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Edelson sues Girardi company alleging $100 million fraud conspiracy (3)

The now-defunct law firm Girardi Keese operated an ongoing criminal enterprise that stole more than $100 million from its clients, co-lawyers, vendors “and many others unfortunate enough to do business with firm,” the Edelson PC law firm said in a federal lawsuit.

According to court case, filed Wednesday evening. Instead of handing out rewards to clients, millions of dollars went to fund the lavish lifestyles of Thomas Girardi and his “Real Housewives of Beverly Hills” wife, Erika Girardi, according to the filing.

“When the curtain was finally drawn, it became clear that Girardi Keese was operating in a manner similar to a Ponzi scheme, only much worse,” according to the U.S. District Court for the Northern District of California trial.

Edelson served as Girardi Keese’s local co-counsel for clients in litigation regarding the 2018 Lion Air JT 610 crash. In December 2019, Edelson sued Girardi, Girardi Keese and others to recover his share of the attorney’s fees and to track down the Boeing Co. Settlement Fund that Girardi Keese still owes to several clients. Girardi’s creditors have filed for Chapter 7 involuntary bankruptcy against the company.

Girardi Keese collapsed days after Edelson filed a contempt motion for money stolen from Lion Air families, the lawsuit heard. Tom Girardi was disbarred in June and the California Supreme Court ordered him to pay $2.28 million plus 10% interest for funds stolen from clients.

Edelson alleges Girardi Keese stole from clients; falsified expenses to justify stealing customers’ money; mixed stolen client funds; laundered stolen funds through the company’s payroll account and American Express cards; mixed money from Tom Girardi and lenders in the client’s trust account to pay off long-overdue payments to clients; and paid non-lawyers, like case runners, illegal cash bonuses for referring clients, in addition to committing to pay them illegal shares of ultimate recovery.

“They used to be a law firm, but at some point they turned into a criminal enterprise,” Sen. Tom Umberg (D), chairman of the California Senate Judiciary Committee, said Thursday.

celebrity lawyer

Girardi was the company’s founder and a celebrity inside and outside the courtroom. He was considered by many to be the most prominent plaintiff’s attorney in the country, according to the lawsuit. “But inside the corporate gates, the story was completely different.”

Edelson accuses Girardi Keese of bribing former judges who allegedly split the settlement money among the plaintiffs to produce the result Girardi Keese wanted. The lawsuit alleges that Girardi Keese lied to, threatened and/or bribed clients and attorneys “to silence them and keep the scheme from collapsing.”

Edelson has redacted the amount of money he seeks, including treble damages, restitution, attorneys’ fees and punitive damages of at least $55 million.

In the past, RICO claims have been filed against law firms, “but this is, of course, a unique case,” Jay Edelson said in an email Thursday. “We are not aware of any lawsuits alleging that the firm was essentially a criminal enterprise acting as a law firm. We are satisfied that Tom orchestrated the largest Ponzi scheme in plaintiff’s bar history, dating back over a decade (and probably much longer) and involving hundreds of millions of dollars.

David Freeman Engstrom, co-director of the Stanford Law’s Center on the Legal Profession, said Thursday that for years, “corporate defendants have attempted, mostly unsuccessfully, to deploy RICO against plaintiffs’ attorneys for allegedly suing fictitious. Most of these lawsuits were dubious at best and suggested that RICO had no place in the civil justice system. But if the allegations against Girardi turn out to be true, this RICO lawsuit seems to be getting closer to the mark.

Girardi is said to be mentally incapacitated.

Other defendants

The lawsuit also names David Lira, a former partner of Girardi Keese who is now a member of Engstrom, Lipscomb & Lack, and who is Girardi’s son-in-law. Lira did not respond to an email seeking comment, nor did Keith Griffin, a lawyer for Girardi Keese who is now a partner at Dordick Law Corp.

Erika Girardi and EJ Global LLC, a California limited liability company whose sole member is Erika Girardi are also named as defendants. “EJ Global was created for the purpose of funneling money from Girardi Keese for the benefit of Erika,” the lawsuit said.

Evan C. Borges, partner of Greenberg Gross LLP in Costa Mesa, Calif., bankruptcy attorney for Erika Girardi, on Thursday called the lawsuit “another misguided attempt to blame Erika for the actions of Tom Girardi and others of which she had no knowledge and in which she had no involvement.

Lawyers for Levene, Neale, Bender, Yoo & Brill LLP representing the company’s trustee in bankruptcy declined to comment on the lawsuit. Representatives of Girardi could not immediately be identified.

Christopher Kamon, chief financial officer of Girardi Keese, was also prosecuted; George Hatcher, a non-lawyer “consultant” who was responsible for referring the families of plane crash victims; Consultants Hatcher’s Wrongful Death; Joseph DiNardo; and Nardo’s California Attorney Lending II, which allegedly loaned Girardi Keese money and secured a first tranche of settlement money entering the business.

Filing alleges violations of federal racketeer-influenced and corrupt organizations law; conspiracy; postal fraud; electronic fraud; money laundering; engage in monetary transactions in property derived from specified illegal activities; obstruction of justice; transportation of stolen goods; and violate the California Unfair Trade Practices Act and the California Penal Code for receiving stolen property and aiding and abetting the concealment of stolen property.

Defective bar

Despite years of complaints and allegations of fraud and mismanagement, “Tom has maintained an unblemished record before the state bar. The fraud therefore continued, with only an occasional glimpse of rot within the Girardi Keese business,” the lawsuit said.

Edelson alleges that Girardi “cultivated the impression that not only was he a successful and powerful lawyer, but that he was in fact in control of the relevant authorities, including the agency responsible for disciplining lawyers, the State Bar of California”. Girardi entertained bar officials at lavish parties “and allegedly went so far as to bribe a longtime state bar investigator,” the lawsuit said.

The bar has not commented on the lawsuit, said the bar’s chief executive, Leah Wilson.

In March, the state bar court ordered Girardi inactive status and he was disbarred effective July, Wilson said in a statement emailed Thursday. “The investigation, including details of past closed complaints and investigations, must be kept confidential to comply with the law and give this investigation the best chance of success.”

California attorneys are overseen by the California Supreme Court, which ultimately sanctions and admits attorneys to practice on the recommendations of the bar, and the California Legislature under the state’s Business and Professions Code.

Lawmakers have fought for years with the bar to improve oversight. The bar “is responsible for discipline against Girardi and any lawyer engaged in this business,” Umberg said, adding that the Girardi case is a lesson for complaints filed over 20 years ago that “have only recently come to light.” and have only been the subject of a recent investigation”.

“This is a case study of how to fail to protect consumers,” Umberg said.

The case is Edelson PC vs. LiraND Cal., No. 3:22-cv-03977, complaint filed 7/6/22.