Court Approves Major Settlement in D.E.L.T.A. Rescue Bankruptcy
Jul 8, 2026
On June 12th, 2026, a federal bankruptcy judge approved a $5.5 million settlement resolving the largest financial liability facing D.E.L.T.A. Rescue, marking a significant milestone in the charity’s ongoing Chapter 11 bankruptcy.
The settlement resolves the wrongful termination lawsuit brought by former employee Adriana Duarte that resulted in a multi-million-dollar jury verdict against D.E.L.T.A. Rescue and ultimately led the charity to file for Chapter 11 bankruptcy protection in May 2025. The bankruptcy court also authorized the Chapter 11 Trustee to liquidate investment assets to fund the settlement.
The bankruptcy proceedings continue against the backdrop of a separate federal criminal case involving D.E.L.T.A. Rescue founder Leo Grillo, who remains in federal custody awaiting trial on a charge of attempted kidnapping. Grillo plead “not guilty” in March 2026. According to federal prosecutors, Grillo allegedly sought to have Duarte kidnapped and transported to Mexico, where she would be held against her will and forced to cooperate regarding the same wrongful termination lawsuit that ultimately pushed the charity into bankruptcy.
Although the settlement represents an important step toward resolving DELTA Rescue’s financial difficulties, the Chapter 11 case remains ongoing. The organization continues to operate under the control of a court-appointed Chapter 11 Trustee, who assumed authority over the charity’s finances and operations shortly after the bankruptcy filing.
Trustee’s Settlement Approved Despite Objections
The settlement approved by the bankruptcy court was negotiated by the Chapter 11 Trustee, who argued that resolving the lawsuit would substantially reduce the bankruptcy estate’s financial exposure while avoiding the expense, uncertainty, and continuing interest associated with prolonged litigation.
Leo Grillo and D.E.L.T.A. Rescue’s two board members, Charles Leonard and John Rustin, opposed the settlement. Among other arguments, they contended that certain investment assets should not be used to satisfy the judgment because they were restricted for the care of rescued animals.
The Trustee disagreed, arguing that years of audited financial statements, IRS Forms 990, bankruptcy filings, and other financial records consistently treated those investment assets as unrestricted and that no evidence established legally enforceable donor restrictions. The bankruptcy court ultimately approved the Trustee’s settlement and authorized the liquidation of investment assets needed to fund it. CharityWatch independently reviewed D.E.L.T.A. Rescue’s 2024 audited financial statements and IRS tax Form 990 and confirmed that it reported 100% of its assets as being unrestricted.
Although the bankruptcy estate’s largest financial dispute has now been resolved, the Chapter 11 case itself is not over. The Trustee will continue overseeing DELTA Rescue’s finances and operations while the remaining bankruptcy matters are addressed.
$2.5 Million in Donations Still Unaccounted For
CharityWatch has been investigating and reporting on D.E.L.T.A. Rescue’s finances and governance issue since April 2025, prior to the bankruptcy filing.
CharityWatch published an investigation examining the charity’s financial reporting, governance, and relationships with affiliated organizations. Among other findings, our investigation identified more than $2.5 million in grants that D.E.L.T.A. Rescue reported making to a related nonprofit organization whose publicly available IRS filings did not report receiving those funds. CharityWatch also examined the charity’s governance practices and warned that the then-pending wrongful termination litigation posed a significant financial risk to the organization.
More recently, CharityWatch reported that bankruptcy records revealed D.E.L.T.A. Rescue paid approximately $80,000 to convicted felon Frank Parlato during a time frame that coincided with articles he published attacking CharityWatch, its CEO Laurie Styron, and Adriana Duarte. There is currently no publicly available evidence that Parlato has been compelled by the IRS or the California state Attorney General to pay back these funds to D.E.L.T.A. Rescue to be used for the care of animals or other legitimate charitable purposes.
What Happens Next?
The bankruptcy court’s approval of the settlement represents meaningful progress toward resolving one of D.E.L.T.A. Rescue’s largest financial obligations. However, both the bankruptcy proceedings and the criminal case against Leo Grillo remain active, and CharityWatch will continue monitoring and reporting on significant developments affecting the organization, its donors, and the animals in its care.
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