston Hutchinson & Lira LLP, and Keith Griffin, who left Dec. 4, both denied wrongdoing. Lira told the court that Girardi had control over the money.
The matter came to light this month after Edelson PC, Girardi Keese’s co-counsel in litigation over the crash of Lion Air 610, a Boeing 737 Max jet, sued Girardi Keese alleging it hadn’t distributed money to other attorneys or their clients for several months after Boeing funded the settlement.
The total settlement amount was not disclosed, but the firm admitted Monday that four clients are short $500,000 each, and a fifth client may not have received any funds at all. It was unclear where the missing cash has gone.
Edelson’s suit, however, claims Girardi used it to fund a lavish lifestyle for him and his wife and pay off a series of multimillion-dollar loans he had taken out but hasn’t been able to repay.
On Monday, Edelson PC founder Jay Edelson told Judge Durkin his firm is uncovering evidence that this is not some stand-alone oversight, but that Girardi’s claim of mental incompetence is a “sham.”
“What we have been uncovering through our investigation is that the Girardi firm has been running a Ponzi scheme for at least a decade,” Edelson said. “What they do is when money comes in, they use that to pay previous creditors, previous clients, and then they wait until more money comes in. And what happened is, I guess everything just caught up with them. But this is not new behavior. This is consistent. They’ve been doing it for a decade.”
Girardi Keese has won numerous high-dollar judgments and settlements over several decades, but this year, the firm fell into insolvency and the vast majority of its attorneys have left as funds ran out debts and lawsuits piled up.
The firm recently failed to make payroll and had just $15,000 in its operating account, Girardi’s criminal defense attorney Jeness said at Monday’s hearing. Creditors are hashing out plans for a receivership in state court.
In July, a Los Angeles Superior Court judge deemed Girardi Keese insolvent after it wasn’t able to afford its share of fees for an arbitrator in litigation with lender Stillwell Madison LLC.
Another lender, California Attorney Lending II Inc., has also sued Girardi Keese, alleging the firm and its founder owe it $8 million. The company accuses Girardi of pledging the same collateral to obtain well over $30 million in additional loans from three different companies, including Stillwell Madison, and then defaulting. Ex-clients are also suing Girardi and his firm on allegations he raided their settlements, including one who obtained a $10 million judgment.
California Attorney Lending sought to give a potential receiver the power to maintain accounting records over the law firm’s accounts and sole authority to decide whether to file for bankruptcy on behalf of Girardi Keese.
Attorneys have been fleeing the firm over the last year or two. The firm had some 20 attorneys in 2019, but just five listed on its website as of last week as debts and judgments piled up.
Girardi’s wife, Jayne, recently announced she had filed for divorce, but Edelson contends the filing is “simply a sham” to fraudulently protect the couple’s money from those who seek to collect on their debts.
In the Boeing 737 Max litigation, Girardi Keese and Edelson represented clients with relatives among the 189 people killed when Lion Air Flight 610 plunged into the Java Sea in October 2018. It was one of two crashes, with another months later in Ethiopia, that led authorities to ground and investigate the new planes.
On Monday, Judge Durkin said it was unconscionable for the firm to fail to deliver $500,000 to each of the four clients.
“These are widows and orphans,” he said. “Half a million dollars for any one of these families is a significant amount of money – life-changing money, given the tragedy they went through.”
The judge was a federal prosecutor and a white collar criminal defense attorney at Mayer Brown LLP before President Barack Obama appointed him to the court in 2012.
He said he struggled to understand why Girardi Keese paid out parts of the settlement funds in installments to its clients over the course of several months, rather than all at once after Boeing paid.
“Why wouldn’t everything be paid to the plaintiffs upon receipt of the money from Boeing?” Judge Durkin said. He asked if anyone on the line, including Girardi and his former colleagues, could explain. “I’d love to know.”
After several seconds, the judge spoke again.
“All right, the record should reflect their silence.”
Edelson’s motion for contempt was filed by Rafey Balabanian, Jay Edelson, Benjamin Richman and Ari Scharg of Edelson PC.
Girardi Keese is represented by Michael Monico of Monico & Spevack. Tom Girardi is represented by Evan Jenness. Boeing is represented by Mack Schultz of Perkins Coie LLP. Lira is represented by Edith Matthai of Robie & Matthai PC. Griffin is represented by Ryan Saba of Rosen Saba LLP.
