Former New York Mayor Rudy Giuliani speaks during a news conference outside the federal courthouse in Washington, Friday, Dec. 15, 2023. A jury awarded $148 million in damages to two former Georgia election workers who sued Giuliani for defamation over lies he spread about them in 2020 that upended their lives with racist threats and harassment. (AP Photo/Jose Luis Magana)
Lawyers for Rudy Giuliani’s creditors have formally asked his bankruptcy judge to appoint a trustee that would “take control” of the former NYC mayor’s finances, citing the debtor’s “dishonesty,” “incompetence,” and “gross mismanagement” throughout the months-old Chapter 11 proceedings.
In April, U.S. Bankruptcy Judge Sean Lane warned Giuliani that his creditors’ lawyers had fired a “warning shot across the bow” and could pursue “draconian requests for relief in the future,” including the potential appointment of Chapter 11 bankruptcy trustee. That trustee would be empowered to “manage the affairs of the debtor and make all decisions” about Giuliani’s property and to “propose a plan of reorganization.”
More recently, the judge remarked that he’s “disturbed about the status of this case” and criticized Giuliani’s “troubling attitude vis-à-vis the law and the court system.”
Lane’s ominous forecast has panned out, as the Official Committee of Unsecured Creditors has moved for a June 17 hearing to appoint a trustee.
“The Committee could not agree more with the Court’s statement at the May 14 Hearing, ‘I am disturbed about the status of this case. The question is, as it always is in bankruptcy court, where do we go from here,’” the motion said. “At this point, there is only one right answer to the Court’s question: a trustee must be appointed.”
It’s clear from the language of the opening lines of the motion that patience has run out.
“More than five months ago, the Debtor commenced his bankruptcy case. One might ask what he has accomplished during that time. An objective review leads to one conclusion: he has accomplished almost nothing,” the filing said, slamming Giuliani for “filing false and misleading financial reports, delaying the inevitable monetization of his assets, ignoring this Court’s orders, trying to retain professionals and attempting to relitigate the Freeman Judgment,” the $148 million dollar Georgia election workers defamation penalty that sent the former U.S. Attorney for the Southern District of New York into bankruptcy.
The committee attorneys said multiple “facts” left them no choice but to demand the appointment of a trustee that would “take control of the Debtor’s assets and financial affairs, including those of his wholly-owned businesses.”
“Here, the facts compel the appointment of a trustee for cause, including (i) dishonesty, (ii) incompetence, (iii) gross mismanagement of the Debtor’s affairs, (iv) inadequate record-keeping and reporting, (v) inappropriate relations between the Debtor and his wholly-owned businesses, (vi) conflicts of interest and (vii) breach of fiduciary duty,” the motion said.
The attorneys took stock of Giuliani’s recent fake electors felony indictment in Arizona, commenting, “And with Mr. Giuliani, when it rains, it pours,” and noting that he has a $10,000 bond to post.
In one eye-popping paragraph, the lawyers even stated possible “bankruptcy crimes” warrant investigation, claiming later that Giuliani may be “funneling funds that belong to his creditors to his business and using his business as a personal piggy bank, which is fraudulent”:
So, where does this leave Mr. Giuliani and his bankruptcy case? Mr. Giuliani is a criminally indicted debtor who claims no income except social security payments. He has been suspended from his job at WABC, and his WABC radio show has been cancelled. The Debtor previously identified this radio show as a source of income for him personally (though he never reported such on monthly operating reports). He has been suspended from the practice of law and thus cannot earn income as a lawyer. He is facing a judgment of $148 million, other claims of many millions more, and self-reports just $10 million of assets. His financial reporting and record-keeping are abysmal, as he commingles his personal affairs with those of his shill businesses. And it follows therefrom that the Debtor cannot find even one accountant willing to work for him. Among other things, the chapter 11 trustee and the Committee will now need to investigate whether the Debtor is liable for bankruptcy crimes through the use of his businesses to divert resources away from his estate and creditors in connection with his purported income that he allegedly never personally received.
The committee, accusing Giuliani of “egregious spending habits” in the form of some “60 Amazon transactions, charges for entertainment such as Netflix, Prime Video, Kindle, Audible, Paramount+ and Apple services and products and numerous Uber rides,” also called attention to the former mayor’s new “Rudy Coffee” business activities. The lawyers pointed out that a contractual agreement says payments are to be made to Giuliani’s company Giuliani Communications, rather than to Giuliani’s personal bank account.
“And, surprising exactly no one, the contract for the Debtor’s Rudy Coffee venture, which contract the Debtor entered into postpetition on April 23, 2024, directs all payments (‘80% of the net profit of each sale of Rudy Coffee’) to Giuliani Communication’s bank account, even though the contract appears to be signed by the Debtor in his individual capacity and refers to him in the contract as ‘Rudolph Giuliani, aka Giuliani Communications, LLC,’” the filing said. “The contract also obligates ‘Rudolph Giuliani’ to promote ‘Rudy coffee.’”
Citing “no confidence” in Giuliani to manage his finances in the proceedings, the committee attached a proposed order for the bankruptcy judge to sign that would appoint a trustee to do so.
“The chapter 11 trustee shall (i) take control of the companies in which the Debtor holds a controlling ownership interest (the ‘Debtor-Owned Companies’),” the proposed order said in part, adding that the trustee would manage and oversee “all day-to-day operations” of Giuliani’s businesses.
“Over and over again, the Debtor has shown his preference for delay, diversion and theatrics over progress, rehabilitation and maximization of value for his creditors. His creditors do not need to accept this as their plight, and the Committee refuses to do so,” the motion concluded. “Accordingly, the time has come for the immediate appointment of a chapter 11 trustee to take control of the Debtor’s assets and financial affairs, including his wholly-owned businesses.”
Read the motion to appoint a trustee here.
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