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California


TOM GIRARDI’S EPIC CORRUPTION EXPOSES THE SECRETIVE WORLD OF PRIVATE JUDGES

A Times investigation drawing on newly revealed law firm records found that Tom
Girardi’s practice often relied on private judges, who work in a secretive
corner of the legal world.
(Robert Carter / For The Times)
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By Harriet Ryan, 
Matt Hamilton
Aug. 4, 2022 Updated 6:24 PM PT
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The settlement Tom Girardi reached with a drug company in 2005 was
characteristically large and righteous: some $66 million the famed Los Angeles
trial attorney won on behalf of patients who said a diabetes medication caused
liver failure and other maladies.

At Girardi’s suggestion, a nationally renowned mediator was appointed to ensure
proper distribution of the funds. For overseeing the settlement, retired
California appellate Justice John K. Trotter Jr. and his private judging firm,
JAMS (formerly known as Judicial Arbitration and Mediation Services), received a
$500,000 cut.

Yet in the years that followed, Girardi diverted money Trotter was hired to
safeguard for purposes that were highly questionable and even, in the recent
assessment of one federal judge, “a crime.” Girardi sent $750,000 to a jeweler
for what Bankruptcy Court records show was the purchase of an enormous pair of
diamond earrings for his wife, “The Real Housewives of Beverly Hills” star Erika
Girardi. He dipped into the settlement account again and again for supposed case
expenses, sometimes writing multiple seven-figure checks to his law firm in the
same week, according to the records.

Tom Girardi in court in 2014.
(Irfan Khan / Los Angeles Times)

Ultimately, he took more than $15 million — about 22% of the settlement — for
what he described as “costs,” according to a check registry filed in court.
Legal experts told The Times the pattern of withdrawals indicated fraud.

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Girardi’s firm collapsed a year and a half ago amid evidence that one of the
most respected lawyers in California had stolen from clients for decades — the
largest legal scandal in state history.

A Times investigation drawing on newly released internal firm records found that
his unethical practice depended on private judges, who occupy a secretive corner
of the legal world. Girardi’s reliance on them raises questions about whether
there are enough safeguards in this highly confidential and largely unregulated
industry to protect the public from predatory attorneys.


READ MORE COVERAGE

For Subscribers


UNRAVELING THE MYSTERY OF ERIKA JAYNE’S $800K DIAMOND EARRINGS — AND TOM
GIRARDI’S FINANCES

Aug. 4, 2022

Retired judges, including Trotter, played prominent roles in administering large
settlements from which Girardi is accused of stealing money. Several worked for
Irvine-based JAMS, the world’s largest private mediation and arbitration
company.

Judge John K. Trotter Jr.
(Daily Journal)

Girardi paid private judges at JAMS and elsewhere up to $1,500 an hour to work
on mass tort settlements that often involved hundreds or thousands of clients
and tens of millions of dollars, according to court records. When pressed about
missing funds, he often invoked the jurists’ impressive credentials. The
willingness of the former judges to stand by Girardi in court — and sometimes
join him at his lavish junkets and boozy parties — enhanced his aura of
invincibility.

In some instances examined by The Times, it is not clear that the retired judges
knew Girardi was using them as a shield to fend off scrutiny, such as a 2018
letter in which he blamed delays in paying clients on Trotter’s heart problems.
But in others, there is evidence the retired judges were aware of misconduct
allegations and assisted him anyway.

In 2001, a former judge helped Girardi improperly siphon $3.5 million from a
settlement for workers of Lockheed Corp. (which later became Lockheed Martin
Corp.) by signing a sham “order” to release the money to him, according to a
copy of the document and correspondence from a bank executive filed in court.

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Television


CATCHING UP ON ‘REAL HOUSEWIVES’? READ OUR COVERAGE OF ERIKA JAYNE AND TOM
GIRARDI

Times reporting has played a starring role in ‘The Real Housewives of Beverly
Hills’ this season. Here’s our guide to Erika Jayne and Tom Girardi.

Aug. 9, 2022

In 2014, a retired state Supreme Court justice then at JAMS was drawn into an
attempt to mislead cancer survivors about more than $1 million missing from
their settlement. Girardi’s firm, Girardi Keese, told clients that the former
justice had instructed the firm to “hold back” the money. The claim was false,
but the jurist did not inform the clients or the trial court and fought a
subpoena for months before finally being forced to testify under oath. Only then
did he disclose that Girardi was lying.

