Giuliani bankruptcy hits breaking point as creditors seek takeover 

Tensions in Rudy Giuliani bankruptcy case are coming to a head, with his creditors hoping for the drastic solution of having a third party take control of the former New York mayor’s finances.

Since Giuliani filed for bankruptcy protection, Buoyed by a $148 million defamation verdict, his creditors accused him of hiding assets and a coffee business, spending egregiously and failing to provide necessary documentation on time.

They have had enough. On Monday, lawyers representing Giuliani’s creditors will return to New York bankruptcy court, hoping to persuade a judge that the time has come for a trustee to intervene.

“Simply put, Mr. Giuliani and his bankruptcy case have reached an impasse,” the unsecured creditors committee wrote in its motion.

In December, Giuliani hastily filed for Chapter 11 bankruptcy after a jury ordered him to pay two Georgia election officials $148 million for defaming them by spreading a baseless conspiracy on behalf of former President Trump in 2020 that they were involved in mass voter fraud. He has promised to appeal.

The bankruptcy automatically froze election officials’ efforts to collect the enormous sum. And by filing for Chapter 11 — as opposed to Chapter 7, a more common type of individual bankruptcy that would lead to liquidation — Giuliani maintained control of his assets, for now.

“Mr. Giuliani entered Chapter 11 because he wanted to maintain control. This is the key to Mr. Giuliani’s bankruptcy,” said Daniel Gielchinsky, a partner at DGIM Law who specializes in bankruptcy law.

That could soon change as creditors hope to take the reins. For months, they expressed concerns about Giuliani’s genuineness in filing for bankruptcy, considering it a delaying tactic. Election workers believe federal law prevents Giuliani from fulfilling his nine-figure severance pay in bankruptcy.

U.S. Bankruptcy Judge Sean Lane, who is overseeing the case, expressed frustration at a hearing last month.

“I am disturbed by the status of this case. The question is, as always happens in bankruptcy courts, where do we go from here?” Lane said.

In a scorching 55 page movement filed days later, Giuliani’s creditors told Lane he should take the rare step of appointing an independent trustee, arguing that Giuliani had shown a preference for “theatricality over progress.”

“Your creditors do not need to accept this as their situation, and the Committee refuses to do so. Accordingly, the time has come for the immediate appointment of a Chapter 11 Trustee to assume control of the Debtor’s assets and financial affairs, including its wholly owned businesses,” the motion says.

If the judge agrees, the trustee could try to sell assets or prevent Giuliani from diverting assets to his companies, which have not filed for bankruptcy.

While Gielchinsky said he thinks the motion has merit, he added that the judge may wait so that Giuliani can first propose a reorganization plan to his creditors, which must be confirmed for Giuliani to emerge from bankruptcy. Court documents indicate that Giuliani is looking for a third party to finance his “so far unsuccessful” plan.

“The big question the judge will have to deal with at the hearing of this conversion motion is: should I do this now or just wait and essentially give him the rope to hang himself when he proposes a reorganization plan that everyone rejects,” said Gielchinsky.

Since Giuliani filed for bankruptcy, his finances have become visible to the public.

He disclosed $10.6 million in assets, including a Mercedez-Benz, two IRAs and three Yankee World Series rings. But most of it comprises his homes in New York and Florida, and there are questions about whether Giuliani will sell them.

Creditors have already tried to force Giuliani to sell his $3.5 million condominium in Palm Beach, Florida. The judge did not order Giuliani to do so, but at a hearing, Lane noted that it was a “warning shot across the bow.”

“The debtor may be able to defeat this motion only to be faced with much more draconian requests for relief from the committee in the future,” Lane said at the time.

Last week, Lane authorized Giuliani’s request to hire a broker to sell his New York apartment, which he valued at $5.6 million.

“The bankruptcy bought him six months, that’s true,” said Eric Snyder, a partner at Wilk Auslander who chairs the law firm’s bankruptcy department. “But what did it really buy him, if he lost them anyway? Except now he’s in a legal process that is much more intrusive.”

Giuliani’s income and expenses were also scrutinized, including credit card statements showing he spent thousands to cover his business costs, as well as paying the credit card bill of Maria Ryan, one of his employees and Giuliani’s alleged girlfriend. .

Giuliani’s lawyers deny any wrongdoing, saying he transfers personal funds when business revenues are insufficient to cover his company’s expenses.

As for his income, creditors have complained that many of Giuliani’s income streams flow to his company, which has not filed for bankruptcy, rather than to a personal account.

The former mayor indicated that he lived off IRA withdrawals and income made up of Social Security payments and his radio show. But Giuliani’s network suspended his show last month following his indictment in Arizona for his post-election efforts.

He is now starting a new venture called “Rudy Café”, with pre-orders expected to ship later this month, according to the store’s website. But this agreement also caused confusion.

Giuliani is expected to receive 80 percent of net profits, court documents show, but creditors say the funds will similarly go to his company. They further claim that Giuliani’s own lawyer was kept in the dark until the deal became public.

“Some of them are not real reasons to appoint an administrator,” Snyder said. “But paying other people’s bills and not disclosing the cafe contract – those are real issues that could constitute what they call cause to put to the administrator.”

Giuliani should find gainful employment to help finance his reorganization plan, the creditors said, rather than “kickbacks to his cronies and a personal slush fund,” indicating they plan to investigate whether Giuliani is “responsible for bankruptcy crimes.” ”.

In court documents filed on Monday, his lawyers said the comment was a “stretch of facts,” also noting that Giuliani has “possible” lung disease after spending time at Ground Zero after 9/11.

“Perhaps the Committee also has a suggestion about who would employ a fired 80-year-old lawyer,” Giuliani’s lawyers wrote.