The case is In re: Lion Air Flight JT 610 Crash, case number 1:18-cv-07686, in the U.S. District Court for the Northern District of Illinois.
Edelson Sues ‘Housewives’ Couple, Claims Girardi Debt Spiral
A star from the “Real Housewives of Beverly Hills” and her husband, a partner at Girardi Keese, have been sued by Chicago law firm Edelson PC, which claims the attorney’s firm is “on the verge of financial collapse” and that the pair have been embezzling settlement money from nearly a dozen cases involving victims of a Boeing 737 Max crash.
Edelson said in a suit filed Wednesday in Illinois federal court that Erika Girardi, known as Erika Jayne, and her husband, Thomas Girardi of the Los Angeles law firm Girardi Keese, have been using proceeds of settlements that should have gone to the widows and orphans who lost family members in the 2018 crash of Lion Air Flight 610, which killed 189 people.
Much of the suit concerns the alleged financial woes of Girardi Keese.
Girardi and his law firm are “on the verge of financial collapse and locked in a downward spiral of mounting debts and dwindling funds,” according to Edelson, which represented the families of the victims of the Lion Air crash along with Girardi Keese in suits brought against Boeing. Just before filing the suit, Edelson was pointed to an apparent receiver for Girardi Keese, the complaint said.
“Tom’s downward spiral appears to have finally bottomed out,” the complaint said. “On information and belief, Tom’s mounting loans and debt have piled up to such an extent that GK can no longer meet its financial obligations and it is likely that GK will soon not be a going concern.”
Edelson claims Girardi’s firm owes “tens of millions of dollars” to clients, lenders, co-counsel and settlement administrators, and that Girardi, a prominent personal injury attorney, resorted to embezzlement to fund his wife’s opulent lifestyle and keep up their celebrity status.
Jayne recently announced she has filed for divorce, but Edelson contends that the divorce filing is “simply a sham” to fraudulently protect the couple’s money from those who seek to collect on their debts.
A phone call to Girardi’s firm seeking comment was not immediately returned Wednesday.
Following the Lion Air crash, more than a dozen families retained Girardi Keese and, with the assistance of Edelson, a series of mediation sessions ensued, leading to individual settlements from Boeing, according to the complaint.
Girardi Keese oversaw the communication with the clients and Edelson, in turn, began preparing motions seeking court approval for each settlement providing for an allocation of settlement proceeds to children of the deceased, the first of which was filed in February.
Girardi, however, with the help of attorney Keith Griffin and his former partner David Lira, “prevented a significant portion of that money, and potentially all of it, from ever reaching the victims of this horrific crash,” according to the complaint.
Instead, Girardi kept the money for his own purposes, doling it out to his friends and family, Edelson alleged.
Edelson began following up with Griffin and Lira on a nearly weekly basis inquiring about the settlements and when the clients could expect their payments, but the two attorneys would only respond “periodically with little more than a statement” and claimed they couldn’t get the clients their settlements because Boeing wanted to wait until all of the clients had signed agreements.
Griffin and Lira could not be reached for comment. Edelson declined to comment.
After even more follow-ups, Edelson in July was told that even though Boeing had fully funded the settlements, “clients had not received the full amount owed to them and were still owed about half of what was due to them,” according to the complaint.
By September, Edelson thought those settlement proceeds had finally been paid out but its suspicions were again raised last month when it received a letter from Lira, who had since moved to the law firm Johnston Hutchinson & Lira, indicating that Girardi had transferred a chunk of his firm’s interest in attorney fees from the Lion Air cases to litigation funder California Attorney Lending.
Knowing its own fees were wrapped up in Girardi Keese’s interest, Edelson again reached out to the other firm and learned from Griffin that clients were still owed settlement money.
“Griffin further stated that he was skeptical that Girardi or GK had the financial means to satisfy GK’s obligations to those certain Lion Air clients that are still owed settlement proceeds and Edelson,” the complaint said.
Before filing the present lawsuit, Edelson attorneys again spoke with Griffin, who pointed them to Robert Finnerty. Finnerty, Griffin told them, “would be serving as a receiver charged with overseeing the wind up of defendant GK,” according to the complaint. Finnerty, who is also named as a defendant, was a decades long partner at the firm who had departed in May, the complaint said.
