Split Widens on Dischargeability for Third Party’s Violation of Securities Laws
Circuits are split 2/1 on whether a debtor must have committed a securities law violation before a judgment is made nondischargeable under Section 523(a)(19).
%1
Trustee Green-Lights Lawsuit Against 'Real Housewife' Erika Girardi
A bankruptcy trustee overseeing the estate of Tom Girardi's defunct law firm has dropped her opposition to allowing a lawsuit against Girardi's estranged wife, "Real Housewives of Beverly Hills" star Erika Jayne Girardi, ahead of a key Tuesday hearing, Reuters reported. Chapter 7 trustee Elissa Miller said in a Thursday filing she has no objection to Chicago law firm Edelson pursuing its own claims that Erika Girardi used misappropriated settlement funds obtained by her husband's law firm to fund a "glitz-and-glam" lifestyle. U.S. Bankruptcy Judge Barry Russell has scheduled a Tuesday hearing on whether to allow Edelson's lawsuit to proceed in Chicago federal court. The move is a notable reversal for Miller, who last month argued that allowing Edelson's lawsuit to proceed against Erika Girardi would disrupt her administration of the Girardi Keese estate. Edelson PC's lawsuit against both Girardis, which said they used settlement funds meant for the families of victims of the 2018 Lion Air crash for themselves, triggered a flood of claims by Girardi's former partners and others that forced Girardi and his firm into bankruptcy. Edelson's claims against Tom Girardi and Girardi Keese have been stayed due to the bankruptcy proceedings. "The further this moves away from a reality TV atmosphere into courts of law, the closer we will be to uncovering the truth," Edelson partner J. Eli Wade-Scott said in a statement. "We’re gratified that we’re on that path and we’ll be getting into real discovery." Miller is also substituting the special litigation counsel tasked with investigating whether Girardi Keese assets were fraudulently transferred to the reality star. Miller on Thursday said it was in the estate's "best interests" to swap out Ronald Richards, of Ronald Richards & Associates, for Larry Gabriel, a Los Angeles-based partner at Jenkins, Mulligan and Gabriel.
Another District Judge Rules that Tax Foreclosures Can Be Fraudulent Transfers
The circuits are split on whether the Supreme Court’s BFP opinion can be extended to bar fraudulent transfer attacks on in rem real estate tax foreclosures.
Racial Gaps in Bankruptcy Advice Expose Lawyers’ Blind Spots
Breaking the cycle of sending Black debtors to the least protective form of bankruptcy starts with the attorneys advising them — but most of them don’t see racial gaps as a problem, Bloomberg reported. Faced with data on racial disparities in bankruptcy decisions, attorneys guiding those clients defended their decisions as providing the best advice for individuals’ situations, according to a study. The survey found most bankruptcy attorneys either claimed no knowledge of widespread racial disparities in bankruptcy or expressed little interest in addressing them. “I found exactly what all of the research that inspired my project found, which is two things — one, either they don’t know [the racial disparity exists], or they’re not interested in tackling it,” said Emony Robertson, a Howard law school student who conducted the survey with LexisNexis African Ancestry Network and LexisNexis Rule of Law Foundation. Past research shows that more than half of Black filers are steered toward chapter 13 — twice the rate of White, Hispanic or Asian filers. That disparity is significant for Black filers who saw chapter 13 issues exacerbated by the pandemic, which drove job losses, added unexpected medical bills, and a widened wealth and homeownership gap. The ongoing research on racial gaps should force bankruptcy attorneys to take a harder look at themselves and the advice they give clients, said Jim Haller, education director at the National Association of Consumer Bankruptcy Attorneys. “It’s our role to make sure that implicit bias does not play a role in terms of chapter choice,” he said. “I thoroughly believe that the buck always stops at my desk, so if there’s a disparity out there, I need to examine it and see if it’s affecting the advice that I give. That’s it. It’s not on somebody else to prove it to me.”
Peñitas City Manager Pleads Guilty to Bribery, Bankruptcy Fraud
Peñitas (Texas) City Manager Omar Romero pleaded guilty to bribery and bankruptcy fraud, KRGV reported. He faces up to five years in federal prison on each count of conviction. Romero admitted that in 2018, he used a cellphone to communicate with other public officials regarding a scheme to sell a water tank to Agua Special Utility District (SUD). Compensation would be paid in consideration for board votes, according to a release. Romero also admitted that he received an unauthorized payment of at least $50,000 during a bankruptcy proceeding. He was appointed as the chief restructuring officer of Hidalgo County Emergency Services Foundation at the time. In a statement, the city of Peñitas announced that Romero has been "demoted" as city manager, with the city council appointing Humberto Garza serving as the new city manager. Sentencing is set for Jan. 20, 2022. Romero remains free on bond until then.