4-7-22 as Seen on Law.com -The Recorder - Girardi Litigation Funder Calls Edelson's Latest Accusations 'Truly Offensive'
Posted on April 07, 2022
A litigation funder that worked with Tom Girardi called new accusations in a proposed racketeering lawsuit brought by Edelson PC “truly offensive” and a “smear campaign.”
California Attorney Lending II, a Buffalo, New York-based lender to Girardi’s law firm, Girardi Keese, was named in a draft complaint submitted on Tuesday as part of an agreement Edelson reached to pay clients of the Lion Air crash their $2 million in stolen settlement money. The complaint, which seeks $50 million in punitive damages, accuses two former Girardi Keese partners, the law firm’s former bookkeeper, a consultant and Erika Girardi, who is divorcing Tom Girardi, of operating a “criminal enterprise, disguised as a law firm,” and says California Attorney Lending II benefitted from the scheme.
“We’re just shocked by these allegations,” said the group’s lawyer William F. Savino, of Woods Oviatt Gilman in Buffalo, New York. “I’m sorry there are $500 million in claims. I’m sorry Tom Girardi took victims’ money. We all are. I worry now that the fractional dollar going to the victims is going to be miniscule. I worry that people are trying to ignore the propriety of secured lending and just look for people to shake down, and we won’t be shaken down.”
Edelson partner Jay Edelson disputed Savino’s characterization.
“We have no axe to grind, other than the obvious one: we believe they were involved in Tom’s scheme,” he wrote in an email.
According to a motion to approve its agreement, Edelson’s insurer will wire the money to the Lion Air families within 14 days of the effective date of the agreement. The payments will not be reduced for attorney fees.
The draft complaint, which Edelson plans to file to recoup that money, says Girardi Keese turned to California Attorney Lending II for tens of millions of dollars in financing when client money wasn’t available. Joseph DiNardo, described in the complaint as the founder of California Attorney Lending and Counsel Financial and a “close friend” to Girardi, provided funds to Girardi Keese into 2020 in exchange for the “first cut” of money coming from case settlements.
Savino noted that Edelson initially named California Attorney Lending II in an embezzlement lawsuit brought in late 2020 against Girardi Keese and Girardi, along with Erika Girardi and several former law firm partners. But in a stipulation filed on Jan. 7, 2021, Edelson agreed to drop California Attorney Lending II from the embezzlement case after the lender demonstrated “that the funds it has so far received from Thomas Girardi and/or Girardi Keese did not come from proceeds that would be regarded as client trust funds in connection with the Lion Air settlement.”
“We did not get trust funds, and they admitted it,” Savino said.
Edelson said a lot has changed since then.
“On the stipulation, we agree that they showed us that they did not take money from the client trust account,” he wrote in his email. “Instead, we have learned that they took the money directly before it even reached the clients. This is worse for them, not better. The fact that we voluntarily dismissed them without prejudice as we investigated this further (and the fact that we did not name other lenders who were in our initial complaint) shows we aren’t just firing random shots in the air.”
California Attorney Lending II has a $6.6 million bankruptcy claim against both the Girardi Keese estate and Girardi’s estate. Savino said that the Chapter 7 trustees in both bankruptcies have paid California Attorney Lending II more than $5 million.
“If they thought my client was guilty of the grievous charges thrown around in the Edelson complaint, we would not have been paid,” Savino said. “Do you pay a racketeer $5 million?”
Edelson questioned Savino’s claim. His email noted hat the Girardi Keese bankruptcy trustee has asked to expand the scope of her outside counsel’s job to investigate whether three lenders, including California Attorney Lending II, knew that Girardi had fraudulently transferred $25 million to his wife. In an objection last month, Savino called the trustee’s request a “baseless fishing attempt.”
“If they actually got money from the trustee, that would be very shocking,” Edelson wrote. “We have clients with judgments who have gotten nothing.”
As to DiNardo, the draft complaint says he pleaded guilty to filing a false income tax return after being indicted in 1997 for tax evasion and bribing and tampering with government witnesses. His New York bar license was suspended for three years.
The draft complaint says DiNardo “had actual knowledge” that Girardi and others were stealing money from clients because he obtained liens in agreements with Erika Girardi and included terms in loan documents that required settling defendants, including Boeing in the Lion Air cases, wire 50% of attorneys’ fees directly to his lending firm.
“This fact again demonstrates that DiNardo knew or should have known that Girardi Keese’s finances were not adding up,” the draft complaint says.
Neither California Attorney Lending II nor DiNardo are named in the racketeering claims, but they are alleged to have received money and violated California consumer fraud statutes. Both received Girardi Keese’s monthly bank statements and had access to the firm’s books and records, the draft complaint says, and California Attorney Lending “transferred some or all of the money it received from the Lion Air clients’ settlements to DiNardo.”
Savino called that accusation false.
“This is just a smear campaign, to dredge up this ancient history about Joe DiNardo who’s not tied with this entity,” he said.
Savino said the lending entities that DiNardo founded were predecessors to California Attorney Lending II and no longer exist. DiNardo is retired and “well into his 70s,” he said.
“Joseph DiNardo has never owned any part of California Attorney Lending II. Never. Never. Never,” he said. “We are the gold standard in litigation funding. We were meticulous about creating a California entity that would satisfy the rules of that state, and that entity has never had DiNardo ownership.”
Edelson questioned whether DiNardo was retired, especially since he was speaking this week on behalf of Counsel Financial at Mass Torts Made Perfect, a plaintiffs’ bar conference in Las Vegas. He also said Counsel Financial does business in California as California Lending II.
“Overall, Joe seems to be taking on the same strategy as his fellow defendants: lie, distract, and play the victim,” Edelson wrote. “We don’t think that will be successful in front of a jury, especially when they are all doing that at once.”