American Express has agreed to a $3 million settlement to resolve claims by the Girardi Keese bankruptcy trustee. The trustee accused American Express’s banking unit and a subsidiary of facilitating $50.25 million in fraudulent transfers as part of the defunct law firm’s scheme to deceive creditors.
Settlement Approval and Dismissal
U.S. Bankruptcy Judge Barry Russell approved the settlement on July 24, leading to the dismissal of the trustee’s lawsuit against American Express National Bank and American Express Travel Related Services Company on Friday, according to court filings.
Trustee’s Motion and Settlement Terms
In a June motion, trustee Elissa Miller of Greenspoon Marder LLP highlighted that American Express denied the allegations of fraudulent or preferential transfers made in her 2023 complaint. Miller emphasized that the settlement is fair, reasonable, and beneficial for the estate and its creditors, considering the uncertainties of litigation and potential recovery amounts.
Investigation and Allegations
The trustee has filed over 100 complaints to recover allegedly fraudulent transfers while managing the estate. Her investigation revealed that client and partnership funds were misappropriated by Tom Girardi and his associates. The trustee described Girardi Keese as a fraudulent operation designed to enrich Thomas Girardi, his wife, and their collaborators.
Financial Mismanagement and Fraud
Girardi Keese fell into financial turmoil, and during this period, it failed to pay its creditors. The trustee stated that Thomas Girardi and his associates systematically drained available cash and diverted funds held in trust for clients, defrauding both clients and creditors.
American Express’s Defense
American Express challenged the trustee’s claims and asserted affirmative defenses. The company argued that nearly half of the targeted transfers occurred outside the statutory timeline for voiding fraudulent transfers. These transfers are only recoverable if the trustee can prove they were fraudulent and that a reasonable person would not have discovered them.
Background of Girardi Keese
Girardi Keese, a renowned plaintiffs firm in Los Angeles, gained notoriety when Tom Girardi was found to have misappropriated millions from Indonesian plane crash victims in December 2020. Numerous other former clients and co-counsel have since come forward with similar allegations, leading to involuntary bankruptcies for Girardi and his firm. Girardi also faces criminal charges in California federal court, with a wire fraud trial set for Aug. 6. He was disbarred by the California Supreme Court in July 2021.
Previous Settlements and Legal Proceedings
In February, the bankruptcy judge approved a settlement involving the trustee, a former Girardi Keese lawyer, and the Mandell Law Firm over $1.8 million in attorney fees from a lawsuit regarding a toxic Exide battery plant. Last year, the trustee agreed to accept at least $1.2 million to settle complaints seeking over $9.4 million, according to a Law360 analysis. Additionally, in 2022, Erika Girardi was required to surrender $750,000 diamond earrings bought with embezzled funds.
Legal Representation
Elissa Miller is represented by Daniel A. Lev and Asa S. Hami of Greenspoon Marder LLP. American Express is represented by Darryl Laddin of Arnall Golden Gregory LLP, Amy Quartarolo of Latham & Watkins LLP, and Shawn T. Hynes of American Express.
The cases are In re Girardi Keese, case number 2:20-bk-21022, and Miller, Chapter 7 Trustee v. American Express Travel Related Services Corporation et al., case number 2:23-ap-01047, both in the U.S. Bankruptcy Court for the Central District of California.
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