Despite the wide power of private judges in the legal system, no government
agency specifically monitors or polices their conduct. Retired jurists often
agree to abide by provisions of the Code of Judicial Ethics when working as a
referee, special master or similar position, but they do not fall under the
purview of the Commission on Judicial Performance, the state agency that
investigates the conduct of active judges, an agency attorney said.

> “His [legal] skills were phenomenal. The bad part was he didn’t do the money
> right.”

— Danny Barnes, a Girardi client who started working at Lockheed as a teenager
and developed cancer at 27

Some of the retired jurists who worked with Girardi have died. None still living
who were approached by The Times agreed to be interviewed. Trotter, 88, has
continued to wield influence. Until recently, he was the sole trustee overseeing
the $13.5-billion trust for tens of thousands of victims of wildfires in
Paradise and other Northern California communities.

“I believe I performed my assigned tasks in an appropriate and timely manner,”
Trotter said in a written response to questions about his relationship with
Girardi. In a second statement, he added that he did “not know when, how or why
[Girardi] morphed from an apparent capable, ethical lawyer to what he is today.”

“The problem isn’t mass torts or private judging, it is Mr. Girardi,” he wrote.

California


THE LEGAL TITAN AND THE ‘REAL HOUSEWIFE’: THE RISE AND FALL OF TOM GIRARDI AND
ERIKA JAYNE

Tom Girardi is facing the collapse of everything he holds dear: his law firm,
marriage to Erika Girardi, and reputation as a champion for the downtrodden.

Dec. 17, 2020

Girardi is not in a position to provide answers. He was diagnosed with
Alzheimer’s disease last year and is in a court-ordered conservatorship overseen
by his younger brother. His court-appointed lawyer, Rudy Cosio, declined to
comment.

Once cosseted in a sprawling Pasadena mansion, the 83-year-old Girardi now
resides in a Burbank nursing home, dependent on family for financial support. In
a court filing, his brother, Robert, wrote that Girardi takes medication for
dementia and that his “care needs are such that he needs to be at a skilled
nursing facility.”

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The state Supreme Court stripped Girardi of his law license in June, and he and
his firm are the subject of ongoing bankruptcy proceedings.

--------------------------------------------------------------------------------

The Lockheed litigation cemented Girardi’s reputation as an attorney willing to
take on big corporations.

Beginning in the early 1990s, he represented hundreds of Lockheed employees who
claimed they had been poisoned at the aerospace giant’s Burbank plant. The
litigation was complex, with clusters of workers suing Lockheed and a host of
chemical companies over a decade. Records from the litigation show that Girardi
wrested more than $128 million from the companies.

Former Lockheed worker Danny Barnes at his home in Los Angeles. Barnes says
Girardi stole money from him and other Lockheed workers in the 1990s in a series
of suits that resulted in settlements of at least $120 million.
(Jason Armond / Los Angeles Times)

“His [legal] skills were phenomenal,” said Danny Barnes, a Girardi client who
started working at Lockheed as a teenager and developed cancer at 27. “The bad
part was he didn’t do the money right.”

Though the law firm was called Girardi Keese, it was owned and controlled by
Girardi alone. He brought on retired judges affiliated with JAMS, with the
assignment of fairly allocating the money among Lockheed workers. To avoid
perceived ethical conflicts, it is common for plaintiffs’ lawyers to hire
outsiders to decide how much of a lump settlement each client should receive.

One retired judge working on Lockheed was the late Jack Tenner, who had spent 10
years on the L.A. Superior Court bench and was widely admired for his civil
rights activism. Tenner, who was white, worked to integrate firehouses and end
discriminatory real estate practices. When Black friends, including future L.A.
Mayor Tom Bradley and baseball legend Frank Robinson, wanted to buy homes in
white neighborhoods with racist deed covenants, Tenner posed as the buyer and
transferred ownership once the sale went through.

California


‘REAL HOUSEWIVES’ ATTORNEY TOM GIRARDI USED CASH AND CLOUT TO FORGE POWERFUL
POLITICAL CONNECTIONS

For decades politicians were happy to take Tom Girardi’s money and put up with
his requests for something in return. Along with his family and employees,
Girardi contributed more than $7.3 million to candidates.

