RHOBH's Erika Jayne "should go to JAIL" for refusing to hand over her $750K earrings in her husband's bankruptcy case, the trustee has claimed.
Her ex, whose health has rapidly declined, was forced into bankruptcy along with his law firm in 2020, as court records show there are over $500million in claims from creditors.
Last week, Erika alleged she's struggling financially and may have to hand the earrings over to pay millions in back taxes as she was sent yet another eye-watering bill.
But the trustee has come back fighting, filing a lengthy reply late Tuesday, alleging: "Her conduct appears to be a new crime. Her refusal to now turn over the Diamond Earrings is conversion, for which she can be held accountable in damages.
"She can also be civilly liable for the value of the Diamond Earrings, plus statutory interest and punitive damages, which with prejudgment interest could easily be $5.4 million."
The court docs continued to state: "Mrs. Girardi in her declaration stated that she first learned of her husband's embezzlement when the issue surfaced in this case – November 2021.
"At that time, Mrs. Girardi had an obligation to return the earrings to the Trustee. She did not, and the Trustee was compelled to file her Motion.
"Mrs. Girardi's response, because of the passage of time, she gets to keep the fruit of the embezzlement. Not so."
They go on to cite legal codes which provide that "every person who withholds any property from the owner . . . knowing the property to be stolen... shall be punished by imprisonment in a county jail for not more than one year, or imprisonment pursuant to subdivision (h) of Section 1170."
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Both Erika and her ex are not currently subject to any criminal investigation amid the embezzlement claims.
Erika argues that they do not have standing to recover the stolen property [cash in the firm's trust account that was wrongfully taken] because the trust funds are not property of the bankruptcy estate.
But the trustee insists: "Not true. An attorney's trust account is an expressed trust. An express trust is defined as a fiduciary relationship whereby a trustee holds property for another's benefit."
They further hit back at Erika's claim that the Statute of Limitations has expired.
TRUSTEE FIGHTS BACK
The trustee insists: "Mrs. Girardi’s statute of limitation argument misses the mark, as it fails to address the complexities of an aggregate settlement and the duties of the lawyer/trustee to provide an accounting to the beneficiaries in disbursing the proceeds from a recovery in the context of a mass tort action."
The money used to buy the earrings came from settlement cash supposedly for a group of people who "suffered serious health issues from their use of the drug Rezulin."
Attorney Ronald Richards, who formerly represented Chapter 7 trustee Elissa Miller and is a creditor in the estate, told The Sun this week: "The statute of limitations for client theft from a trust account is from the date of discovery. The case law applies a more specific probate code instead of the general fraud statute.
"Thus, the statute of limitations is tolled. Erika's statute of limitations agreement will be defeated on a motion to dismiss. Ironically, the same law firm who was involved in the opinion cited by the Trustee is representing David Lira, Thomas Girardi's son-in-law.
"They had made the same argument on statute of limitations grounds and lost in the Court of Appeal.
"Erika Girardi will have to return the earrings to the Trustee so long as it was clear they were purchased with stolen client money. She does not get to keep the fruits of the crime.
"Moreover, the Trustee takes the aggressive position that by refusing to return the fruits of the crime, she is committing a crime herself. This would, of course, start a new statute of limitations clock. Erika has nowhere to go on this motion except down hill."
In a declaration filed last week, Erika, 50, claimed in late May her business manager received yet another Income Tax Due Notice bill from the California Franchise Tax Board which states she owes $2.2M in taxes for 2019.
"I am in the midst of trying to figure out the basis of this tax bill with the assistance of my business manager, who is also an accountant," she wrote. "I do not have the ability to pay the FTB tax bill.
"I also do not know if the FTB is claiming any sort of lien on my assets, which include the diamond earrings," documents claimed.
Court papers detail that Tom bought Erika, 50, the earrings in approximately 2004 or 2005 as a gift but they were stolen around a year later.
She alleges their family home was ransacked while they were out for dinner one evening, and she had left the earrings in a crystal container in her bathroom.
Erika claims the earrings were stolen and they had not been insured, so Tom, 83, replaced them with a replica pair, adding: "I had no reason to doubt or question the source of funds used to buy the earrings."
She explained in late 2021, she heard for the first time from the Trustee in the bankruptcy case for Tom's law firm Girardi Keese, who alleged the earrings were bought with money from a trust account.
"At all times, I have been willing to put the earrings in an escrow until a final court order is issued regarding who is entitled to the earrings," Erika went on.
"In fact, based on an agreement with the Trustee, the earrings are currently held in a safe deposit box, to which the Trustee has access.
"I agree 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."