In the eyes of Leo Rechter, president of a local survivors group, the lawyer appointed by the court to represent needy survivors in the distribution of the $1.25 billion Swiss bank settlement was really the judge’s lawyer, not theirs.
Rechter, of Hillcrest, Queens, said attorney Burt Neuborne fought the American survivors "every step of the way" as they sought a larger share of the settlement money. And he contends that Neuborne consistently maintained he was working without a fee.
So Rechter was aghast when Neuborne asked the court to pay him nearly $4.1 million of the settlement money for his fee: $1 million more than all needy U.S. survivors have received thus far from the settlement.
But Neuborne, a well-respected professor at the New York University School of Law, said Brooklyn Federal Judge Edward Korman and attorneys in the case had requested his help in January 1999. Neuborne said he had worked at no charge for thousands of hours over the prior two years to help forge the settlement achieved in August 1998, and had planned to resume his consulting practice and teaching duties. But the judge and the attorneys persisted, he said.
"They said the settlement was in trouble and that it was unclear if they could make it work," Neuborne recalled.
Neuborne said other class-action settlements "fell apart" because of difficulties in distributing the settlement.
"Everyone had separate lawyers, and each lawyer wanted money," he said of the other cases. "That is why the judge wanted me. He said if there is anyone around with the imagination and academic background to do this, it is you. I put together a mechanism where there was a single lawyer and a special master for the allocation and distribution, along with the supervising judge.
"This was something that would have fallen apart. I made it work."
An alliance of survivors’ organizations has challenged Neuborne’s fee request, and Neuborne last week asked that Korman hold a hearing so he can justify the 8,000 hours he said he worked on the case over the past seven years.
Neuborne insisted that from the start it was made clear that he would be paid from interest money generated by the settlement.
"The judge held an open hearing in court in which he talked about paying me," he said. "The judge distinguished between pre-settlement fees and post, and said my fees would be set on an hourly basis of $500 an hour, which is 25 percent under what I charge clients."
Neuborne said he can understand those who question the size of his $4.1 million fee.
"It is reasonable for them to say that lawyers get paid too much," he said. "Reasonable people can argue. If I wanted to cheat and hide this, I could have put in a bill every three months and the amounts would have been low and under the radar. I didn’t because I was not going to charge the class unless I succeeded. I said to the judge that if I couldn’t work out a way for the settlement to succeed (for the money to get to the victims) then I haven’t earned any money. I said I would take the risk that I wouldn’t fail."
Although reluctant to discuss the case before the hearing, Neuborne said his "only regret is that the survivors are disappointed in me."
"I acted honorably," he insisted. "I hope that after the hearing they will agree."
But Rechter, 78, said his 1,200-member strong organization, the National Association of Jewish Holocaust Survivors, believes "this is holy money" that should be distributed to needy survivors only and not used to pay legal fees.
"We came here destitute, and finally after all these years money is coming and it should not be touched by anybody" but the needy, Rechter said.
In the February issue of the organization’s newsletter, Rechter claimed that Neuborne "steadfastly opposed" pleas from an American survivors’ alliance that more of the settlement money be allocated to needy U.S. survivors. The plan to which Neuborne agreed allocated 75 percent of the "looted assets" proceeds (totaling $205 million) to survivors in the former Soviet Union.
"Throughout the years, the U.S. survivors have felt victimized by the process where an attorney appointed by the court was supposed to be our attorney as well, but who instead fiercely opposed our legitimate interests," Rechter wrote.
"He opposed our appeal last year before the Second Circuit Appeals Court, citing his ‘pro bono’ status in the allocation process," he added. "He brandished his ‘pro bono’ status like a badge of honor that implied his actions were above reproach because he allegedly had no financial interest in the case."
In those papers, Neuborne referred to himself as having the ‘assistance of other pro bono’ attorneys in the case.
Sam Dubbin, a Miami lawyer who represents the nationwide survivors’ alliance Holocaust Survivors Foundation, of which NAHOS is a part, provided a November 1999 court filing from Neuborne in which he wrote that "numerous lawyers [in the case], including lead settlement counsel, have waived all attorney’s fees."
Dubbin also provided the transcript of a federal court proceeding in Miami last September in which Neuborne told the court, "I am the lead settlement counsel in the Swiss case in which I served without fee now for almost seven years."
Asked in a letter by three survivors to explain those comments in light of his request for a fee, Neuborne wrote back that he "never intended to suggest that I was serving as lead settlement counsel without fee. If my remarks were garbled, I apologize for the confusion.
"My intensive legal work for the class not only made possible the successful administration of the settlement, which has now distributed almost $840 million to victims, it actually added more than $50 million to the settlement fund. I am asking for 7 percent of the additional funds that my work added to the settlement fund."
Another survivor, Jack Rubin of Boynton Beach, Fla., said he also believed all along that Neuborne was working without a fee.
"Now that he is not, I’m disappointed because whatever he gets will be less for the survivors," he said. "I had thought that whatever he did he was doing to help the survivors."
But Neuborne insisted that it was he who "begged the judge" to "double the amount of money that went to poor" survivors using interest money from the settlement. And he said it was he who persuaded the Swiss banks to accelerate by one year the payment of $343 million in settlement money, so that the survivors would get an extra year of interest from that money.
"We earned $22.5 million from that money," Neuborne said, noting that he successfully argued at trial that the banks should pay compound interest and not simple interest as the banks wanted. That added an initial $5 million to $8 million to the settlement.
Neuborne added that he also worked to persuade Congress to make the settlement money tax exempt. And he noted that he worked to keep attorneys’ fees in this case to $11.1 million, including his fee. That compares to $52 million in legal fees in the $5 billion German Foundation settlement.
But David Mermelstein, 77, chairman of a survivors’ group in Miami, said he was "shocked" that Neuborne never mentioned that he would be seeking compensation and questioned why he said repeatedly that he was working without a fee.
"Every month we had conference calls with him in which he said that he was not getting paid," Mermelstein said. "We were begging the judge every month for money. I gave the judge the names of survivors who are desperate … but we were told there was no more money."
He said that if Neuborne’s $4 million was allocated along with other "looted asset" money, it would mean another $1 million for needy American survivors.