March 6, 2021

He was close to Girardi, officiating at his second marriage in 1993, and was one
of three JAMS judges, including Trotter, who helped arbitrate Girardi’s most
famous case: the $333-million settlement he won in 1996 for residents of the
Mojave Desert town of Hinkley. That case inspired the film “Erin Brockovich.”

After the legal victory, which delivered at least $120 million to lawyers
involved, Girardi and a colleague organized a celebratory Mediterranean cruise
and invited Tenner, Trotter and other current and former judges. As The Times
then reported, most of the jurists eventually repaid Girardi, but questions
about the propriety of the trip lingered.

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By the time of the cruise, Tenner had worked with Girardi on the Lockheed cases
for about five years, and clients and fellow attorneys were growing upset at the
lack of transparency and the pace of payouts, according to court records and
interviews.

As with many cases Girardi handled, his Lockheed clients were of modest means
and education, and as time went on, many were terminally ill from cancer.

Mildred Davis at the home she shared with her husband, Willie Davis, who died of
cancer in 2014 after working at Lockheed for decades.
(Gina Ferazzi / Los Angeles Times)
Mildred Davis holds a photo of Willie.
(Gina Ferazzi / Los Angeles Times)

“People were one foot in the grave and one foot out and trying to get
something,” recalled Mildred Davis, whose husband, Willie, was diagnosed with
cancer after a career at Lockheed. She suspected that Girardi saw his clients as
easy marks who, in their desperation, would accept far less than they were owed.
Girardi, she said, would reason, “If I give them $50,000 or $25,000, they are
going to be OK, because they never had that kind of money.”

“It upset my husband that [Girardi] felt that he was so dumb, stupid, that he
would just be quiet and sit down,” she recalled. Her husband collected some
money but not all he believed he was due, she said. He died in 2014.

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Tenner remained firmly in Girardi’s corner. In 1998, after some clients filed
complaints with the State Bar and others considered lawsuits, the retired judge
sent a letter to Lockheed workers in which he wrote that he and another JAMS
judge “want to compliment the law firm of Girardi and Keese for its undying
efforts on your behalf.”

The effusive letter did not mollify discontent, and clients continued pressing
Girardi to explain what he had done with their money. A partial accounting in
2000, later described in court papers, only deepened their sense of alarm about
the settlement and Tenner’s oversight of it.

Millions of dollars had gone to companies and lawyers that had no clear ties to
the case and a host of individuals with dubious-sounding names such as K. Ernest
Citizen, Giovanni Medici and Lee Marvin, according to court filings. One line
item showed $450,000 withdrawn for an “expert witness” fee. It bore the cryptic
notation “Confidential (Subject Matter attested to by Judge Tenner).” When
pressed for documentation, Girardi refused to provide any.

Tenner died in 2008. The Times did not find any records in which he explained
his actions.

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The questions about Girardi’s conduct were significant enough that a settlement
reached in 2000 with two Lockheed-related chemical companies included
constraints on his access to funds. The money was placed in an escrow account,
with withdrawals requiring the approval of lawyers for the chemical companies
and a mediator.

California


HIS JOB WAS TO POLICE BAD LAWYERS. HE BECAME TOM GIRARDI’S BROKER TO L.A.’S
RICH, POWERFUL

While working as a watchdog for the public, Tom Layton spent hours advancing the
interests and political connections of one lawyer with a long record of
misconduct complaints, emails obtained by The Times show.

July 13, 2021

But in early 2001, Tenner helped Girardi circumvent those safeguards, according
to court records outlining the previously unreported episode. Tenner signed an
“order to transfer funds” drawn up by Girardi on what appeared to be L.A.
Superior Court letterhead; it directed Comerica Bank to release $3.4 million to
the lawyer. A bank officer sent the money to Girardi, along with $175,000 in
interest. Two days later, Tenner signed a second “order” for an additional $3.6
million, but the bank balked, court filings show.

After the missing funds were discovered six months later, Girardi claimed that
he had paid that money to clients, but he would not provide copies of the
checks.

