Former New York Mayor Rudy Giuliani speaks during a news conference outside the federal courthouse in Washington, Friday, Dec. 15, 2023. (AP Photo/Jose Luis Magana)
Rudy Giuliani lost the protections of bankruptcy on Friday as the judge overseeing his case dismissed the proceedings and barred the former New York City mayor from refiling for bankruptcy for a year.
In a 22-page memorandum decision, U.S. Bankruptcy Judge Sean H. Lane said the court’s order dissolving the case will be the best course forward for the various people to whom Giuliani owes money.
“[T]he Court finds that dismissal of this bankruptcy case with a one year bar to refiling is in the best interests of creditors,” the order reads.
Now, Giuliani’s assets are exposed to the execution of judgments and he can be subjected to further lawsuits seeking additional damages.
Developments in the case happened fast this month.
On July 1, Giuliani filed a motion seeking to convert his Chapter 11 bankruptcy into a Chapter 7 bankruptcy — an effort that would have seen the liquidation of some of his assets and payments to some creditors. At the same time, such a conversion would have frustrated creditors’ long-sought efforts to appoint a Chapter 11 trustee who would have been granted full control over Giuliani’s assets.
On July 3, a pre-scheduled status conference was held during which the debtor and his attorneys professed an “absolute right” to the Chapter 11 conversion. Two sets of creditors, represented by two different legal teams, staunchly contested the conversion motion.
But the creditors disputed how to handle the chaos.
On July 8, the Official Committee of Unsecured Creditors, which represents defamed Georgia election worker Wandrea ArShaye “Shaye” Moss, Dominion Voting Systems, and sexual assault accuser Noelle Dunphy, filed a motion formally lodging their discontent — and renewing their call for appointing a trustee.
Also on July 8, Ruby Freeman, who is Moss’ mother, filed a motion asking the court to dismiss Giuliani’s bankruptcy case with prejudice. Notably, Moss was included in this motion as well.
In each motion in opposition to the conversion, Giuliani’s creditors accused him of attempting to game and “abuse” the system through a series of repeat delays in order to avoid paying his debts.
Then, things abruptly changed again.
On July 10, just before a hearing, Giuliani’s attorney filed papers notifying the judge that the debtor would abandon an effort to convert his Chapter 11 bankruptcy reorganization case to a Chapter 7 liquidation of his assets, and would instead agree to dismiss his case as demanded by the Georgia election workers he was found liable for defaming and subsequently ordered to pay $148 million.
During the hearing that followed, Lane indicated he was likely to agree with Giuliani and Freeman and dismiss the case.
Friday’s order takes Giuliani to task for repeat violations of the bankruptcy process that necessitate the case’s dismissal.
“The Court finds that cause exists to convert or dismiss the case,” the dismissal order reads. “The record in this case reflects Mr. Giuliani’s continued failure to meet his reporting obligations and provide the financial transparency required of a debtor in possession.”
Most egregious, the court noted, was that neither Giuliani nor any of his businesses have properly responded to a discovery order regarding certain assets. Giuliani, the judge noted, only made one court-ordered production while his businesses have not responded to the order whatsoever.
Other mandatory information from the debtor has also been lacking, the court found.
“Giuliani has not fully met his obligation to file certain schedules and lists detailing his financial condition, including a list of creditors, a schedule of assets and liabilities, a statement of current income and current expenditures, and a statement of financial affairs,” the order goes on. “These documents are to be filed at or near the start of a case. The accuracy of these documents is vital to a bankruptcy proceeding.”
To the extent Giuliani did file those relevant papers, the court noted an ongoing series of “deficiencies in the information” provided as well as a failure to file “accurate, complete monthly operating reports.”
Lane opines about the upshot of such violations:
The lack of financial transparency is particularly troubling given concerns that Mr. Giuliani has engaged in self-dealing and that he has potential conflicts of interest that would hamper the administration of his bankruptcy case. The income that Mr. Giuliani earns for his individual labors is funneled to his corporate entities. Mr. Giuliani’s choice to route income into his businesses is concerning given that his monthly operating reports reflect that Mr. Giuliani receives no income from these corporate entities; indeed, he purportedly received no income other than his social security benefits even though he receives compensation of at least $15,000 per month for hosting a radio show on WABC and between $100,000 and $150,000 from his work hosting a podcast called America’s Mayor Live. Moreover, Mr. Giuliani’s own disclosures demonstrate that he uses personal funds to pay expenses associated with his businesses without Court approval.
In the end, the court suggested, the major issue was not whether to sanction Giuliani — but how exactly to do so.
Finding that Giuliani did not, in fact, have an “absolute right” to convert his case into a Chapter 7 liquidation, Lane said the relevant factors favored dismissal — while expressing some concerns about the “race to the courthouse” that is likely to ensue for unsecured creditors.
Still, the judge said, Giuliani was likely to continue violating bankruptcy court rules even with the presence of a trustee — and the process would likely drag on for years and deplete the debtor’s assets.
“Forcing creditors to wait years while they are prevented from pursuing their rights for, at best, a modest distribution seems inequitable and ill-advised,” Lane ruled. “Considering the totality of circumstances and weighing all the facts, therefore, the interests of creditors and the estate are better served by dismissal.”
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