Former New York Mayor Rudy Giuliani talks to reporters as he leaves the federal courthouse in Washington, Monday, Dec. 11, 2023. (AP Photo/Jose Luis Magana); U.S. Bankruptcy Judge Sean Lane (Southern District of New York court photo)
A Wednesday morning status conference on how to deal with “ancillary matters” in the aftermath of Rudy Giuliani’s bankruptcy dismissal had to pause for a break because no one could say for sure how much money is in the former NYC mayor’s checking and savings accounts, even his own lawyers. When the break was over, the judge blew his stack.
U.S. Bankruptcy Judge Sean Lane began the Zoom call by making clear to the parties that “[w]e’re not going to unring that bell,” the bell being dismissal. Lane said that he was merely trying to figure out an enforceable way to make Giuliani pay professional and administrative fees, potentially racked up to the tune of hundreds of thousands of dollars over the course of his voluntary Chapter 11 bankruptcy filing in New York.
“We rarely see this kind of an issue,” Lane remarked, not yet knowing what would happen at the very end of this day in court.
As Law&Crime reported ahead of the hearing, the fees of Global Data Risk, the forensic investigator hired by his creditors to probe his finances, have been estimated at anywhere from $350,000 to $400,000, and creditors’ attorneys suggested that the substantial bill be paid by first draining Giuliani’s checking and savings accounts that are part of the debtor’s estate in the case and then covering the remainder of what is owed when Giuliani’s Upper East Side multi-million dollar apartment is sold by Sotheby’s International Realty, whenever that might occur.
During a hearing exactly one week ago, Giuliani’s attorney Gary Fischoff stated he was “aghast” at the estimated fees because his client’s “cash assets are limited,” and he subsequently opposed the Official Committee of Unsecured Creditors’ push to appoint a “limited purpose trustee” who would “facilitate and control the monetization” of apartment sale funds and force Giuliani to “cooperate in all respects with respect to the sale,” including handing the trustee “all access, information, documents and records related to the NYC Apartment.”
“The terms of the proposed order are onerous, punitive, and overreaching,” Fischoff wrote. “The creditors want it both ways, they want the case dismissed while they also exercise complete control over the Debtor.”
Fischoff proposed instead that Global Data Risk place a lien on the NYC property so the firm could be paid at closing of the apartment sale.
On Wednesday, Lane heard first from attorney Rachel Strickland, who represents defamed Georgia election workers Ruby Freeman and Shaye Moss, the plaintiffs who won a $148 million dollar judgment against Giuliani at the tail end of 2023.
Strickland said “there is plenty of law that the administrative claims must, indeed, be paid” and that this is not a negotiation.
“We are not trying to negotiate with a party who won’t negotiate in good faith,” she said, not willing to simply accept Giuliani’s proposed “IOU” path forward.
Strickland insisted that initial payment be made from “whatever it is in cash” that’s available in Giuliani’s bank accounts.
“The New York apartment has been on and off the market for a year,” Strickland said. “At the very least it is confusing to us why the cash, which is property of the estate, is not being ordered to pay administrative expense claims” that accrued after Giuliani’s voluntary bankruptcy filing.
When the judge asked how much cash is available, Strickland didn’t know the answer.
“I don’t have an understanding because this is not a debtor’s that’s remotely forthcoming,” Strickland said, suggesting that the debtor’s counsel “show us what the bank balance was as of July 11th.”
“If he took a bunch of money out following the hearing, it would fly in the face” of what she was told by Giuliani’s attorney, that the money would not be moved, Strickland said.
“Show us the bank statements,” she demanded. “I don’t know what the number is, but it is a knowable quantum.”
Attorney Philip Dublin, speaking on behalf of the Official Committee of Unsecured Creditors, representing Moss, Dominion Voting Systems, and Giuliani sexual assault accuser Noelle Dunphy, spoke next and approved of Strickland’s approach.
“I would echo every one of Ms. Strickland’s statements,” he said, arguing that Giuliani’s apartment sale would be able to cover the fees eventually but not today.
“We know that there are sufficient assets to satisfy those obligations,” even if no one now knows how much cash Rudy has, Dublin said.
The judge again commented that this kind of discussion isn’t typical from his 14 years of experience on the bench in White Plains.