The late Jack Tenner, a longtime Los Angeles Superior Court judge.
(Patrick Downs / Los Angeles Times)

“Judge Tenner had no authority to issue any such order, the release of the funds
was in direct contravention of the settlement agreements,” Jeffrey McIntyre, an
attorney for Girardi’s clients, wrote in a 2002 court filing. He asked a
Superior Court judge to bar Girardi from using Tenner “to make any purported
‘Orders’ ” going forward. The outcome of that request is unclear.

Tenner continued supporting Girardi in the face of embezzlement claims. In a
2003 letter to Lockheed clients, Tenner wrote, “You should also know that all
settlements to the workers and all legal fees have been approved by me.”

He added, “In my many years as a lawyer, my many years as a judge and my many
years as a retired judge, I have never seen the legal effort put forth on behalf
of clients like the Girardi firm has done.”

To this day, Lockheed clients say they have never received full payment, and
Davis, Barnes and others have filed claims in the pending Girardi bankruptcy
case for compensation.

--------------------------------------------------------------------------------

The clients were growing more suspicious by the day.

Girardi in 2011 had reached a settlement of more than $17 million with the
manufacturer of a menopause drug called Prempro. Some of his 138 clients, all
elderly cancer survivors, came to question his handling of the money and hired a
former federal prosecutor who in 2014 demanded an accounting.

Girardi knew the cancer survivors were right; he hadn’t paid them everything
they were due, evidence that emerged in court later showed. But instead of fully
compensating the women or opening his books to their lawyer, he sent them to
retired state Supreme Court Justice Edward A. Panelli.

He had earlier tapped Panelli, a JAMS judge, for what his firm told his clients
was the important and difficult work of allocating the settlement. Now he and
his firm seized on that role to explain why some cancer survivors had received
less than expected. In a letter to the women’s attorney, a Girardi Keese
employee revealed for the first time that the firm had withheld 6% of the
settlement — about $1 million — and claimed it was at the behest of Panelli.

Former California Supreme Court Justice Edward A. Panelli.
(California State Supreme Court )
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“I am copying Justice Panelli on this letter and I suggest that we meet with
Justice Panelli so that you can verify the 6% ‘hold back’ with him,” wrote James
O’Callahan, a lawyer at Girardi’s firm. (O’Callahan died in 2019.)

Though California attorneys are required by law to provide an accounting within
10 days of a client’s request, Girardi refused repeated demands, and the cancer
survivors ultimately sued to get the financial records.

In response, Girardi turned again to Panelli. Girardi’s firm filed court papers
arguing that the lawsuit should not be decided by the assigned federal judge but
transferred to a private arbitration overseen by Panelli. Girardi Keese asserted
in a court filing that the retired judge had already been formally “appointed”
and “has sole discretion to make awards in the underlying ... ligation.” The
filing reiterated the claim that it was Panelli, not Girardi, who had decided to
retain $1 million.

A federal judge in L.A. called the argument that Panelli should oversee the case
“clever” but rejected it in a decision that colorfully described Girardi’s
defense as “the Justice-Panelli-made-me-do-it argument.”

California


FOR WIDOWS, ORPHANS CHEATED BY TOM GIRARDI, ‘REAL HOUSEWIVES’ RICHES ADD TO THE
PAIN

Clients who have accused Tom Girardi of misconduct will be tracking the new
season of ‘Real Housewives,’ hoping for evidence to bolster their case.

May 18, 2021

What the clients and the federal judge didn’t know at the time was that almost
everything Girardi Keese said about Panelli was a lie. Evidence that emerged
later established that no court had appointed him in the cancer survivors’ case,
and he had never instructed Girardi Keese to hold back any money, let alone $1
million.

The claim that Panelli had vast and sole authority over the settlement was also
exaggerated. Panelli had spent “approximately 20 hours” on the case, according
to a magistrate judge’s analysis. He met with only two or three of the cancer
survivors and had merely “rubber-stamped” payouts already decided by Girardi
Keese, according to the cancer survivors’ attorney.

> “My attendance at any such event never affected my integrity as a lawyer or my
> impartiality as a jurist or neutral.”

— Judge Edward A. Panelli

At the time, Panelli was working on several cases for Girardi, and the two men
had developed a friendship and sometimes socialized. The retired justice seemed
unwilling to testify against his friend. He and JAMS fought subpoenas for
months, with Panelli arguing in a court declaration that he was too busy to
submit to questioning: “With regard to the next eight weeks, with rare
exception, I am scheduled to be either engaged in family caretaking obligations,
on vacation, or working on previously set matters.”

