Embattled “Real Housewives of Beverly Hills” star Erika Jayne is fighting a judge’s order to turn over $1.4 million diamond earrings, court documents obtained by Heavy show. Attorneys for the Bravo TV reality star filed a motion in federal court on Tuesday, July 26, appealing a bankruptcy court’s judgment, the documents, which can be read here, show.
The earrings were given to Jayne by her estranged husband, Tom Girardi, as a gift in 2007. U.S. Bankruptcy Judge David Russell ordered Jayne to turn over the jewelry to a trustee as part of proceedings against Girardi’s closed law firm, Girardi Keese. Attorneys for those who say they are owed money after the collapse of Girardi’s legal empire, including former clients and other lawyers he worked with, have sought personal property owned by Jayne and her companies, EJ Global and Pretty Mess Inc., according to court documents.
A source close to the “RHOBH” star previously told People magazine on July 6, “It wasn’t easy for (Erika) to part ways with something that was sentimental to her. but she knows she needed to do it and she complied.” The source told People that Jayne turned over the earrings “months ago,” adding, “now that the ruling has happened, she’s somewhat relieved a decision has been made and she can officially focus on moving on.”
The Diamond Earrings Were Given to a Trustee, Who Will Seek to Have Them Appraised & Possibly Sold, Court Documents SHow
The judge’s ruling states the trustee took possession of the diamond earrings and is keeping them in a safety deposit box. The earrings will be appraised and the trustee can then sell them, with the proceeds being put into a trust while the bankruptcy case plays out. Jayne is now appealing that decision, the July 26 court filing reveals. Jayne’s attorney, Evan Borges, is seeking to have the appeal heard by a federal district court judge in California’s central district, instead of in bankruptcy court, according to the documents. The appeal has not been filed yet and no hearings are currently scheduled in the case.
According to court documents, Tom Girardi paid $750,000 using a check from a trust account for clients of his law firm to buy the earrings from M&M Jewelers on March 7, 2007. According to the court documents, “Girardi then concealed the theft by describing the purpose of the check on the GK Rezulin Trust Account (‘RTA’) Ledger as a ‘cost’ item of the ‘Rezulin’ mass tort litigation, noting the payee to be ‘M&M’ without further explanation. The Diamond Earrings were then given to Defendant Erika.” The funds had come from a settlement in a Girardi Keese case against Pfizer brought by people harmed by a diabetes drug, Rezulin, court records show.
The bankruptcy trustee argued in court, “Given that the funds used to purchase the Diamond Earrings came from the RTA , Erika has no legal or equitable right to the Diamond Earrings and the same are legally and equitably valuable assets of the GK Bankruptcy Estate that the Trustee can and should sell under Section 363 of the Bankruptcy Code. Based upon the foregoing, the Trustee has demanded return of the Diamond Earrings from Erika. As of the filing of this Motion, Erika has refused to comply with the request of the Trustee.”
That motion, which can be read here, was made in January 2022 and Jayne eventually turned over the earrings, now worth at least $1.4 million, by May 2022. But she is apparently continuing to fight to get them back, according to the recent court documents. Trustee Elissa Miller wrote in a court filing:
During the course of the review of the Firms books and records, it was discovered that over a 10- year period the Firm had provided Erika Girardi a “Black” American Express card, and authorized Erika to use the credit of the card for her expenses. It was further discovered that during this 10- year period of time, Erika charged and the firm paid Erika’s American Express charges in an amount in excess of $14 Million.
Evan Borges, Jayne’s attorney, responded in a court filing in May, which can be read here. He wrote:
The Trustee has not met her burden to show with actual evidence that the funds in question were in fact misappropriated, as opposed to constituting funds due to the debtor and therefore the debtor’s rightful property. Second, in the present case, the alleged rightful owners of the funds are numerous and disparate and the Trustee has not even purported to identify them. Rather, the Trustee seeks to recover a marital gift from an innocent spouse solely for the purpose of recovering the asset in question for the benefit of other creditors of the debtor who never had any right to the funds in question. Even according to the Trustee, the debtor’s estate never had any right to the funds in question.
