Bankruptcy judge weighs stripping Giuliani’s control of his finances

Rudy Giuliani’s creditors attempted to persuade a bankruptcy judge to appoint a trustee to take control of the former New York City mayor’s finances Monday.

Following more than two hours of arguments, U.S. Bankruptcy Judge Sean Lane made no ruling on the creditors’ request but expressed worry about multiple aspects of the case, including financial reporting issues and Giuliani’s struggle to keep an active bookkeeper and accountant.

“There are reasons to be very concerned here. I’m not going to beat a dead horse,” Lane said just before adjourning the hearing.

Giuliani filed for Chapter 11 bankruptcy in December after a staggering $148 million verdict against him in a defamation case brought by two Georgia election workers whom he baselessly accused of 2020 election fraud. Though the election workers believe their award can’t be discharged in bankruptcy, Chapter 11 has enabled the former mayor to remain in control of his assets.

Monday’s hearing marked the culmination of months of rising tensions between Giuliani and his creditors, who have accused the former Trump attorney of obscuring his finances and contend his bankruptcy is nothing more than a delay tactic.

“He’s not a doddering 80-year-old. He is a shrewd and manipulative man. His reports are false, inconsistent and late. His deadlines are ignored,” Rachel Strickland, the election workers’ attorney, told Lane at Monday’s hearing.

Strickland went on to note Giuliani’s bookkeeper is ill, while his accountant quit.

“Those are huge red flags that warrant that adult supervision,” she said.

Rachel Biblo Block, an attorney representing the unsecured creditors committee, said Giuliani’s “gross mismanagement” of his financial affairs necessitates the appointment of a trustee to take control. She also raised Giuliani’s apparent failure to “rein in his spending,” pointing to $26,000 in credit card payments and more than 50 Amazon transactions since filing for bankruptcy.

Giuliani’s attorney, Gary Fischoff, acknowledged his client’s past shortcomings, including late reports and improper credit card spending.

But Fischoff attempted to fend off the motion by insisting the situation is improving. The credit cards have since been canceled, and an accounting professional has newly expressed interest in coming aboard, he noted.

“I understand that it has taken some time, but what’s important is the debtor has been paying these expenses not with creditors’ money, with his own money,” Fischoff said.

“How do I know that?” the judge shot back, referencing creditors’ concerns about transparency into the finances of Giuliani’s companies.

Fischoff also argued a full evidentiary hearing was needed before approving creditors’ contested motion, saying all the creditors had was a “nice presentation.” Fischoff even raised the possibility of Giuliani himself testifying.

“I think, perhaps, the debtor needed to take the stand,” Fischoff said.

Giuliani joined Monday’s hearing virtually, while many of the attorneys appeared in person in the White Plains, N.Y., courtroom. Moments before it concluded, Giuliani went live on his daily online show.

Even if Giuliani’s desire to remain in control of his finances survives his creditors’ takeover attempt, it may not be his only obstacle to proceeding with his bankruptcy process.

Moments after arguments on the issue concluded, an attorney with the Justice Department’s bankruptcy watchdog arm expressed concerns that Giuliani has not yet sought his bankruptcy judge’s approval to retain attorneys actively representing him in his Georgia criminal case and a civil lawsuit Giuliani filed against President Biden.

“We’re actually close to filing a motion to dismiss or convert the case, because all of these things that are going on here are extremely problematic,” said Andrea Schwartz, the attorney.

The office had not taken a position on creditors’ request for an independent trustee other than raising a few concerns about the proposal’s phrasing.

The former New York City mayor’s finances have been put on full display since his bankruptcy filing, exposing hundreds of thousands of dollars in unpaid taxes and credit card debt, on top of the millions of dollars he could owe in outstanding litigation.

Beyond the election workers’ case, Giuliani could owe more than $3.5 million if outstanding lawsuits are resolved against him, in addition to the “unknown” claims of litigants in several other lawsuits. That includes lawsuits stemming from Giuliani’s 2020 election fraud claims against voting software companies Dominion Voting Systems and Smartmatic.

The president’s son, Hunter Biden, another creditor, in recent days agreed to drop his lawsuit against Giuliani after the bankruptcy case stalled its progress.

The next hearing in Giuliani’s bankruptcy is scheduled for July 10, when attorneys for the creditors are expected to argue a motion to compel discovery that Giuliani has not yet turned over despite lapsed deadlines. They also expect to seek sanctions on the ex-mayor.

“I’m not surprised to hear that,” Lane said.

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