Giuliani is warned of ‘draconian’ personal costs he faces over $148m fine at bankruptcy hearing

‘We don’t see a scenario where the debtor will be able to possess the Florida condo at the end of the Chapter 11 case’

A judge in disgraced former New York City Mayor Rudy Giuliani’s bankruptcy case has not yet granted his creditors the ability to force him to sell his Palm Beach, Florida condo.

Mr Giuliani is in bankruptcy court after voluntarily filing for Chapter 11 bankruptcy in December following a judge ordering him to pay a colossal penalty of $148m for defaming two Georgia election workers: Ruby Freeman and Shaye Moss. Now, his creditors are trying to figure out how to get the funds they are owed.

At a 4 April hearing in bankruptcy court, Judge Sean Lane heard arguments from lawyers for Mr Giuliani and the Committee of Unsecured Creditors after the committee filed a motion last month to compel the former mayor to sell his Florida condo.

The judge did not rule on this motion on Thursday.

Lawyers for the committee said they filed the motion because the committee is concerned about the debtor’s intentions, given his spending habits. One of the committee’s lawyers, Rachel Biblo Block, said Mr Giuliani spent $120,000 in January alone — roughly $30,000 of which was spent on maintenance for the condo.

Ms Block added that the committee is unable to determine if these fees are an anomaly or typical because the February spending report hasn’t been filed.

The committee’s team also pointed out that Mr Giuliani’s argument relied on the pending Freeman judgment; Mr Giuliani’s lawyers believe the amount could be reduced upon appeal.

“In order for the Freeman judgment to become a non-player here, the judgment would have to be reduced by over 95 per cent,” Ms Block said. But even then the numbers still don’t work and “you have to sell the Florida condo.”

So, it’s “unlikely that the judgment is going away,” she told the court. “We don’t see a scenario where the debtor will be able to possess the Florida condo at the end of the Chapter 11 case.”

Gary Fischoff, a lawyer for the former mayor, argued, “There is no statutory authority for the committee’s motion to compel the debtor to sell this property.”

He said the “presumption by many in the case that the debtor owes $150m and that’s not going to change,” referring to the Freeman judgment.

“I don’t see why the debtor can’t be given the opportunity to propose a plan that deals with a much smaller universe of debt, and retains the Florida residence to live there at that time,” Mr Fischoff added. He added that Mr Giuliani plans to leave Manhattan and relocate to Florida.

The judge then asked Mr Giuliani’s lawyers, “Would it be a Pyrrhic victory for your client if the motion is denied? And it simply forces the committee then to ramp up other alternatives, which are more draconian than simply marketing the Florida property?”

Mr Fischoff responded, “Hopefully, in a short period of time, [the committee] can get a true picture of the debtor’s” finances, adding that his client will comply with the discovery requests from the committee.

He told the court that there seem to be a lot of questions, and in turn suspicion. To quell those, Mr Fischoff said that they are planning on holding an examination of Mr Giuliani later this month which “may remove some of those suspicions and some of those questions.”

The hearing highlighted some discrepancies over Mr Giuliani’s finances, including the maintenance fees for the Florida condo.

For example, Ms Block said that court filings suggest he put $160,000 into just the Florida condo. However, the ex-mayor’s filings claimed that he pays roughly $8,400 per month on maintenance and real estate taxes.

“Are the [payments] $8,416 or are they something more?” she asked the court. “We can’t find any calculation in the amount of a sense that would add up” to that sum.

“The numbers are all over the place,” Judge Lane said, adding that the debtor needs to provide more financial information.

While the judge conceded that because Mr Giuliani is paying for the condo maintenance with non-exempt funds and that is of “significant and legitimate concern” to the committee, he said he wouldn’t be making a ruling on the motion to force the sale of his Palm Beach property on Thursday.

He encouraged the lawyers to “have a meaningful conversation about practical solutions going forward.”

Judge Lane explained that it is a “challenging legal position to say that the committee, however right minded and legitimately concerned, to compel a debtor in possession to sell a property.” But the committee has other options. He interpreted this motion as “a warning shot across the bow.”

Although Mr Giuliani can succeed in fending off this motion, he could be “faced with far more draconian requests for relief by the committee in the future.”

The Independent previously reported that the committee is “discussing” the possiblity of suing Mr Giuliani’s former client and close friend Donald Trump for $2m in alleged unpaid legal fees.

On Thursday, the judge granted three uncontested motions, including discovery requests into Mr Giuliani’s personal and business finances.

The next status conference will be held on 14 May.