Borges added, “Accordingly, as a matter of law, the Trustee’s Motion should and must be denied for two fundamental reason,” writing:
First, claims by a trustee in 2022, based on a 15 year-old transaction in 2007, are barred by every conceivable statute of limitations, as well as by the 7 year statute of repose in California applicable to fraudulent transfers. The Trustee’s sole argument is that somehow, the Trustee is entitled to the “delayed discovery” rule of accrual of statutes of limitation, because the Trustee did not learn of the underlying 2007 transfer of funds until late 2021. Here, the Trustee ignores the fundamental and binding legal principle that the Trustee stands in the shoes of the debtor, including for purposes of knowledge of the fact of the alleged fraudulent transfer of funds in 2007. Importantly, the check in question out of the GK trust account, which was used to pay a jeweler for the earrings, was signed by not one, but two GK partners: Tom Girardi and James O’Callahan. The Trustee, as a matter of law, inherits the knowledge of the debtor in 2007, and therefore, all statutes of limitation began to accrue in 2007 and have expired. Further, the seven-year statute of repose under California law, which “notwithstanding any other provision of law,” applies to transfers that occurred more than seven years before an action is filed, presents a further insurmountable time bar to the Trustee’s Motion. The Court need go no further than to address the statute of limitations and statute of repose, and the Motion should be denied on that basis.
Second, as an additional ground for denying the Motion, as the Trustee concedes, in California, an attorney trust account (which was the source of funds for the 2007 transfer at issue) is an express trust. As a matter of Ninth Circuit law, and as provided in 11 U.S.C. § 541(b)(1), funds held by a debtor under an express trust for another are not property of the estate. The GK trust funds at issue were one of two things: either property of GK’s clients or fees due to GK and therefore property that GK was entitled to receive. In either scenario, the Trustee’s Motion must be denied. If the trust funds at issue were client funds, then GK (and therefore the GK estate) had and have no property right in the funds at issue, and suffered no harm by the taking of the trust funds. As a result, the GK estate, and by extension the Trustee, have not suffered an injury in fact and lack standing to bring the Motion
By contrast, if the funds at issue constituted fees to which GK had an entitlement (a factual inquiry as to which the Trustee provides no evidence, including evidence to which the Trustee should have access such as the underlying fee agreements between GK and its clients), then the transfer of funds from a GK account, at the directive of TG and one other partner of the firm, may be a constructive fraudulent transfer if GK were insolvent in 2007. But as noted above, any fraudulent transfer claim is undisputedly barred by the seven-year statute of repose under California law.
Borges added in the court filing, “Erika is not and never has been an attorney. Her career during her marriage to TG was as
an entertainer. Erika never worked at GK; she never managed the finances of GK; and she never had access to or knew anything about how TG or GK managed any of their client trust accounts. Erika also had no involvement in or knowledge of the actions of TG or GK in connection with the Rezulin litigation or the GK trust account in the Rezulin litigation. At all times during the marriage, Erika believed that TG and GK were financially successful, extremely wealthy, and made large amounts of money.”
About the earrings, Borge explained in the court documents:
In approximately 2004 or 2005, as a gift for either Erika’s birthday or the couple’s wedding anniversary, TG gave her a set of diamond earrings. This gift had high sentimental value to Erika. In approximately 2006, TG and Erika’s home was ransacked while they were out for dinner. Erika had left the diamond earrings in a crystal container in her bathroom, and discovered upon searching the house that the earrings had been stolen. Neither TG nor Erika had insurance on the earrings. After the passage of a fair amount of time after the burglary, in 2007, TG gave Erika another set of diamond earrings to replace the set that had been stolen. The replacement earrings were a replica of the earrings that had been stolen.
At the time, Erika believed that TG and their marital community had a high net worth and that TG and GK had very high income. Erika had no reason to doubt or question the source of funds used by TG to buy the earrings. Specifically, Erika never knew or heard anything from anyone to the effect that any of the gifts that TG had given her, including the earrings in 2007, were bought using money that did not belong to TG or that belonged to someone else.
In November 2020, Erika filed a petition for divorce against TG and moved out of the couple’s residence. Since that time, Erika has been living in a rental. Her principal assets are her personal belongings (which include jewelry) and her income from the Real Housewives of Beverly Hills television program. Since her separation from TG, Erika has not held or received and has no expectation to hold or receive in the future any assets or income of TG or GK, unless it is awarded to her by the divorce court or unless all legitimate creditors are paid in the GK bankruptcy case and a surplus remains left over. Erika intends to finalize her divorce from TG (which is stayed by his pending bankruptcy case). Since the separation, Erika has been trying to move on with her life independently of TG and GK.