Finally forced to testify in 2015, Panelli gave up Girardi’s lie.

“Did you authorize Girardi Keese to hold back any portion of the settlement
funds from the plaintiffs?” an attorney for the women asked.

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“No,” Panelli replied.

By then, the cancer survivors had become suspicious that Panelli was paid
excessively for the limited work he had performed. JAMS billed Girardi Keese
about $78,000 for Panelli’s time, but records from Girardi’s bank, filed in
court, showed another payment: a $50,000 check to Panelli personally. Combined,
those payments would amount to an hourly rate of more than $5,000.

California


THE ‘REAL HOUSEWIFE’ UNDER REAL SCRUTINY: ERIKA GIRARDI AND THE HUNT FOR THE
MISSING MILLIONS

Bankruptcy trustees have accused the reality star of concealing assets for her
husband and are dispatching investigators to comb through her belongings and
accounts.

May 17, 2021

Asked under oath to explain the personal check, Panelli replied, “I don’t know.”

“Did you ask them why they paid you directly?” a lawyer for the women pressed.

“No,” Panelli answered, according to testimony excerpted in court papers. The
full transcript was confidential.

After the deposition, Panelli did not work with Girardi again. Now retired,
Panelli, 90, declined to answer questions submitted in writing, including
whether he had reported the lawyer to the State Bar or other authorities. But in
a statement, he said he had always complied with ethical guidelines established
by JAMS and was not swayed by his socializing with Girardi.

“My attendance at any such event never affected my integrity as a lawyer or my
impartiality as a jurist or neutral,” Panelli said.

The cancer survivors eventually obtained law firm records that showed Girardi
had removed millions of dollars of client money months before he informed the
women that the settlement funds had arrived. A forensic accountant who examined
the records found evidence of a “Ponzi scheme” in the settlement account,
according to court filings. The case settled on confidential terms in 2016.

::

“We finally got him. This time we got the kahuna,” Girardi crowed in 2006 to the
audience of his syndicated weekly radio show, “Champions of Justice.” “One of
the finest justices the Court of Appeal has ever had.”

The honored guest was Trotter or, as Girardi informed listeners, “a man of great
principle,” who, having left the bench, was “the greatest” of the “great men and
women at JAMS.”

The praise was so over the top that Trotter, when finally given a chance to
speak, joked, “After an introduction like that, I would imagine that you would
do very well in front of me the next time you appear.”

> “People were one foot in the grave and one foot out and trying to get
> something.”

— Mildred Davis, whose husband, Willie, was diagnosed with cancer after a career
at Lockheed

As it happened, Trotter at the time was handling one of Girardi’s cases: an
approximately $66-million settlement with the maker of the diabetes drug
Rezulin. The terms were confidential, but Trotter’s role had been spelled out in
a 2005 court order appointing him “special referee” for the settlement. Under
the order, his duties included “review and approval” of payouts to each of the
approximately 4,300 clients, as well as the legal fees due Girardi and his
co-counsel and any expenses incurred by those firms in preparing the case.

The L.A. Superior Court judge who signed the order had every reason to trust
Trotter. A widely admired Orange County plaintiffs’ attorney in the 1970s,
Trotter had served for nearly a decade as a judge, first in Superior Court and
later on the state appellate bench. He surprised some in the legal community in
1987 by stepping down to join JAMS, a six-judge mediation firm started by a
friend.

In the years that followed, Trotter helped transform JAMS into a national and,
eventually, international powerhouse with a pivotal role in the judicial system.
The company Trotter built now employs more than 400 arbitrators in 29 locations,
and many important legal disputes, particularly those involving corporations,
play out not in public courtrooms but behind closed doors at JAMS. (The Times
has used JAMS to resolve disputes.) Although he retired from JAMS five years
ago, Trotter said he remains a shareholder. A spokesperson for JAMS said he
stopped being a shareholder in 2020.

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In the Rezulin settlement, the court made Trotter a gatekeeper for the funds. No
money was to leave an escrow account at Comerica Bank except “as directed” by
the retired justice, according to a court order. Yet almost all of the
settlement — some $65 million — poured into a separate law firm account
controlled by Girardi, according to internal Girardi Keese records that became
public this year in bankruptcy proceedings.