As part of the suit, Edelson claims that Girardi, in “a Madoff-inspired attempt,” tried to protect his own wealth by using client settlement funds to pay down loans. Two of those lenders, California Attorney Lending and Stillwell Madison, are named as defendants in the complaint.
To stave off collection efforts, Girardi entered into multiple inter-creditor agreements, which allowed lenders and creditors to access and withdraw funds from Girardi Keese’s bank accounts.
Edelson alleged that those lenders should have been aware of Girardi’s financial troubles and that the funds in the bank accounts were “likely embezzled client funds and co-counsel fees,” according to the complaint.
Home ownership is headed to extinction. Why? After the financial bail out of banks in 2008, the true victims were the people. As Ken McElroy discusses in this edited video, 2021 is going to be much worse for the American people with evictions and affordable housing at a premium. pic.twitter.com/NrMioqQfxj
— LawsInTexas (@lawsintexasusa) December 1, 2020
Law360 (December 3, 2020) — Girardi Keese will face a contempt hearing this month stemming from Edelson PC’s allegations that the Los Angeles plaintiffs firm and its famed trial lawyer founder embezzled settlement funds meant for the families of plane crash victims, an Illinois federal judge ruled Thursday.
Law firm Girardi Keese has a week to respond to allegations that its attorneys, including founder Tom Girardi, misappropriated settlement funds paid by Boeing.
U.S. District Judge Thomas Durkin, who is overseeing Boeing’s settlements with numerous Indonesian families whose relatives died when Lion Air Flight 610 crashed in 2018, gave Girardi Keese a week to file a written response to Edelson’s claims. Edelson serves as plaintiffs’ co-counsel in the case.
The scheduled hearing in the Boeing case rapidly escalated a crisis for Girardi Keese that first burst into public view Wednesday, when Edelson aired the allegations in a separate lawsuit against the firm; its 81-year-old founder, Tom Girardi; his wife, “Real Housewives of Beverly Hills” star Erika Jayne; and others.
Judge Durkin slated the contempt hearing for Dec. 14 after Edelson urged the court Wednesday to hold an evidentiary hearing that could result in criminal or civil penalties for Girardi Keese.
“Based on communications with GK attorneys and others, Edelson has become concerned that GK has misappropriated the settlement proceeds that are owed to GK’s clients, including possibly by converting those funds and redirecting them to litigation funders, other creditors, and friends and family of GK’s sole equity owner, Tom Girardi,” Edelson said in its motion for rule to show cause for contempt.
Girardi did not respond to requests for comment Thursday.
Boeing said in July that it had settled the vast majority of its Lion Air claims. In its motion, Edelson said its attorneys became concerned after learning from a Girardi Keese attorney that same month that Boeing had fully funded the settlements, but that the proceeds hadn’t been fully paid out to clients.
When the attorneys tried to follow up, they encountered confusion, delays and conflicting information, the firm said in its filing.
Edelson’s motion mirrored the separate complaint it filed the same day in Illinois federal court against Girardi Keese, litigation funders and other defendants. The complaint offered more salacious details, claiming that Girardi Keese is “on the verge of financial collapse,” including links to audio of Girardi’s voicemails to the firm, and recounting fit-for-tabloid details about Girardi and Jayne’s lavish lifestyle.
“Tom’s downward spiral appears to have finally bottomed out,” the complaint says. “On information and belief, Tom’s mounting loans and debt have piled up to such an extent that GK can no longer meet its financial obligations and it is likely that GK will soon not be a going concern.”
Jayne recently announced she has filed for divorce from Girardi, but Edelson contends that the divorce filing is “simply a sham” to fraudulently protect the couple’s money from those who seek to collect on their debts.
Aside from his occasional television appearances, Girardi is known for major trial wins for plaintiffs, perhaps the most famous of which was a groundwater contamination suit against Pacific Gas & Electric that inspired the film “Erin Brockovich.”
Edelson’s motion was filed by Rafey Balabanian, Jay Edelson, Benjamin Richman and Ari Scharg of Edelson PC.
Counsel information for Girardi Keese was not immediately available.
The case is In re: Lion Air Flight JT 610 Crash, case number 1:18-cv-07686, in the U.S. District Court for the Northern District of Illinois.