All Parties Must Disclose Disbursement of Insurance Settlement Funds
Ever since 2004 and 2005, when lawsuits against New York Life and AXA insurance companies were settled for $37.5 million, there has not been a full accounting of the disbursements made to heirs of genocide-era policyholders and Armenian charitable organizations.
In recent years, there have been disagreements among the lawyers who had jointly filed the two lawsuits. Attorney Vartkes Yeghiayan petitioned the court last year seeking the appointment of an independent administrator to oversee the disbursements by his co-counsels, Mark Geragos and Brian Kabateck. The Judge rejected Yeghiayan's request.
Earlier this month, the tables were turned when attorneys Geragos and Kabateck sued Yeghiayan and his wife Rita Mahdessian in Los Angeles County Superior Court, accusing them of fraudulent activities, including misappropriation of nearly $1 million of insurance settlement proceeds intended for Armenian charities. Yeghiayan categorically denied the accusations and told the Daily Journal that Geragos and Kabateck "had hoarded more than $17 million in settlement funds" and that they had failed "to give an accounting of how the money was being spent."
While some community members were concerned that these allegations would be exploited by the Turkish media to discredit Armenians’ pursuit of restitution for Genocide victims, others were troubled that funds rightfully belonging to Armenian Genocide victims may have been misdirected misappropriated.
Based on our preliminary research, here is approximately how the New York Life Insurance Company’s settlement of $20 million (plus accumulated interest) was disbursed:
- Almost $9 million went to the heirs of 1,500 of the 2,300 unpaid policyholders of New York Life. No heirs came forward from the remaining 800 policyholders;
- $4 million was divided equally among attorneys Geragos, Kabateck and Yeghiayan to be given to charities of their choice;
- $4 million to cover legal fees for the four attorneys (Geragos, Kabateck, Yeghiayan and William Shernoff) who represented the Armenian plaintiffs in this class action lawsuit;
- $3 million was donated to nine major Armenian charitable organizations; and
- Almost $1 million was spent on administrative expenses in order to disburse the funds to the heirs of policyholders. A three-member Settlement Fund Board was set up by the California Insurance Commissioner to evaluate the documents submitted by surviving family members of policyholders.
Based on similar preliminary research, here is approximately how the AXA settlement of $17.5 million (plus accumulated interest) was disbursed:
- Around $8.5 million went to an unknown number of heirs of the 11,000 AXA policyholders;
- $3 million was given by the three attorneys to Armenian charities in France;
- $3 million to cover legal fees for the three attorneys (Geragos, Kabateck and Yeghiayan) who represented the Armenian plaintiffs in this class action lawsuit;
- $2.85 million was divided equally among the three attorneys to be distributed to charities of their choice; and
- $150,000 (possibly more) was spent on administrative expenses to evaluate the documents submitted by the heirs of insurance policyholders.
It is noteworthy that the Settlement Agreement approved by Federal Judge Christina Snyder mandated that all charities, within six months of receiving funds from the New York Life settlement, must provide to the court a full accounting of how these funds were spent. It is not known if the required reports were filed by the recipients. The Settlement Agreement also stated that the California Attorney General has jurisdiction to enforce compliance with these provisions and prosecute all violations. In the case of AXA, the Settlement Agreement required that within six months charities submit to the attorneys of the plaintiffs and AXA a report on the use of the funds they have received.
The Los Angeles Superior Court now has the opportunity to review the allegations made by attorneys Geragos and Kabateck against Yeghiayan and Mahdessian to determine if the insurance settlement funds were properly disbursed. Until then, no one should jump to any conclusions regarding the guilt or innocence of any of the involved parties.
Independently of any legal requirements, all organizations which have obtained funds from the two insurance settlements have the moral obligation to disclose to the Armenian community the amounts they received and spent. Similarly, the three attorneys should make public all disbursements they have made from the settlement funds to all organizations. Furthermore, all settlement-related documents in the possession of the three attorneys, both Settlement Fund Boards and their staffs should be preserved until the conclusion of this lawsuit.
Those entrusted with funds rightfully belonging to victims of the Armenian Genocide have the sacred duty to treat them with utmost care and diligence. Anything less would invite the condemnation of all people of good conscience.