Tom Girardi Downfall Casts California Bar in Unflattering Light

A racketeering lawsuit filed towards Girardi & Keese by one in all its native counsel has as soon as once more centered consideration on the California Bar’s failure to reign in legal professionals like disgraced plaintiffs’ legal professional Tom Girardi.

Lawmakers and legislation watchers have criticized the bar for many years, alleging inaction and poor legal professional oversight notably of Girardi, who was disbarred final month amid allegations he’d violated bar ethics guidelines and stolen hundreds of thousands of {dollars} from shoppers.

The RICO lawsuit, filed final week by Chicago-based Edelson PC, alleges the now-defunct Girardi & Keese agency operated a long-running Ponzi scheme, stealing from distributors and attorneys as nicely to fund a lavish way of life for Girardi and his movie star spouse, Erika.

Edelson was Girardi & Keese’s native counsel in litigation over the 2018 crash of Lion Air flight JT 610.

Reporting by the Los Angeles Instances, filings by Edelson, and state audits revealed allegations of decades-long fund diversions, self-dealing, and moral violations. The climbing rely of Girardi’s victims additionally fueled already lengthy simmering claims of a state regulator sleeping on the job.

“Tom Girardi was a wake-up name,” stated David Freeman Engstrom, co-director of Stanford Regulation’s Heart on the Authorized Occupation.

“We knew that solely a tiny proportion of grievances resulted in disciplinary motion. However we didn’t know simply how dangerous the sorting mechanism was,” he stated. “Perhaps, we instructed ourselves, these statistics might be defined if most grievances have been unfounded. Girardi confirmed that even egregious conduct is falling by way of the cracks.”

A legislature-mandated State Auditor’s report, prompted by revelations Girardi stole from shoppers, discovered defective insurance policies restrict the bar’s potential to guard the general public from legal professional misconduct.

“The Tom and Erika Girardi fiasco illustrates that the state bar and all of us accountable to guard California customers must do a greater job,” stated Tom Umberg (D), the state’s Senate Judiciary Committee chairman.

“Girardi and Co. stole from those that had been victimized, first by the occasion, for instance, the airplane crash, and secondly as victims of his crimes as he stole the cash and used it for he and his spouse’s private bills,” Umberg stated. The truth that he was allowed for therefore lengthy “is an indictment of our system.”

Accountable for regulating greater than 1 / 4 million attorneys, the bar has lengthy exasperated California lawmakers. The state legislature oversees the career underneath the Enterprise and Professions Code whereas its Supreme Court docket licenses and in the end disciplines legal professionals. Lawmakers exert affect by way of the annual charge invoice, beforehand often known as the dues invoice, which funds bar operations.

Whereas legislative strain has helped rework the bar from a rustic membership run by a board of governors charging dues for its members, to 1 that prioritizes client safety over the previous decade, the Girardi affair reached its crescendo at almost the identical time the group was compelled to defend itself in US court docket towards allegations it did not safeguard on-line legal professional and consumer grievance information.

Bar Govt Director Leah Wilson in an emailed assertion declined to touch upon Edelson’s allegations.

The bar’s board of trustees “in mild of Girardi’s huge malfeasance” accredited requiring legal professionals to report the quantity of consumer awards held in particular person belief accounts and to conduct obligatory self-assessments, she stated.

“These proactive, corrective actions with an academic focus will strengthen the disciplinary system and enhance public safety. This effort ought to in the end end in a discount of instances within the State Bar’s self-discipline system, in addition to a stop-gap measure to rapidly determine attorneys who search to defraud their shoppers,” Wilson added.

Years of Complaints

Jay Edelson stated his agency was “astonished” that the bar apparently knew of Girardi’s theft of consumer funds “and did nothing to guard the general public.”

“Even now,” he stated, “they’ve refused to do a full investigation into all these probably concerned and received’t appoint a particular prosecutor who’s free from conflicts.”

The bar should “be re-examined from the underside up. Their major job is to guard the general public from dangerous legal professionals. They’ve clearly failed and aren’t motivated to do higher,” Edelson stated in an e-mail.

Appearing California State Auditor Michael Tilden agreed that California’s system for overseeing the authorized career did not adequately examine attorneys “regardless of prolonged patterns of complaints towards them.”

“We reviewed recordsdata for one legal professional who was the topic of 165 complaints over seven years, lots of which the State Bar dismissed outright or closed after sending non-public letters to the legal professional,” Tilden stated in a letter to lawmakers accompanying the audit launched final spring.

