Incomplete disclosures. Concealing the details of a coffee startup. Blown deadlines. Paying the credit card of a girlfriend. Ignoring pleas from creditors.
This is Rudy Giuliani’s $153 million bankruptcy case, and nearly everyone except him appears to be at a breaking point over it.
Creditors are asking the judge to appoint a trustee who would commandeer Giulaini’s assets; meanwhile, reports said, the U.S. Trustee indicated that it may soon move to dismiss the case, stripping Giuliani of the legal protection offered by Chapter 11 bankruptcy.
And, at a contentious Monday hearing, the judge in the case reportedly suggested that he’s becoming increasingly fed up with Giuliani.
“There are reasons to be very concerned here. I’m not going to beat a dead horse,” U.S. Bankruptcy Judge Sean Lane said.
Giuliani filed for bankruptcy in December, days after a federal jury found that he owed $148 million to Georgia election workers Ruby Freeman and Shaye Moss for defaming them. That claim constitutes the overwhelming majority of Giuliani’s $153 million debt; additional unsecured creditors include former Giuliani employee Noelle Dunphy, who accused Giuliani of sexual harassment and assault, and Dominion Voting Systems.
The bankruptcy was largely seen as a means to protect Giuliani from the financially disastrous effects of the defamation judgment, allowing him to use the process to safeguard at least some of his assets so long as he complied with the rules.
But in classically Giulianian fashion, that bargain appears to be failing. The former New York City mayor has spent a lot of time in court discussing the difficulties of hiring a good accountant, while failing to file standard documents on time and keeping some critical financial information from the court since the case began late last year.
“One might ask what he has accomplished during that time,” his creditors wrote in a recent filing. “An objective review leads to one conclusion: he has accomplished almost nothing.”
In one episode, Giuliani began to market a coffee brand called Rudy Coffee without telling the creditors. Creditors told Judge Lane in a filing that they did not learn of the coffee deal until one month after Giuliani signed a contract to promote the coffee.
Through discovery, the creditors learned more. Giuliani provided a breakdown of how much it cost to produce a single bag of Rudy Coffee, with the proviso that 80 percent of each sale would go to the bank account of a business belonging to Giuliani.
That goes to a key, larger problem for Giuliani’s creditors: They accuse him of using his businesses to conceal assets from the bankruptcy case, calling them a “piggy bank” at one point.
Giuliani Communications, for example, purportedly receives money from the coffee deal. It also receives thousands of dollars each month from other Giuliani ventures, creditors say, including the 9/11 memorial nonprofit Tunnel to Towers.
At the same time, creditors say that Giuliani Communications’s expenses have “mysteriously and significantly increased” this year.
In another episode, Giuliani submitted the credit card statements of his girlfriend Maria Ryan. Those documents showed that Giuliani was paying for her bills, as well as costs incurred by some of his businesses. Giuliani’s attorneys have argued that Giuliani uses his personal funds to cover business expenses when there’s a shortfall.
For Giuliani, these episodes are mere continuations in a long-running battle to delay the various civil cases against him by any means necessary. In the run-up to his defamation judgment, Giuliani earned the ire of U.S. District Judge Beryl Howell for the District of Columbia through a similar series of delays and failures to produce documents.
In that case as in this one, the effect has been to delay the proceedings while frustrating the other parties.
But for Giuliani, it’s also led to a chain of negative consequences. In the Georgia election workers case, Giuliani was able to delay the proceedings until the jury trial. But then he was found liable for $148 million in damages.
In the bankruptcy filed soon after that judgment, Giuliani risks potentially severe legal consequences. If the judge makes the rare choice to approve the motion to appoint a trustee in a Chapter 11 case, Giuliani would lose control over his estate.
Reports from the hearing on Monday also said that the U.S. Trustee’s representative was considering filing a motion to dismiss the case.
“All of these things that are going on here are extremely problematic,” Trustee attorney Andrea Schwartz reportedly said at the hearing.
If the judge were to dismiss the bankruptcy, Giuliani would lose the protections that bankruptcy affords and Freeman and Moss would be able to resume collecting on the judgment against him.
It’s not clear that these potential consequences have prompted any change in how Giuliani is treating the case.
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