Erika Girardi at the Pasadena home she shared with husband Tom Girardi.
(Wally Skalij / Los Angeles Times)

Just over a month after he gained access to the money, Girardi wrote a check on
that account for $750,000 to M.M. Jewelers. The family-owned store in downtown
L.A. had created several pieces in the $15-million jewelry collection of Erika,
his now-estranged wife, and the funds from Rezulin went to purchase a set of
diamond stud earrings to replace a pair that had been stolen in 2007 from the
couple’s home, according to declarations from Girardi and a store owner that
were filed in the bankruptcy proceedings.

“The diamonds were of exquisite quality and very large,” Ared “Mike” Menzilcian
recalled in the affidavit.

In a hearing this summer in L.A., the federal judge overseeing the Girardi Keese
bankruptcy said the earring purchase “clearly was a crime.”

“This was an embezzlement. This was a theft,” U.S. Bankruptcy Judge Barry
Russell said.

Though there is an ongoing federal investigation into Girardi’s misappropriation
of client funds, no charges have been filed.

Trotter said in a statement that he was unaware that Girardi transferred
settlement money to a jewelry store.

Girardi categorized the purchase in internal firm records as a “cost,” meaning a
case expense deducted from the amount that went to clients. Put another way,
Girardi was charging his clients for his wife’s earrings. And there were other
questionable withdrawals billed as “costs.”

At various points over a 21-month period, Girardi removed money from the account
for what he claimed were expenses, according to a check registry filed in
Bankruptcy Court. The checks, made out to the firm Girardi solely controlled,
were for large sums and, with one exception, were for round numbers such as $4
million, $1 million, $500,000 or $100,000. They eventually totaled $14.3
million.

Experts who reviewed the court order and financial records at the request of The
Times said there were numerous red flags.

Television


THEY WROTE THE STORY THAT ROCKED ‘REAL HOUSEWIVES.’ AND THEY STILL HAVE
QUESTIONS

The Times reporters covering Tom and Erika Girardi explain what “The Real
Housewives of Beverly Hills” revealed — and what they still want to know.

Nov. 3, 2021

Advertisement


“You are never going to see a round number like $1 million or $750,000, because
the costs are never that way. They come with pennies,” said Charles Silver, a
professor at the University of Texas at Austin School of Law who specializes in
civil practice.

He and others said attorneys usually deduct all or almost all of their expenses
at the outset and not as Girardi did, with more than a dozen withdrawals
spanning about two years.

“It doesn’t make any sense,” said forensic accountant Steve Franklin, who had
examined records in the cancer survivors’ litigation. “They are treating it like
a slush fund.”

By comparison to the vast sums Girardi took, Trotter approved just $604,500 in
cost reimbursements for a Pasadena law firm that partnered with Girardi Keese on
the case and did substantial work preparing suits for trial, according to emails
filed in Bankruptcy Court.

“How did this go for so long without being discovered?” asked UC Irvine Law
School professor Carrie Menkel-Meadow, who has worked as a mediator and written
extensively on ethics and mass tort settlements.

She and others said it is incumbent on anyone overseeing a settlement to demand
invoices, receipts or other proof that costs are legitimate.

Asked to explain his handling of the Rezulin settlement, Trotter said in a
statement that “questions regarding a 17-year-old case are difficult to answer
with specificity,” but he “did not in any way authorize nor know about the
withdrawals you reference that Mr. Girardi labeled as costs.”

“They appear to be Mr. Girardi’s unlawful use of client funds and had nothing
whatsoever to do with actual costs,” Trotter said.

Whatever the oversight failures in Rezulin, the case brought Trotter further
acclaim. The National Law Journal cited his work on the settlement in a 2011
article that declared him the country’s “most influential” attorney in
alternative dispute resolution.

Trotter and JAMS were also paid handsomely. Their $500,000 fee was not widely
known before it was revealed this year in Bankruptcy Court, and its size has
raised eyebrows.

During a hearing this summer, an attorney for Erika Girardi, Evan Borges, called
the sum “very suspicious,” adding, “I’ve never heard of such a thing.”