The State Bar Court docket charged Girardi with 14 counts of violating ethics guidelines and California legislation. He was ordered to inactive standing in March. Stripping him of his legislation license on June 1, the California Supreme Court docket ordered the fallen legal professional to pay 4 minor youngsters of Lion Air flight 610 crash victims and others $2,282,507 plus 10% curiosity for stolen funds.

The long-delayed and high-profile self-discipline solely fueled condemnation of the bar.

The bar doesn’t go after well-funded, well-connected giant legislation companies “as a result of they’re going to make you struggle for months,” stated Carol Langford, an legal professional who represents California legal professionals in self-discipline instances and is an adjunct College of San Francisco College of Regulation professor. “Do you actually suppose there aren’t extra Girardis on the market?”

The bar’s Wilson, in an interview about Girardi’s legacy earlier than Edelson’s lawsuit was filed, agreed that the company isn’t “all the best way there when it comes to our transformation.”

“One actually essential side of the legacy is the bar actually has to reconcile the truth that it’s tough for us to go after extra subtle dangerous actors. I feel that we’re not essentially useful resource skilled, staffed to have methods which have extremely subtle disciplinary perform that is ready to successfully and well timed go after a Tom Girardi,” Wilson stated.

“Sure, there have been additionally failings in our system,” which the bar acknowledged after the audit, she stated. “However suppose the opposite piece of it past higher processes in place is admittedly our potential to prosecute extra dangerous actors.”

The bar on July 5 filed disciplinary costs towards its former government director, Joe Dunn, alleging three counts of ethical turpitude together with breach of fiduciary responsibility. Dunn, a former state lawmaker, oversaw the company for 4 years till his firing in 2014. An arbitrator in 2017 upheld his termination.

An outdoor, part-time particular counsel was appointed to evaluation a self-discipline grievance towards Dunn in a prolonged course of, Stacia Laguna, bar particular deputy trial counsel administrator, stated in an emailed assertion. “Regardless, we imagine this case displays the precept that each one California attorneys should adhere to their oath, to the legislation, and to the Guidelines of Skilled Conduct.”

Soiled Jobs

Girardi “was in all probability the largest mistake traditionally they’ve ever made. And so they’ve made a whole lot of errors,” Langford stated.

“It doesn’t matter for those who move the ethics guidelines,” Langford stated. “They’re nonetheless going to steal.” The legal professional added,”Girardi was given a move, a get out of jail free card, a corridor move to commit fraud” due to associates within the bar.

“It wasn’t the Workplace of Skilled Competence. It was not the bar board. It was not charge arbitration. It was none of these. It was the Workplace of Chief Trial Counsel,” Langford stated. “I’m not going to be fashionable with that as a result of I signify shoppers earlier than them.”

The bar’s prime prosecutor job was the main target of final 12 months’s charge invoice as lawmakers set charges at zero until the affiliation employed a everlasting chief trial counsel. In August, it appointedGeorge Cardona, a federal prosecutor for 3 a long time, as chief trial counsel. The Senate confirmed his appointment June 29.

Wilson agreed having a everlasting chief trial counsel will stabilize the workplace and set the “ethical phrases of tradition.” “You even have someone who’s completely vested in getting issues proper. Making systemic reforms from modifications the chief trial counsel will make and is making will take a while to bear fruit.”

Giant Numbers, Not Investigations

Ensuring the bar works for almost 40 million Californians will depend on successfully overseeing the state’s 285,609 attorneys, together with judges, professors, and people who aren’t eligible to observe.

The California Bar in 2020 opened almost 17,500 instances of legal professional misconduct, a quantity reflecting just below 1% of the variety of licensed attorneys in California.

It filed notices of disciplinary costs looking for to impose some type of legal professional self-discipline towards 180 attorneys in State Bar Court docket. In 2020, 79 California attorneys have been disbarred, and one other 114 have been suspended, Neil Wertlieb, a founding member and co-chair of the California Legal professionals Affiliation Ethics Committee, wrote in a California Legal professionals Affiliation article.

Meeting Judiciary Committee Chairman Mark Stone (D) in an interview stated the bar would have extra impression instilling concern in giant companies when the chief trial counsel’s workplace calls than prosecuting a younger practitioner who makes a mistake.

“I need that managing accomplice or someone to say, ‘Oh yeah, oh shit. We’re going to need to take care of this and we’re going to have to point out that we solved no matter drawback we recognized.’ Not, ‘Don’t fear. We will get round this’ angle. That’s the place I need these prosecutors” performing, stated Stone.