No Misconduct In Handling Of Armenian Genocide Settlement Proceeds
An unpublished decision of the California State Bar Court dismisses all charges
In this contested proceeding, Rita Mahdessian was charged, inter alia, with misappropriating in excess of $385,000 in cy près settlement funds awarded to a California nonprofit corporation established for the education and remembrance of the Armenian Genocide of 1915–1918, and with misleading the district court judge who approved the award. The hearing judge dismissed the charges of misleading the judge, but found that Mahdessian committed acts of moral turpitude by both (1) misappropriating $30,000 from the nonprofit, and (2) engaging in tax fraud by falsely reporting this and another $26,000 in taxable payouts to her children and their law school as donations or loan repayments, charges that were not contained in the Notice of Disciplinary Charges (NDC). Considering Mahdessian’s three prior disciplinary suspensions, the hearing judge recommended disbarment.
Both Mahdessian and the Office of Chief Trial Counsel of the State Bar (OCTC) appeal. OCTC supports the hearing judge’s disciplinary recommendation, does not challenge the considerable narrowing of the misappropriation charge, and requests review only as to the limited issue of whether Mahdessian engaged in additional acts of moral turpitude, by withholding material information from the district court judge.
Mahdessian disputes culpability and requests a full dismissal. Her argument is twofold: (1) OCTC did not charge her with either tax-related transgressions or breach of fiduciary duties; and (2) the evidence falls short of establishing the actual charged allegations of misappropriation and misrepresentation because (a) the nonprofit board approved all at-issue fund transactions, and (b) Mahdessian did not file any pleadings, make any court appearances, or have any proven duty to provide information to the district court judge.
Upon our independent review (Cal. Rules of Court, rule 9.12), we too find fatal deficiencies in the notice and evidentiary record in this case. Conduct in the nature of tax fraud
was not alleged in the NDC against Mahdessian. Moreover, we find no clear and convincing evidence to support culpability as to the charged misconduct. The evidence fails to establish that Mahdessian made any unauthorized fund withdrawals from the nonprofit or that she was ever involved in the district court litigation such that she had an obligation to disclose information. Accordingly, we dismiss this proceeding with prejudice.
On the merits of the charged misconduct
we do not find clear and convincing evidence that Mahdessian misappropriated $30,000 from CAR. CAR, as a nonprofit, is not the subject of these disciplinary proceedings and we have no basis to question the financial decisions of CAR or its board, which approved the transaction. Under the circumstances, and the uncontroverted evidence that CAR knowingly approved the fund transfer, we are unable to find that any unauthorized transaction occurred.
The Los Angeles Times covered the disbarment recommendation.
According to bar documents, Mahdessian and Yeghiayan misrepresented a pair of nonprofit groups they created to appropriate the settlement money.
The money was the result of a pair of class-action lawsuits in 2005 against French insurance company AXA and the New York Life Insurance Co. over survivor benefits for descendants of victims of the Armenian Genocide. The pair were co-counsels on the case against AXA.
The resulting $20-million settlement was split into two parts; $17.5 million was paid out to members of the class-action suit, while $3 million was set aside for an Unclaimed Benefits Fund, to which nine beneficiaries were named, according to court documents.
Any money left over after paying the main settlement and administrative costs would be transferred into the Unclaimed Benefits Fund, which could then be distributed to charitable nonprofit organizations recommended by the suit’s lawyers — Mahdessian and Yeghiayan.
The organizations were to “advance the charitable interests of the Armenian community,” according to documents from the state bar.
State bar officials said one of the nonprofits, the Center for Armenian Remembrance, was based out of the couple’s Glendale law firm and created three months after the settlement’s approval. A second nonprofit, the Conservatoire de la Memoire Armenienne, was also said to be based out of their office.
According to the state bar, Mahdessian and Yeghiayan requested more than $300,000 for the two nonprofits because of their supposed charitable status. However, according to court records, they were unable to provide any record of charitable activity and failed to disclose their ties to the two organizations.
The state bar said the couple used the funds for personal expenses such as issuing checks to their own law firm and paying law school tuition for their two children.
(Mike Frisch)