“Happily this is a problem that we don’t normally have in this courthouse, but we have it in this case,” Lane remarked.
The judge, pointing out that Dublin and the firm Akin Gump Strauss Hauer & Feld LLP have been representing Giuliani’s creditors pro bono, responded to Fischoff’s complaints about the fee number by reminding him that it could have actually been “much higher.”
Lane’s main concern was including provisions in a proposed order that will “meaningfully be enforceable” to ensure payment.
When it was Fischoff’s turn to speak, he reiterated that Giuliani was “caught off guard by the size of the number announced in court,” but he said his client recognizes that’s the number that has to be paid when Global Data Risk’s fee application is filed and the the judge decides what the number should be.
Lane first expressed frustration at this point.
“You hold the keys to solving this problem,” the judge said, referring to how much Giuliani has in cash. “That’s something, frankly, everyone should know at this point of this case.”
“It’s a solvable problem,” Lane said. “The question is under which terms you want to solve it.”
Fischoff represented that Sotheby’s continues to market the NYC apartment, and that there’s been “a little action, [but] no result yet.”
“Why should people have to wait if there are, in fact, liquid assets” in bank accounts, the judge asked, dubbing this a “help me to help you situation.”
Lane said that everyone in the courtroom seems to want to move on from the case today, so answering this basic question about the cash was necessary.
“I would urge you and your client to think very clearly about what the alternative is, which is to spend more time and money to figure this out,” the judge told Fischoff.
Lane pressed Fischoff for an answer on what the “liquid assets” are that can be paid right now; an “IOU” approach, the judge indicated, “seems inappropriate because I have to dismiss the case now” and to do that the fee issue needs to be resolved.
At this point, Lane saw that the back-and-forth was going nowhere, so he encouraged the parties to discuss issues further. Fischoff didn’t seem certain that he’d be able to get a hold of his client, who is in Milwaukee attending the Republican National Convention.
“I need to reach my client. I don’t know if he’s available immediately,” Fischoff said, asking for an hour break to make that contact and speak with creditors’ lawyers.
Lane granted that break, and when the parties returned, Rachel Strickland said that not much headway had been made at all.
She said that she asked Giuliani’s lawyers: “Can you tell us how much cash we’re dealing with?”
Strickland said that Giuliani just three minutes earlier sent a statement of his main checking account, and that it showed the account had dropped from $60,000 to about half that much since the parties were in court last Wednesday, showing anything from Amazon and Apple expenses, to expenses in Milwaukee, to a payment to maintain Giuliani’s Florida condo, to marketing firm payments.
Meanwhile, though Strickland said it was “through no fault of debtor’s counsel,” as “they don’t have the information either,” a savings account was said to have a “small” amount in it.
“The debtor is up to Giuliani shenanigans again,” Strickland summed up, asking that the judge order Giuliani to pay Global Data Risk whatever the amount in the checking account was as of July 11th.
Heath Berger, another attorney for Giuliani, told Lane, “We got in touch with the debtor as quick as we could,” which isn’t always easy, he said.
All of the above set the judge off.
“Here’s the problem. Everyone knew this issue was going to come up today,” Lane said, clearly annoyed that there was no fallback plan. He called it “frankly unbelievable and uniquely unhelpful.”
The judge said he’s a “patient man,” but suggested that patience has run out hearing the “same song” all over again. Bristling at Giuliani’s apparent unavailability but not accepting it, Lane asked Giuliani’s lawyers directly if their client is willing to sit in the witness box to provide transparency about his finances.
“I have a jurisdictional basis for requiring transparency into the assets” so that dismissal can be appropriately effectuated, Lane noted, but the debtor has chosen instead to “stick his head in the sand.”
“There are a lot of bad things that can happen,” Lane said, before catching himself and rephrasing. “There are a lot of things that can happen that your client does not want to happen.”
“I’m going to ponder what I’m going to do, and you should ponder what you’re going to do,” the judge told Fischoff and Berger, adding, “I’m really at a loss.”
Lane said that he “strongly” urged the lawyers and Giuliani to sit down and talk about what they want the “end game” of this case to look like, ordering them to “by high noon” on Thursday provide an update on the funds at issue.
“I frankly don’t know what the appropriate next steps are. Like you all are doing, I’m considering my options,” the judge said, rather ominously.
Have a tip we should know? [email protected]
