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IN RE HOLOCAUST VICTIM ASSETS LITIGATION

April 2, 2004.

IN RE: HOLOCAUST VICTIM ASSETS LITIGATION, This Document Relates to: All Cases


The opinion of the court was delivered by: EDWARD KORMAN, Chief Judge, District

MEMORANDUM & ORDER

I write here to address another allocation issue that has arisen in connection with the settlement of this class action, the background of which is set forth at In re Holocaust Victim Assets Litigation, 105 F. Supp.2d 139 (E.D.N.Y. 2000). In an order dated November 17, 2003 I adopted the Special Master's Interim Report on Distribution and Recommendation for Allocation of Excess and Possible Unclaimed Residual Funds (hereafter "Interim Report"), and I explained my reasons for that decision at In re Holocaust Victim Assets Litigation, No. 96 Civ. 4849, 2004 WL 423186, 2004 U.S. Dist. LEXIS 3649 (E.D.N.Y. March 9, 2004). In my memorandum and order of March 9, 2004, I also responded to several types of objections to the allocation scheme that has governed the distribution of excess funds in this case. Now I respond to one more — this time the objectors argue that not all unclaimed funds should be distributed to needy survivors of the Holocaust.

The Pink Triangle Coalition, an international coalition formed to advocate for homosexual victims of the Nazis, filed a joint objection and proposal for the distribution of residual funds. Briefly, the Coalition "objects to the Special Master's Recommendation to the extent it inadequately accounts for the tragic historical record of Nazi persecution and post-war repression of homosexual class members," and proposes an alternative cy pres distribution. Memorandum in Support of Joint Objection and Proposal of the Pink Triangle Coalition in Response to the Special Masters October 2, 2003 Recommendation, at 27 (hereafter "Pink Triangle Memorandum"). The Special Master's recommendation was that $60 million in excess funds be reallocated to the Looted Assets Class for distribution to the neediest survivors of Nazi persecution and that I solicit proposals for the distribution of any possible unclaimed residual funds. The Pink Triangle Coalition claims that this recommendation fails to adequately account for homosexual victims because homosexual victims are nearly impossible to identify and thus have not often been among the needy survivors receiving settlement funds. It requests that in order to adequately account for homosexual victims, 1% of excess funds be allocated not to needy survivors, but to programs devoted to research and education regarding the plight of homosexuals in the Nazi era and its aftermath.

  Similarly, the Disability Rights Advocates (DRA), a non-profit law center founded to represent individuals with disabilities, has filed a Proposal for Cy Pres Award For the Class of "People who are Physically or Mentally Disabled or Handicapped" From the Allocation of Residual Unclaimed Funds. (Hereafter "DRA Proposal"). The DRA claims that although "[m]en, women and children with physical, mental, and emotional disabilities were subject to appalling acts of persecution during the Holocaust," these victims have been cut off from society and have thus not adequately benefitted from compensation programs. It contends that without a separate cy pres distribution, "the disabled victim class are at risk of failing to fairly benefit from the distribution of this extraordinary settlement." DRA Proposal, at 4. As a solution, the DRA requests that between 2% and 3% of all residual funds be allocated not to needy survivors, but to a "short term Trust that will provide grants to disability oriented, non-profit, non-governmental organizations." Id. at 6. While victims of Nazi persecution who were targeted because of a disability could be among the beneficiaries of this "trust," so too could any other disabled individual or disability rights organization. Though the DRA's proposal relates only to residual funds that will not be identified until the Special Master issues a recommendation on April 16, 2004, I address it now because it rests on logic similar to the Pink Triangle Coalition's objection and because my response may provide guidance to the Special Master in formulating his recommendation.

