A judge dismissed Rudy Giuliani’s Chapter 11 bankruptcy on Friday, removing a shield that for six months froze two Georgia election workers’ efforts to collect their $148 million defamation judgment.
The former New York City mayor had long pushed back on the mounting pressure from his creditors. But in recent days, he consented to dismissal after they increasingly asserted he acted in bad faith and could be liable for bankruptcy crimes, accusations Giuliani denies.
In a 22-page ruling issued Friday, U.S. Bankruptcy Judge Sean Lane tossed the bankruptcy, citing Giuliani’s “continued failure” to provide financial transparency.
“Mr. Giuliani has failed to provide an accurate and complete picture of his financial affairs in the six months that this case has been pending. Transparency into Mr. Giuliani’s finances has proven to be an elusive goal,” Lane wrote.
It ends a half-year detour that commenced after the two Georgia election workers, Ruby Freeman and her daughter, Shaye Moss, prepared to collect on a jury’s $148 million defamation verdict over Giuliani’s baseless conspiracy that the duo committed mass election fraud in 2020. Giuliani has vowed to appeal.
Filing for Chapter 11 automatically froze their case and Giuliani’s other civil lawsuits, all while enabling him to remain in control of his assets so he could propose a plan of reorganization — which never surfaced.
Giuliani’s creditors long cast the bankruptcy as a delay tactic, accusing him of hiding assets and spending egregiously. The election workers insisted bankruptcy law would have ultimately prevented the former federal prosecutor and Trump attorney from discharging the staggering judgment.
In his ruling, Lane called Giuliani’s struggle to retain an accountant “a clear red flag,” chastising gaps in his financial reporting. The ruling blocks Giuliani from filing for bankruptcy again during the next year.
“When confronted with complaints about a failure to satisfy the Bankruptcy Code’s obligations as to financial transparency, most debtors will respond by curing at least some — if not all — of the defects. By contrast, Mr. Giuliani has done nothing,” Lane wrote.
By dismissing the bankruptcy, as the election workers requested, their original lawsuit will unfreeze and again set the duo free to attempt to collect their sum.
They are likely to recover far less than the $148 million, however, as a result of Giuliani’s limited asset pool, which mainly include his New York and Florida properties. The election workers’ lawyers contended proceeding in the bankruptcy system would instead send much of the available funds to professional fees.
“It is in the interest of creditors, for the victims of this man, to have their claims heard in the forums of their choosing, which are better positioned than the bankruptcy court to hear and decide these claims. If the opposite occurs, and we stay in Chapter 11, the cost of this process will just continue to pile up,” Rachel Strickland, an attorney for the mother-daughter duo, said at a hearing this week.
But dismissal could leave out to dry other creditors whose lawsuits against Giuliani remain in earlier stages.
To bolster their prospects, the official creditors committee wanted to remain in the bankruptcy system but strip Giuliani’s control of his finances by appointing an independent trustee. The other committee members comprise electronic voting machine company Dominion Voting Systems, which also sued Giuliani over 2020 election conspiracy theories, and Noelle Dunphy, a former employee of the ex-mayor who sued him alleging sexual assault, harassment and nonpayment of wages.
“If the case remains in chapter 11, with the oversight of Your Honor, the trustee and the committee, we can do everything we possibly can to ensure there’s an equitable distribution of that value to the people that have been aggrieved by the debtor,” Phil Dublin, an attorney representing the committee, said at this week’s hearing.
The judge opted against that option, writing in Friday’s ruling that “there is little reason to conclude that the Mr. Giuliani’s uncooperative conduct will change after the appointment of a Chapter 11 trustee.”
Giuliani had long resisted the increasingly drastic proposals from his creditors as frustrations grew, contending as recently as last month that he was still determined to propose a reorganization plan to emerge from Chapter 11 bankruptcy.
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