Consulting a lawyer about one’s specific situation is never a bad idea. I think we are at the point where a good number of grantees should be trying to set up legal counsel if they do not already have someone. That is doubly true for anyone who is thinking about taking any action that could be seen as hiding the ball in any form or fashion. Sending money to the Caymans or other sheninigans are very likely to be a bad idea.
That being said, the facts in the Girardi matter seem rather extreme. Her husband wrote a check for $750K out of a client trust account for the earrings, and she still had the very same earrings. These facts had been established by court proceedings and evidence, not by a generic press release. So the origin of the property was clearly and 100% a fraud (not from a source that contained a mix of equity investments, fees, and customer funds), and the property retained its distinct character up until the time of the turnover demand. That is, the earrings had not become commingled with Girardi’s other assets. And Giradi’s receipt of the earrings seems to have been without any even arguable consideration of any kind.
Even on those extremely unfavorable facts for Girardi: I looked at the transcript of oral decision and didn’t see the bankruptcy judge specifically find that there was criminal liability for retaining them as long as she did. (“I don’t believe that Mrs. Girardi, at least for our purposes, knew that this was—you know, the diamonds were stolen property.”). The lawyer for the estate may have taken that position, but that’s not the same as a judge accepting it. I didn’t see a judgment for the triple damages you mentioned. (Admittedly, I didn’t look at either exhaustively.) You didn’t mention a prosecutor going after her criminally either; trying to defraud the bankruptcy court by turning over other earrings would be a different kettle of fish. Her lawyers are appealing even the turnover order, which seems a foolhardy strategy if they think she has serious criminal exposure. And I’m still not aware of any prosecutions for going about one’s ordinary business and at least waiting for a demand letter from the bankruptcy estate.
As for the spent/unspent distinction—I assume that at least smaller grantees commingled the grant monies with their other funds. Although the answer may be obvious in some cases, how do you propose that they figure out whether they have “spent” the FTX dollars rather than other money that was in their account? St. Benedict trotted out the usual “we spent it already” defense, but the court opinion doesn’t describe the donation as restricted—only as conditional on naming an auditorium for the fraudster’s parents. And likely St. Benedict kept $2MM on hand at all times, so it isn’t clear to me how we would figure out if it was Petters’ donation that had been spent.
Incidentally, there may be some individual grantees who want to send money back by December 31 for tax reasons. I haven’t thought much about that, but I know for executive salary clawbacks the tax treatment is cleaner and more complete if the money is clawed back in the same year.
Consulting a lawyer about one’s specific situation is never a bad idea. I think we are at the point where a good number of grantees should be trying to set up legal counsel if they do not already have someone. That is doubly true for anyone who is thinking about taking any action that could be seen as hiding the ball in any form or fashion. Sending money to the Caymans or other sheninigans are very likely to be a bad idea.
That being said, the facts in the Girardi matter seem rather extreme. Her husband wrote a check for $750K out of a client trust account for the earrings, and she still had the very same earrings. These facts had been established by court proceedings and evidence, not by a generic press release. So the origin of the property was clearly and 100% a fraud (not from a source that contained a mix of equity investments, fees, and customer funds), and the property retained its distinct character up until the time of the turnover demand. That is, the earrings had not become commingled with Girardi’s other assets. And Giradi’s receipt of the earrings seems to have been without any even arguable consideration of any kind.
Even on those extremely unfavorable facts for Girardi: I looked at the transcript of oral decision and didn’t see the bankruptcy judge specifically find that there was criminal liability for retaining them as long as she did. (“I don’t believe that Mrs. Girardi, at least for our purposes, knew that this was—you know, the diamonds were stolen property.”). The lawyer for the estate may have taken that position, but that’s not the same as a judge accepting it. I didn’t see a judgment for the triple damages you mentioned. (Admittedly, I didn’t look at either exhaustively.) You didn’t mention a prosecutor going after her criminally either; trying to defraud the bankruptcy court by turning over other earrings would be a different kettle of fish. Her lawyers are appealing even the turnover order, which seems a foolhardy strategy if they think she has serious criminal exposure. And I’m still not aware of any prosecutions for going about one’s ordinary business and at least waiting for a demand letter from the bankruptcy estate.
As for the spent/unspent distinction—I assume that at least smaller grantees commingled the grant monies with their other funds. Although the answer may be obvious in some cases, how do you propose that they figure out whether they have “spent” the FTX dollars rather than other money that was in their account? St. Benedict trotted out the usual “we spent it already” defense, but the court opinion doesn’t describe the donation as restricted—only as conditional on naming an auditorium for the fraudster’s parents. And likely St. Benedict kept $2MM on hand at all times, so it isn’t clear to me how we would figure out if it was Petters’ donation that had been spent.
Incidentally, there may be some individual grantees who want to send money back by December 31 for tax reasons. I haven’t thought much about that, but I know for executive salary clawbacks the tax treatment is cleaner and more complete if the money is clawed back in the same year.