JAMS confirmed receiving the fee in the Rezulin case but refused to provide
invoices substantiating Trotter’s work and declined to make executives available
for interviews. The company did not answer questions submitted in writing but
said in a statement that its retired judges “are expected to adhere to the
ethical standards that they swore to uphold under oath.”

--------------------------------------------------------------------------------

The Carousel neighborhood in Carson was contaminated with hazardous waste from
oil storage tanks.
(Dania Maxwell / Los Angeles Times)
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In 2015, the year Erika debuted her lavish lifestyle to viewers of “The Real
Housewives of Beverly Hills,” her husband was negotiating settlements that would
ultimately total $120 million for residents of a Carson neighborhood who claimed
they got cancer and other maladies from polluted soil.

At Girardi’s request, Trotter was appointed as special master to divide the
funds secured from an oil company and a real estate developer among about 1,500
clients affected by the pollution at Carousel, a housing development north of
the Port of L.A.

Years passed, but the settlements — one announced in 2015, another in 2016 —
remained partly unpaid, and clients complained. Chris Gutierrez, a public school
teacher who had lived in Carousel since childhood, took to dropping by Girardi
Keese’s Wilshire Boulevard offices on his way home from work.

“I would be waiting there for like an hour, and they wouldn’t give me the
information,” Gutierrez recalled. “I think they were irked I actually showed
up.”

Chris Gutierrez, a former client of Girardi, plays with his grandson in front of
his home in Carson. Gutierrez feels he was cheated out of his settlement by the
lawyer.
(Dania Maxwell / Los Angeles Times)

It seemed inconceivable at that time that Girardi could be delaying payment
because he was short on cash — one had only to watch his wife on “Housewives” to
see the couple’s opulent home and her designer clothes and personal “glam
squad.”

Girardi responded to clients’ ire with a series of letters that pinned the blame
for delays on Trotter, bankruptcy filings show. In April 2017, he told them, “We
have now satisfied all the requests of the Special Master and, beginning next
week, we will be issuing checks.”

Months later, the funds still delayed, Girardi wrote again, emphasizing that
Trotter, not his firm, was responsible for the holdup: “Every penny of the
settlement was governed by him including the timing in which funds could be
distributed.”

More than a year later, Girardi floated a new explanation. Trotter, he wrote,
had “a terrible heart condition and he has been unable to handle many of the
issues.”

A few days later, Girardi related supposed sickbed comments from Trotter.

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The Carousel neighborhood in Carson was heavily polluted by Shell and other
companies. Girardi represented more than 1,500 residents in lawsuits against the
companies, but much of that settlement was mishandled.
(Myung J. Chun / Los Angeles Times)

“I did speak to his wife and asked if we could at least do a partial payment as
soon as possible. She discussed the matter with him and told me that he said he
gave consent,” Girardi wrote, adding, “Mrs. Trotter thought that his heart
condition would settle down and he would be able to have a meeting in about 30
days.”

It is unclear what Trotter’s physical condition was at the time or whether he
knew of Girardi’s letters to clients.

Within months, Trotter had a new job with enormous responsibility: serving as
the trustee of the multibillion-dollar trust for Northern California wildfire
victims. He declined to answer questions about the purported heart condition or
other Girardi correspondence but said in a statement that his duties were
limited to deciding the amount of a plaintiff’s award.

“I had no authority or oversight and was not in any way involved with the
timeliness or distribution of the money. Nor was I privy to Mr. Girardi’s
comments,” he said.

On at least two occasions, Girardi sent partial payments to clients, saying
Trotter had authorized him to pay out some but not all of their money, according
to letters the clients submitted to Bankruptcy Court. Experts consulted by The
Times said attorneys can hold back money earmarked for specific medical costs
incurred by clients, but state law requires them to pay funds due to clients
“promptly.”

“I would be suspicious right away that there was some misappropriation,” said
Kevin Mohr, a professor at Western State College of Law who chaired the State
Bar’s Committee on Professional Responsibility and Conduct. “Whatever is
undisputed, the client has to be paid.”

The partial payments raised questions about how Trotter was apportioning money.
Carousel residents said in interviews that the process seemed random, with
little correlation between the settlement award and the time a client had lived
in the neighborhood or the injuries claimed.

