Bankruptcy judge threatens to force Giuliani to testify about finances

The federal judge overseeing Rudy Giuliani’s bankruptcy proceedings threatened to force the former New York mayor to testify under oath about the state of his finances after Giuliani failed to explain how he plans to pay roughly $350,000 in administrative fees incurred in the case.

U.S. Bankruptcy Judge Sean Lane in the Southern District of New York said in a written order Thursday that he is holding off on finalizing his decision to dismiss Giuliani’s bankruptcy case and may decide to keep the proceedings going after Giuliani claimed “he does not have the ability to pay such fees” — which must be resolved before the case can be closed.

But Lane, who has been critical of Giuliani’s lack of financial transparency throughout the proceedings, was skeptical of the former mayor’s claim that he doesn’t have the money, citing Giuliani’s ownership of two apartments that are of “considerable value.”

“What little we know about the Debtor’s financial situation makes his stance here more troubling,” Lane wrote. “Even assuming that the Debtor does not have the funds on hand to immediately pay these bankruptcy expenses, he certainly has considerable assets upon which he can draw to pay such expenses.”

Echoing his remarks in a hearing last week, Lane said the “most obvious path forward is to initiate proceedings to assess the details” of Giuliani’s “current financial circumstances” with an evidentiary hearing that would potentially include “the disclosure of documents” and “testimony under oath” by Giuliani.

A spokesman for Giuliani did not immediately respond to a request for comment.

The order comes two weeks after Lane threw out Giuliani’s bankruptcy case, paving the way for numerous creditors, including two former Georgia election workers who won a $148 million defamation claim against the former mayor, to pursue and potentially seize his assets.

But the case can’t be dismissed until Giuliani explains how he plans to pay fees in the case, including expenses his creditors incurred when they retained an investigative accounting firm made up of former CIA and FBI officials to probe his finances.

That hiring came after Giuliani repeatedly failed to fully disclose his cash and assets, including information about his businesses and other holdings that is required in bankruptcy proceedings — a lack of transparency the judge has called “troubling.”

On July 12, an attorney for Ruby Freeman and Shaye Moss, former Georgia election workers Giuliani falsely accused of helping to steal the 2020 presidential election, filed a motion asking the judge to order Giuliani to immediately turn over all of the cash in his bank account. They also pressed that Giuliani be ordered to sign over control of his New York apartment to a trustee appointed by the group to manage its sale — all to resolve costs related to the bankruptcy proceedings.

Lane declined to immediately take up the issue, calling it “premature.” But in a hearing last week, Rachel Strickland, an attorney for Freeman and Moss, urged the judge to take action quickly, accusing Giuliani of financial “shenanigans” and continuing to spend freely without authorization from the court.

Strickland said records from the only bank account Giuliani had disclosed to creditors showed that in recent days he had burned through more than half of the $60,000 in the account — including $39,000 in fees related to his Florida condo and New York apartment. Giuliani also spent money on travel and other expenses related to the Republican National Convention in Milwaukee, she claimed.

Giuliani did not appear at the virtual hearing. And his attorneys, Heath Berger and Gary Fischoff, told Lane they’d had trouble reaching their client — an answer that frustrated Lane, who ordered them to file a plan by noon last Thursday about how Giuliani would pay. He warned if they didn’t, he’d summon Giuliani to the “witness box” to explain himself.

But at the deadline, there was only a letter from Berger, who told the judge that Giuliani’s legal team had been in “extensive negotiations” with attorneys for the creditors but there was not yet an agreement. “The parties are still talking, and I am hopeful a joint resolution will be forthcoming shortly,” he wrote.

A short time later, Strickland faxed her own letter in challenging Berger’s claim of “extensive negotiations.” “Much of the day has been spent with Debtor’s counsel trying to reach his client,” she wrote.

The next day, Berger filed a letter disputing Strickland’s claim, telling the judge he “had been in contact all day” with Giuliani, who had authorized him to make “numerous offers to try to resolve” the dispute over court fees. The letter did not say what those offers were.

On Tuesday, attorneys for Giuliani sent another letter to the court defending their client’s spending on travel to Milwaukee for the GOP convention. The filing included a letter from My Pillow CEO Mike Lindell, a fellow election denier and Trump associate, who told the court his media company, FrankSpeech, paid for Giuliani’s “first class airfare and hotel” for the RNC.

Lindell had previously been subpoenaed by creditors in the Giuliani’s bankruptcy case amid questions about Giuliani’s finances and income.

The back-and-forth comes nearly seven months after Giuliani sought bankruptcy protection after he was ordered to immediately pay millions in damages to Freeman and Moss for the false claims he made about them in the aftermath of the 2020 election when he was serving as former president Donald Trump’s personal attorney.

In court documents, Giuliani has listed roughly $153 million in debts to at least 20 people and businesses, including Freeman and Moss. A list of top creditors filed in February said Giuliani owes more than $3.7 million in unpaid legal fees to three law firms — though he is disputing some of those bills — and more than $1 million in state and federal taxes.

The former federal prosecutor has claimed about $11 million in assets — including an estimated $5.6 million New York apartment and his Palm Beach, Fla., condo, which is valued at $3.5 million. While Giuliani has put his New York property on the market, he has so far successfully resisted selling his Florida home, with one of his lawyers claiming the sale could render the 80-year-old former mayor “homeless.”

A financial disclosure report filed last month said Giuliani had less than $100,000 in the bank at the end of May and was funding his living expenses through a rapidly diminishing retirement account. But creditors have repeatedly complained that Giuliani has not filed a complete picture of his net worth and have accused him of hiding money and assets.

In recent weeks, Giuliani repeatedly shifted legal strategies in the case. In December, he sought Chapter 11 bankruptcy protection, which allows an individual to reorganize and file a plan to pay off debts. But on July 1, Giuliani changed course, asking a judge to reclassify his case under Chapter 7 bankruptcy, which would hand control of his personal and business finances to an outside trustee to liquidate. The request prompted immediate objections from the election workers and other creditors who accused Giuliani of more delay tactics.

On July 10, an hour before a hearing on the matter, Giuliani abruptly changed position yet again, asking the judge to dismiss the bankruptcy case altogether. While some of the creditors pressed the judge to appoint a trustee, Freeman and Moss supported the dismissal and Lane ultimately agreed — saying there was no evidence that Giuliani’s “uncooperative conduct will change.”

A dismissal would allow Freeman and Moss and other creditors to pursue legal remedies to collect money owed to them by Giuliani. It also allows other pending lawsuits against the former mayor that had been frozen by the bankruptcy proceeding to resume, including defamation suits by the voting machine companies Dominion Voting Systems and Smartmatic and a sexual harassment and wage theft claim by former Giuliani associate Nicole Dunphy.

All are part of a committee of “unsecured creditors” that had sought relief in the bankruptcy case.

But last week, Lane threatened to hold off on finalizing that order to dismiss Giuliani’s bankruptcy, to press him to pay the creditor costs first — a requirement by law but also an acknowledgment that it may be the only money that any of the creditors see in the near future as they seek to collect what Giuliani owes them.

“There are a lot of bad things that can happen,” Lane warned Giuliani’s attorneys if their client didn’t comply. “There are a lot of things your client doesn’t want to happen that will happen.”

On Thursday, Lane reiterated that warning in writing and said the court may have to reconsider whether closing Giuliani’s bankruptcy case is the “appropriate course of action.”

The judge suggested he could re-entertain the appointment of a trustee who would oversee Giuliani’s finances and “promptly liquidate” his assets but said he wanted to hear from attorneys for Giuliani and his creditors by next week before “determining the path forward.”