Borges wrote, “In late 2021 or early 2022, Erika heard for the first time that the Trustee alleges that the replacement earrings given to her by TG as a gift in 2007 were bought with money from a GK client trust account, which allegedly did not belong to GK or TG. At all times, Erika has been willing to put the earrings in an escrow until a final court order is issued regarding who is entitled to the earrings. Based on an agreement with the Trustee, the earrings are currently held in a safe deposit box, to which the Trustee has access. Erika has agreed that the earrings may be held in the safe deposit box until such time as there is a final judicial determination as to ownership of the earrings.”
After the judge’s decision regarding the earrings, attorney Ronald Richards, who has been involved in the bankruptcy case representing those seeking money owed to them by Girardi Keese, told Radar Online, “The decision to award the earrings to the estate was a justifiable one. Erika’s fantastical belief that she could keep the proceeds of an embezzlement of the client trust account was disturbing and should never have been argued. She has no compassion and one day soon her attorney and her will know that just because you claim willful blindness, doesn’t mean you get to keep stolen property. She will be liable for all the funds paid on her behalf and all the gifts provided with the stolen client funds.”
Jayne & Her Attorneys Have Denied Any Wrongdoing on Her Part as the Legal Battles She’s Waging Continue to Mount
While the legal fights she is dealing with continue to mount, Jayne has maintained her innocence, saying she was unaware of any embezzlement or fraud by her estranged husband and his law firm. But she has now been named in two lawsuits accusing her of benefitting from the fraud and helping to build her husband’s image in an effort to keep the money coming in.
Her attorney, Evan Borges, told Bloomberg Law after his client was named in a $55 million federal RICO lawsuit that it was, “another misguided attempt to blame Erika for actions of Tom Girardi and others of which she had no knowledge and in which she had no involvement.” That lawsuit calls Jayne the “frontwoman” for the massive fraud scheme to steal money from Girardi Keese clients to fund her and her husband’s lavish lifestyle.
Borges added in a statement, “Erika has no law degree and never worked at or managed her former husband’s law firm. Whatever Mr. Girardi or others at his law firm did or said to the plaintiffs in this case, Erika had no knowledge or role in any of it. The focus should be on Mr. Girardi, his law firm, and anyone else who enabled what he did. Piling on Erika may generate publicity, but it’s without any basis in reality.”
She was also named in a lawsuit filed in California state court by Christina Fulton, Nicolas Cage’s ex, who is accusing Girardi Keese of stealing money that she received in a settlement after a car crash. Lawyers for Fulton, who was Girardi’s client, say the firm funneled money meant for her into Jayne’s companies and to pay off credit card bills for items she and her husband bought.
Jayne filed for divorce from Girardi, her husband of more than 20 years, in 2020 amid accusations of financial malfeseance against him and his firm. On an episode of the 11th season of “RHOBH,” Jayne told her fellow Housewives, according to Today, “When I filed this divorce, I was a gold digger. This week, you’re a conspirator. I mean … neither one of them are true. “To be out here on your own and to have like millions of dollars worth of lawsuits pointed at you is heavy, and to know that the person that got you here has been like (claps hands). You’re like, what the f*** am I gonna do?”
The divorce case has stalled as the lawsuits pile up against him, his former law firm and Girardi, slowing the process. Girardi has also been diagnosed with Alzheimer’s disease, according to court documents. Girardi recently said she has moved on from her husband and they are legally separated, but the circumstances surrounding their marriage make it so she can’t actually get divorced.
“It’s ironic, but if I was divorced from Tom, I’d have to pay him alimony. I’ll stay married, thanks.” While this doesn’t mean that Erika is having a change of heart, it does suggest that she isn’t worried about speeding up the process — though she is still looking forward to the legal stuff being over,” Jayne told “RHOBH” co-star Lisa Rinne on the July 20 episode of the Bravo reality show. “I can’t get a divorce right now. Like, I’m legally separated, so my life has moved on and everything is separate. But I can’t get a divorce right now. There’s so much legal s*** going on. It’s a weird time and I’m really ready for it to be over.”