Regina Torrez holds legal documents at her home in Carson. A former client of
Girardi, Torrez has still not been paid her full settlement.
(Francine Orr / Los Angeles Times)

Regina Torrez, a court reporter and cancer survivor who had lived in the
neighborhood for decades, said she had hoped Trotter’s involvement would root
out fraud and “correctly disburse the award.” But she came away disappointed.

“I don’t think they went through the applications and figured out how people
were affected and what injuries they had,” Torrez said.

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Some appealed to Trotter, without success.

“They never responded to me,” said John Parago, who wanted to detail for Trotter
how he survived testicular cancer as a teenager. He wondered whether “they were
just waiting for people to pass so they wouldn’t have to pay us.”

Carousel client Richard Fair sued in 2017 for an accounting. As he had in the
past, Girardi tried to move the suit outside of court into private arbitration
with a JAMS judge. In court filings, he contended that Trotter had jurisdiction
because of his ongoing work in the settlement.

An L.A Superior Court judge rejected the proposal, but Girardi tried again
months later, including in his request a copy of a letter to Trotter marked
“Personal & Confidential.”

“We would like you to set a date and time for a hearing in this matter,” he
wrote to the retired justice. There is no record in the court file of Trotter
responding. The request was denied.

“My sense was that he felt Trotter would rule in his favor. I don’t know why
else he would want Trotter in there,” said Fair’s attorney, Peter Dion-Kindem.

Girardi repeatedly refused to turn over financial records showing what he had
done with the Carousel money and continued to call upon Trotter to fend off the
lawsuit. One of the allegations against Girardi was that he had bungled the
$120-million settlements by leaving the funds for years in his firm’s trust
account, instead of in an interest-bearing account that could earn money for
clients.

Trotter vouched for Girardi’s handling of the money, writing in a 2019
declaration that “it would have been totally absurd to try to allocate interest
to an individual plaintiff.”

Experts consulted by The Times said the retired judge’s reasoning was flawed.
State regulations do allow attorneys to keep “nominal” funds in their firm trust
accounts for a short period of time, with the interest going to the State Bar
for distribution to nonprofits that promote public access to the courts.

But “there’s no way that millions of dollars held for any period of time fits
within this category. No way,” said Jack Londen, a partner at Morrison Foerster
who worked on the litigation that upheld the trust fund statute.

Trotter said in a statement that he stood by his original conclusion, but
conceded that at the time, he was “unaware of the allegations regarding Mr.
Girardi’s conduct.”

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“Had I known, my opinion would not have changed, but I certainly would not have
engaged with him in any way,” Trotter said in the statement. He blamed the State
Bar for not catching Girardi but refused to say whether he had ever informed the
agency of misconduct by the lawyer.

Fair died last year, before his suit went to trial. Scores of Carousel residents
have joined hundreds of other Girardi clients in filing bankruptcy claims to try
to recover some of the tens of millions of dollars they say are owed to them.

“We don’t have a lot of sway,” said Parago, one of the dozens of residents who
submitted a claim. “We’re the small people.”

Last month, the Bankruptcy Court seized Erika Girardi’s diamond earrings and
said they would be sold, with the proceeds going toward those cheated by
Girardi.

Those who have lined up for repayment include JAMS, which last year submitted a
claim for an unpaid bill of $9,660.

--------------------------------------------------------------------------------

California
Harriet Ryan

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Harriet Ryan is an investigative reporter for the Los Angeles Times. Since
joining the paper in 2008, she has written about high-profile people, including
Phil Spector, Michael Jackson and Britney Spears, and institutions, including
USC, the Catholic Church, the Kabbalah Centre and Purdue Pharma, the
manufacturer of OxyContin. Ryan won the Pulitzer Prize for investigative
reporting with colleagues Matt Hamilton and Paul Pringle in 2019. She previously
worked at Court TV and the Asbury Park Press. She is a graduate of Columbia
University.

Matt Hamilton

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Matt Hamilton is a reporter for the Los Angeles Times. He won the 2019 Pulitzer
Prize for investigative reporting with colleagues Harriet Ryan and Paul Pringle
and was part of the team of reporters that won a Pulitzer Prize for its coverage
of the San Bernardino terrorist attack. A graduate of Boston College and the
University of Southern California, he joined The Times in 2013.


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