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It’s bankruptcy gone wild!
On Monday, U.S. Bankruptcy Judge Sandra Klein turned introspective, questioning whether she has the authority to jail Girls Gone Wild founder Joe Francis for bad behavior. To satisfy any reservation of her authority, she’s decided to ask the Central District of California to consider issuing an arrest warrant for Francis. The move follows a year and a half of unbelievable action in the typically drab bankruptcy process.
As detailed in the judge’s report, the GGW entities associated with Girls Gone Wild filed Chapter 11 bankruptcy in February 2013.
At the time, Las Vegas mogul Steve Wynn, after winning millions from Francis in a defamation case, filed a motion to appoint a bankruptcy trustee, R. Todd Neilson, whose first order of business was attempting to recover certain trademarks vital to the Girls Gone Wild business. The intellectual property was alleged to have been fraudulently transferred to another Francis company.
Around that time, Neilson filed a complaint against Francis, accusing him of making violent threats against GGW employees and having them perform personal services for him. Among the accusations that would later come in a motion to enforce a temporary restraining order, Francis was accused of having his driver pick up a Cadillac Escalade belonging to the company that was being serviced in a repair shop and deliver it to him. Francis refused to return the car.
Meanwhile, Francis’ girlfriend was accused of changing access cards for the door occupied by Nielson at the GGW office and also terminating parking privileges for employees.
In May 2013, everyone including Francis and his girlfriend came to an agreement not to interfere in the bankrupt GGW business. The judge approved it. Months later, she issued a preliminary injunction that directed Francis not to communicate with GGW employees and to stay at least 100 feet away from the company’s Wilshire Boulevard office.
This past April, the judge approved the sale of the company’s assets for $1.825 million.
On May 9, according to declarations in the court record, Francis and his girlfriend entered the premises without invitation and “shouted profanities,” telling employees they were no longer “legally allowed to be on the premises.” The employees reminded Francis that his presence was a violation of a court order. The police were called; the landlord showed up. Francis became “verbally abusive” but then left.
Francis showed up again on May 16. This time, a security guard was present. There were more profanities. The police showed up. Several employees were “reduced to tears,” says court papers.
A contempt motion was soon filed with the Trustee, arguing that Francis had violated court orders by repeatedly entering the premises, interfering with the removal of property sold, and continuing to refuse to return three automobiles belonging to the company: the Cadillac, a 2012 Bentley and a 2008 Mercedes-Benz.
The judge ordered a hearing, and eventually Francis responded with the argument that after the April sale, the debtors no longer occupied the premises and therefore the preliminary injunction no longer applied. He also presented an alternative version of what happened during those May incidents, saying that GGW officers and employers were the “aggressors and even physically assaulted [girlfriend Abbey] Wilson, who is pregnant with twins.”
Francis also alleged that the vehicles were taken from him to Mexico to satisfy a debt to a strip club, and that he was “powerless” under Mexican law to retrieve them.
The Trustee found the explanation suspect, pointing, among other things, to the Mexican city where the strip club was located and another Mexican city where the vehicles were seized.
A hearing held on July 10 featured surveillance video.
A week later, the judge issued a final ruling that held that Francis hadn’t demonstrated his actions were based on a good faith and reasonable interpretation of the preliminary injunction. Francis was ordered to immediately return the vehicles, pay the clerk $5,000 for every day the vehicles weren’t returned, and also pay about $40,000 in attorneys’ fees and costs. The court set another hearing at the end of the month and hinted at additional sanctions, including arrest warrants for Francis and his girlfriend.
Then, on July 28, Francis filed opposition papers arguing that the bankruptcy court has only civil and not criminal contempt power. Thanks to a 2011 Supreme Court ruling involving former Playmate Anna Nicole Smith, which addressed the limited judicial powers of bankruptcy judges under the U.S. Constitution, he may have had a point.
Judge Klein now writes, “In light of the uncertainty regarding this Court’s authority to issue an arrest warrant as a civil coercive sanction, the Court is left with no alternative but to refer this matter to the District Court for further proceedings.”
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