Michael Avenatti is a celebrity. He represented Stormy Daniels, toyed with running for President and thought he could take down Donald Trump. In March of this year he was arrested for extortion in New York. The next day he was charged in Los Angeles with a 197 page complaint alleging wire and bank fraud. Clients say he stole money. His crash from stardom has been nothing short of spectacular.
But Avenatti isn’t the only celebrity lawyer to take a big fall. A Beverly Hills power lawyer was sued last week for defaulting on a multi-million loan.
Many in California know Tom Girardi as a high profile personal injury lawyer. In social circles, he is known for his marriage to “The Real Housewives of Beverly Hills” star Erica Jayne. Today, a funding company is calling him a deadbeat.
In a lawsuit filed on May 24th, Stillwell Madison LLC says Tom Girardi and his law firm Girardi & Keese defaulted on a $5.1 million loan.
A lawsuit over a loan default is hardly news. What the lender says about Giradi, however, is newsworthy. Ditto for the fact that a law firm that markets that it has recovered more than $10 billion in verdicts and settlements. Why does such a successful law firm need to borrow money?
According to the lawsuit, Girardi and the Girardi & Keene law firm borrowed $5.1 million in April 2016 for business purposes. As lawsuits would settle, the firm was supposed to pay down the loan.
Things went well for about two years. In August of 2018, Girardi said he needed more time to pay. The lender, Stillwell Madison, says that instead of applying law suit recoveries to pay down the loan, Giradi personally took the money to support he and his wife’s “lavish lifestyle and maintain their glamorous public image.”
Worse, Stillwell Madison says that the law firm was in default of another loan, a default that the Girardi’s firm hid from them. As of May, 2019, Stillwell Madison says it is still owed $3.4 million.
Defaulting on a loan is bad enough but the lender claims that Girardi’s false statements, misuse of the loan proceeds and hiding the other default is fraud. Under Arizona loan, if the lender can prove fraud, it might be entitled to punitive damages as well.
Meanwhile, the other lender, the Law Finance Group, is suing Girardi for $15 million. Girardi calls that lawsuit “fraudulent, slanderous and an abuse of the legal process.”
Celebrity New Worth says Girardi is worth $30 million. His apparent inability to pay two loans suggests to us that he is broke.
The similarities between Girardi and Avenatti are troubling. Both are brilliant men but have their egos caused them to dig such a deep hole that even they can’t dig out? Time will tell. We remind everyone that an indictment or an allegation in a lawsuit is just that. Things appear bleak for both men but both are presumed innocent of any wrongdoing.
Should I Hire a Celebrity Lawyer?
The answer to this question is more nuanced than a simple “yes” or “no.” I know plenty of celebrity lawyers and everyone honorable. I might not always agree with their beliefs or clients but they are honorable people.
What worries us is celebrity status combined with arrogance and living an overly lavish lifestyle.
Want another example? Look at Scott Rothstein, once managing partner of Rothstein Rosenfeldt Adler, a high profile law firm with 70 lawyers mostly based in Ft Lauderdale and Miami. Today he is serving a 50 year prison sentence after being convicted of stealing hundreds of millions of dollars from lenders, investors and even clients.
Rothstein was arrested in 2009 but the year before in an interview he said,
“This is where the evil happens. Look, I sleep in the bed I make. I tend toward the flashy side, but it's a persona. It's just a fucking persona. ... People ask me, 'When do you sleep?' I say I'll sleep when I'm dead. I'm a true Gemini. I joke around that there are 43 people living in my head and you never know what you're going to get. There are some philanthropists in there, some good lawyers, and I like to think some good businessmen. There are also some guys from the streets of the Bronx that stay hidden away until I need them. Does that sound crazy? I am crazy, but crazy in a good way.”
And just like Avenatti and Girardi, Rothstein certainly lived an opulent lifestyle. In addition to having 28 city police officers on his payroll for personal protection, he also collected “toys”. Those included a Boeing 727 jet, an 87-foot yacht four Ferraris, a Bentley, a Rolls Royce, three Lamborghinis (worth $400,000 a piece) and two Bugattis worth $1.6 million.
That kind of spending becomes a disease to some. And despite all their brilliance as lawyers, their moral compass fails.
It feels good to have a celebrity lawyer. Everyone loves the bragging rights to say my lawyer is such and such. It is obviously better to have both a highly competent lawyer and one who is honest.
Harking back to my earlier caution that Avenatti and Girardi have only been accused of wrongdoing at this point, assuming they have done wrong, how will victims get paid? That's where things get tricky. Much depends on whether the wrongdoing is civil (defaulting on loans) or criminal (stealing from clients).
Our primary concerns are always the clients. Girardi is simply accused of being a deadbeat and defaulting on loans. Although he was accused in the past of overcharging fees, there is no record that he did so. To be clear, Girardi has not been accused of stealing from clients or being engaged in criminal activities.
Still, whenever a lawyer owes almost $20 million and has no apparent ability to pay, that causes us to worry. Desperate people sometimes do desperate things.
And Michael Avenatti? He is accused of stealing from clients. If true, legal malpractice might not cover any losses. Malpractice insurance kicks in when a lawyer makes a mistake. An intentional act such as stealing is often not covered by insurance.
Before being blinded by a lawyer’s celebrity status, make sure he is also honest. It also pays to consider whether they are deeply in debt
To learn more about legal malpractice, visit our legal malpractice page. Ready to see if you have a case? Contact us online by email [hidden email] or by phone at 877-858-8018. All inquiries kept confidential and protected by the attorney – client privilege.