Trust seeks seizure of Rudy Giuliani associate Lev Parnas's bail to repay $678K judgment

Kevin McCoy, USA TODAY

This story has been updated with details of a Nov. 13, 2019, ruling by a federal court in New York

NEW YORK — Could the legal situation possibly get any worse for Lev Parnas, the associate of President Donald Trump's personal attorney Rudy Giuliani who's under criminal indictment in a campaign finance case?

Short answer: Yes.

A frustrated creditor is trying to seize bail funds that Parnas — a potential witness in the ongoing impeachment proceedings against Trump — posted to stay out of jail while awaiting trial.

And a federal judge might authorize the seizure.

The development stems from the latest efforts of a family trust that since 2015 has tried to collect on a more than $500,000 judgment against Parnas from a movie-loan deal gone bad. The total has since risen to more than $678,000.

In a rare but not unprecedented action, the trust filed an Oct. 29 writ to garnish $200,000 that Parnas's family posted to secure his $1 million appearance bond in the criminal case. The bond keyed a judge's decision to order Parnas held under home detention, rather than jail, pending trial.

A federal attorney in Virginia, where the bond was initially posted, objected and filed a proposed motion to vacate the writ because a judge ordered the bail package to ensure Parnas shows up for court hearings and trial.

A federal court in Florida, where Parnas and his family reside, took the proposed motion "under advisement," but did not reject it. Instead, U.S. District Court Judge Donald Middlebrooks ordered attorneys for the family Trust and Parnas to file legal arguments about the unusual collection effort.

The collection attempt has taken on heightened public significance because the Ukraine-born Parnas and an associate, Belarus-born Igor Fruman, helped Giuliani seek damaging information in Ukraine about the family of former Vice President Joe Biden — a potential Trump challenger in the 2020 presidential election.

They also reportedly assisted Giuliani in seeking the ouster of then-U.S. ambassador to Ukraine Marie Yovanovitch. Trump recalled her to Washington, D.C., in May. As a result, House impeachment investigators have subpoenaed both men.

The proceedings — with the first live public testimony scheduled for Wednesday — focus on allegations that Trump delayed roughly $400 million in congressionally-approved U.S. aid to Ukraine. The goal, in theory, was to pressure Ukrainian President Volodymyr Zelensky for an investigation of Biden's son's financial involvement in a Ukrainian gas company called Burisma Holdings.

Trump also sought an investigation of an unproven theory that Ukraine, not Russia, interfered with the 2016 U.S. presidential election that brought him to the White House. He has repeatedly denied there was anything improper about the aid delay or his investigation requests.

 Parnas and Fruman initially refused to cooperate with the impeachment proceedings. However, defense lawyer Joseph Bondy recently signaled Parnas might provide evidence so long as he did not risk to endanger his defense in the criminal case, The New York Times reported.

In that case, federal prosecutors in New York allege that Parnas and Fruman conspired in a scheme to win influence by funneling hundreds of thousands of dollars in foreign funds to U.S. politicians and election committees. According to the indictment unsealed in October, the scheme involved an unnamed Ukrainian government official and an unidentified Russian businessman who bankrolled the effort.

The long-running judgment collection effort stems from $300,000 that the Michael Pues, the trustee for the Pues Family Trust IRA, loaned Parnas in 2010 to invest in a movie that was to be called "Anatomy of an Assassin." However, the film was never produced, and Parnas didn't return the money.

This photo shows the lawyer for US President Donald Trump, Rudy Giuliani, right, and a businessman who served as Giuliani's associate in Ukraine, Lev Parnas, left, as they arrived for the funeral of late US President George H.W. Bush at the National Cathedral in Washington, DC on December 5, 2018. (Photo by Alex Edelman / AFP via Getty Images)

The trust won a judgment against Parnas and his company, Parnas holdings, in a 2015 federal court decision in the Eastern District of New York. After filing the judgment in Florida, the trust embarked on the so-far fruitless effort to collect from a man whom court filings show has been the target of a string of evictions and civil lawsuits, including one in which his attorneys sued him for non-payment.

In a court filing on Tuesday evening, defense attorney Chris Draper argued that Parnas's bail funds could not be garnished because the money was posted by his wife, Svetlana Parnas. The funds are "essentially being held in trust by the court to be delivered back to whom they belong, and thus are not funds or assets" of Parnas, Draper argued.

Tony Andre, an attorney representing the Pues Family Trust IRA, disagreed in a filing that cited court cases involving creditors that garnished bail packages to recover unpaid debts.

The collection effort "is a somewhat extraordinary remedy" the trust "has been forced to resort to, because of" Parnas's "actions to conceal his assets," argued Andre. "Here, the court has the broad power and responsibility to attach assets . . . to satisfy this long-standing judgment.

Judge Middlebrooks is expected to review the legal arguments before issuing a decision. However, even before the Florida court acted, U.S. District Judge Paul Oetken, who is presiding over the criminal case against Parnas, ordered the court clerk not to release the bail funds.

That order, issued on Nov. 13, raised the possibility of a clash between two federal courts over the issue.

This article originally appeared on USA TODAY: Rudy Giuliani associate Lev Parnas's bail sought for debt recovery bid