Famous Lawyer’s Assets Frozen by Federal Court

Thomas Girardi, a prominent Los Angeles attorney faced a federal judge in Chicago who froze the assets of his firm after finding that he misappropriated at least $2 million in client funds that were due to the families of those killed in the crash of a Boeing jet in Indonesia.

Girardi is one of the nation’s leading civil lawyers, and gained notoriety in 1993 for his role in a lawsuit against the Pacific Gas and Electric Company of California that went on to inspire the 2000 movie Erin Brockovich.

At a contempt hearing U.S. District Judge Thomas M. Durkin called Girardi’s conduct “unconscionable” and said he was referring him to the U.S. attorney’s office for criminal investigation. Judge Durkin said to Girardi: “No matter what your personal financial situation is, no matter what kind of pressures you are under, if you touch client money, you are going to be disbarred and quite possibly charged criminally.” The judge called the need to hold clients money inviolable “ethics 101.”

Girardi, 81, is one of the nation’s preeminent civil lawyers and gained fame for his recent appearances on “The Real Housewives of Beverly Hills” alongside his now-estranged third wife, a 49-year-old pop singer known as Erika Jayne.

During the hearing, two attorneys representing Girardi said he did not currently possess the $2 million owed his clients. Los Angeles attorney Evan Jenness told the judge her client’s firm, Girardi Keese, had about $15,000 in its operating accounts and that: “They were unable to make payroll more recently.” The lawyer also cited “obligations and debts,” as well as an anticipated family court battle with Jayne over their assets. She filed for divorce last month after more than 20 years of marriage.

Girardi attended the court hearing by phone but did not speak beyond acknowledging his presence. His lawyers, who were hired in recent days, said Girardi had not been able to assist them in preparing a defense for the hearing. They said they had concerns about his mental competency. Meanwhile, Keith Griffin, an attorney at Girardi’s firm, told the court he “could not elaborate on why such an amount was still owed to certain clients or what the status of the remaining settlement proceeds was because Girardi is the sole equity owner of [his firm Girardi Kesse] with sole and exclusive control over the firm’s bank accounts, including its client trust accounts.”

Griffin then claimed that Tom was”unavailable in recent weeks due to a serious illness that caused him to be hospitalized for which he sought treatment”amid his fraud case.

Attorney Jay Edelson, a lawyer for the plane crash victims’ families called those assertions “a sham.” Edelson’s firm alerted the judge to the misappropriated funds and told Durkin that Girardi was offering him money in an attempt to stave off the contempt hearing.

Judge Durkin also ordered that a trustee be appointed to oversee whatever assets remained to Girardi and his firm. The priority, he said, was for Girardi’s clients to receive their entire settlement. “These are widows and orphans,” he said, noting each was due about $500,000. “Half a million dollars for any one of these families is significant money, life-changing given the tragedy they have been through and trying to carry on in the aftermath.”

The settlements at issue stem from the crash of Lion Air Flight 610, which plunged into the ocean off Indonesia, killing all 189 people on board. The plane was a 737 Max, the jet that Boeing subsequently grounded because of problems with its anti-stall software.

On Dec. 2, attorney Jay Edelson and his firm, Edelson P.C., filed suit in Chicago federal court against Girardi, Jayne, Girardi’s fim, Girardi Keese, and a number of other defendants.In the complaint, Edelson claims Girardi embezzled much of those funds, preventing much of the settlement from being paid to the crash victims’ families and to the Edelson firm for its services in securing the payment from Boeing.

The missing money is part of the amount Girardi and his firm negotiated from Boeing for four families, and the federal judge was overseeing the litigation and the payouts. The terms of the settlement are confidential, but based on remarks in court, each client was to have been paid $2 million but had only received about 75% of the money owed to them.

Edelson’s law firm filed a separate lawsuit against Girardi, accusing him of diverting the Lion Air settlement money to finance his “public image of obscene wealth” for him and his wife.

Edelson’s multiple attempts to find out whether clients had been paid, received mixed responses. He also accused Girardi and his wife of leading opulent and notoriously lavish lifestyles, pointing out that $ 40,000 a month Erika Jayne reportedly spent on her look and Thomas Girardis daily booking and exclusive table at Mortons The Steakhouse in Los Angeles. He claims the couple face increasing pressure to repay their debts and allege their publicly declared divorce is a sham process designed to protect creditors’ assets. It also states that Girardi and Jayne siphoned off large amounts of money from lenders and customers and removed them from Girardi Keese’s bank accounts for personal use.

To further increase their available cash, Edelson claims the Girardis have begun converting settlement funds, including the funds from the Lion Air settlement, for their own personal use, which, if proved would be a clear and notorious violation of the ABA and California rules of professional conduct. Edelson claims the Girardis have then taken various finance and legal measures to shield those funds from being claimed by the courts. Edelson said, for instance, Girardi has transferred funds from his firm through various “loans” to a company owned by Jayne.

Edelson also claims Girardi has reached deals with certain creditors, some of whom are named as defendants in the complaint, to use Lion Air settlement funds to pay down some of those loans, “in a Madoff-inspired attempt to protect his own wealth and appease his aggressive well-heeled lenders.”

A fifth client also may not have been paid, the judge noted.

Girardi’s law firm partner, Robert Keese, is reportedly suing to dissolve their business venture known as 1126 Wilshire Partnership. Keese, joined by Robert Finnerty and Jill O’Callahan, allege Girardi never paid them the approximately $315,000 in income from the partnership, claiming he took the money “for his own personal gain.”

The three plaintiffs also claim in the documents that Girardi took out loans against the property valued up to $7,460,000 million without their knowledge for Girardi’s “own personal gain, benefit and use” and not for the benefit of the partnership. As a result, the plaintiffs allege they’ve suffered a loss in equity of approximately $442,500 each. Keese and the group want to dissolve the partnership and liquidate the assets, including 1126 Wilshire Blvd. They’re also looking to receive the money they were previously owed and want to be awarded punitive and compensatory damages.

According to court documents Girardi also owes court reporters Veritext $548,941.28 in unpaid invoices. The legal filing comes a month after the divorce from the attorney. The Veritext lawsuit is one of many cases against Girardi making headlines.

In In re Girardi, a case from 2019 the Ninth Circuit Court of Appeal issued an order to show cause why Girardi & Keese, Engstrom Lipscomb & Lack, Thomas Girardi, and Walter Lack should not be suspended, disbarred, or otherwise sanctioned as a result of the massive fraud which took place in litigation pursued by them against Dole Food Company. On July 13, 2010, the Ninth Circuit issued an order suspending Walter Lack for a period of six months and reprimanding Girardi; the order also imposed almost $500,000 in monetary sanctions against the two attorneys.

The Ninth Circuit concluded:

On March 21, 2008, JudgeTashima filed a detailed report addressing the motion for sanctions, in which he concluded that Girardi had “recklessly “made false statements to the Ninth Circuit.

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Girardi’s practice of authorizing the Lack firm to sign his name on briefs that turned out to contain falsehoods may raise separate ethical questions, but with respect to the specific misrepresentations identified in the order to show cause, Girardi’s proven conduct is at most reck-less, and the recklessness inheres in his mode of practice, not in any specific action he took in the enforcement action or the appeal. We will therefore formally reprimand Girardi for his recklessness in determining whether statements or documents central to an action on which his name appears are false.