AmEx Targeted by Girardi Keese Trustee as Stolen Money Conduit

American Express is defending against novel claims the credit card company enabled the defunct Girardi Keese law firm to siphon $50.25 million in fraudulent transfers as part of the insolvent firm’s scheme to cheat creditors.

Trustee Elissa Miller contends American Express cards were a favored means for the firm to make fraudulent and preferential transfers that allowed the alleged fraud and conspiracy of disgraced principal Thomas Girardi and the firm “to operate and flourish.”

Miller maintains the estate is entitled to recover the funds, with interest, from payments made to American Express that she contends “were made by Girardi Keese with actual intent to hinder, delay, or defraud any creditor.”

Her suit places AmEx, more typically a bankruptcy court creditor, in the position of having to explain its issuance of 66 cards to Girardi, his celebrity ex-wife Erika Jayne, and criminally charged chief financial officer Christopher Kamon and others affiliated with the firm. Simultaneously, Miller must prove why the company should have flagged potential wrongdoing by those cardholders.

The challenge for the trustee could be complicated by the fact Girardi was a “high rolling plaintiffs’ lawyer” who liked to spend a lot of money, said Baker Botts LLP partner Kevin Sadler. AmEx may argue it didn’t view Girardi’s spending habits as suspicious, he said.

But attorneys say the trustee just might succeed at getting some of the half-billion dollars in claims against the firm’s estate returned to creditors, victims, and clients.

The trustee’s argument “seems like a viable theory,” Seanna Brown, a BakerHostetler partner who’s represented the trustee liquidating Bernie Madoff’s defunct investment firm, said in an email. “How else will the trustee get the money back otherwise, as the debtor and his family have spent it? I have not seen it before but being a trustee’s counsel I like it.”

American Express didn’t immediately respond to an email seeking comment. Greenspoon Marder LLP, the attorneys representing Miller, declined comment.

‘Systematic Process’

The filing is one of several in the widening fight to recoup some $495 million in claims filed against the Girardi Keese estate. The firm and its principal were hauled into separate, involuntary bankruptcies in 2020. The trustee filed a series of adversary proceedings against former firm lawyers, Erika Jayne, and others it alleges shunted millions from the firm.

The AmEx cards were part of a “systematic process of draining the available cash, often times consisting of stolen client trust funds, by, among other things, making distributions to certain preferred creditors or third parties from funds of Girardi Keese’s estate,” according to Miller’s complaint filed Jan. 10. The firm over seven years paid American Express $50,257,202. Those transfers can be voided under federal and California law, the trustee argues.

No less than $9,079,528 of purchases “solely benefited Thomas, Erika, and their family members and friends, and had no relation to the operation of, and did not benefit, Girardi Keese,” the filing said.

The firm imploded when the famed plaintiffs’ attorney and the Real Housewives of Beverly Hills star were accused in a Chicago federal lawsuit of embezzling money meant for those Girardi Keese was representing in litigation over the 2018 crash of a Lion Air Boeing 737 off the coast of Indonesia. A contempt finding soon followed. Thomas Girardi and the firm were forced into bankruptcy, and lawsuits claimed racketeering and fraud fed the Girardis’ lavish lifestyle.

Novel Claims

The trustee’s move is a new one to Sadler, who for 14 years has represented the receiver for Stanford Financial Group’s estate, recouping funds for victims of R. Allen Stanford’s certificate of deposit-based fraud scheme.

“You have to ask yourself ‘what was the financial relationship between Girardi and AmEx?’” Sadler said. American Express issued a card used to buy things, sends money to merchants, such as a jewelry store, and then sends Girardi a bill.

“AmEx is kind of in the middle between the jewelry store and Girardi,” he said.

“There’s a little bit of the conduit situation there,” which is why it “falls in a gray area,” he said.

If a party that receives money from a debtor in a fraudulent transfer designed to hinder or defraud creditors or paid when the debtor was insolvent, “you have no defense basically. You have to pay it back,” Bruce Markell, a Northwestern University professor and former bankruptcy judge, said in an interview.

The trustee is saying American Express received money from a person who should have been paying other creditors. AmEx will say it gave value for the money that was returned, Markell said.

“AmEx is in a tough spot,” and must show that payments somehow gave value to Girardi Keese, he said.

A status hearing is set for May 2 before Bankruptcy Judge Barry Russell.

The case is Miller v. American Express Travel Related Services Co., Inc., Bankr. C.D. Cal., No. 2:23-ap-01047, summons executed 1/13/23.