  I reject the Pink Triangle Coalition's joint objection and proposal and the DRA's proposal. I have already documented the tremendous need that currently exists among survivors. See In re Holocaust Victim Assets Litig., 2004 WL 423186. Needs exist among all survivor groups in all regions. For Jewish survivors in the Former Soviet Union, the President of the United Jewish Communities has described the nature of the poverty they face:
I have seen severe non-Jewish poverty in my travels, but I had never seen Jewish poverty like this before. After visiting Jewish families living in small two room shacks, sheltering seven to eight people each and heated with coal stoves, I found myself profoundly grateful that we as Jews, through our federations and JDC, have a way to help. Like many of you who have visited the FSU, I had often visited more familiar scenes of shut-ins B older people who are assisted by our hunger relief programs. But here in Kharkov, [in the Ukraine,] the total poverty picture was striking, and the thought that we might lessen our efforts and allocations, well its just unacceptable.
Letter from Steven Schwager to Special Master Judah Gribetz, dated March 4, 2004 (enclosing e-mail from Stephen H. Hoffman, dated January 23, 2004). Dr. Spencer Foreman, the President of Montefiore Hospital and a member of the Board of Directors of the JDC, wrote the Special Master to the same effect after his annual field visit to the FSU. Specifically, he confirmed that adequate medical care is a particular problem.
 
Diagnostic testing, specialties services and all but the most urgent hospital care are unavailable to those unable to pay for them, a group that includes virtually all of the Jewish elderly, and even when admitted to a hospital as an emergency out of pocket payment must be made for pharmaceuticals and medical equipment used during the hospitalization! Prescription medications are either unavailable or unaffordable for the average pensioner. Effective care is further strictured by the primitiveness of hospital and polyclinic facilities and by the scarcity of medical equipment, even the most basic items. While limited hospital care is available for trauma and acute medical problems, elderly patients with serious conditions such as stroke are often just sent home to linger bedridden or to die. A patient with a fractured hip, who in the West would be treated with a surgically inserted hip prosthesis and sent home in three days, is treated with traction for weeks then sent home, often with a non-union of the fracture, never to walk again. With the exception of a few major centers in Moscow and St. Petersburg and selected places available only to those who can pay, the services most people receive are at best comparable to those available in the U.S. in the 1950s, and they are in striking contrast to the high-quality care and advanced technologies to which elderly patients in the U.S. and Israel have access on a routine basis and for which, with a few exceptions, governmental or private payment is available.
Letter from Spencer Foreman to Special Master Judah Gribetz, dated January 15, 2004. According to the International Organization of Migration (IOM), for Romani and others living in Central and Eastern Europe, the situation is often the same.
 
Eastern and Central Europe is a region where many persons, regardless of age or ethnic[ity], now endure daily living conditions which have worsened considerably since the end of communism. The elderly, and persons `living on the edge' such as the Roma, have been hardest hit by the universal collapse of state services which once sought, however imperfectly, to meet some of their most basic material, social and medical needs.
Letter from Delbert H. Field, Jr., to Judge Korman, dated December 4, 2003. The needs of survivors elsewhere, while perhaps not as great, also cannot be ignored. Indeed, considering the level of desperate need among actual survivors of the Holocaust that can be alleviated through distribution of settlement funds, I cannot currently order a cy pres distribution aimed more generally at education, research or advocacy.

  The Pink Triangle Coalition's Joint Objection and Proposal

  The Pink Triangle Coalition's objection involves the distribution of $60 million in excess funds now reallocated to the Looted Assets Class, and its proposal involves the distribution of any residual funds that may remain after distributions to the Deposited Assets Class. While the final allocation of any residual funds has yet to be determined, the $60 million in excess funds is being distributed by the same principles that governed the initial allocation and distribution of $100 million to the Looted Assets Class in 2001 and the first supplemental allocation and distribution of $45 million to the Looted Assets Class in 2002. In my March 9, 2004 memorandum, I explained at length the distribution scheme that has governed the distribution of these excess funds allocated to the Looted Assets Class. See In re Holocaust Victim Assets Litig., 2004 WL 423186. I repeat a portion of that explanation here:
The Looted Assets Class is incredibly large. It consists of:
Victims or Targets of Nazi Persecution and their heirs, successors, administrators, executors, affiliates, and assigns who have or at anytime have asserted, assert, or may in the future seek to assert Claims against any Releasee for relief of any kind whatsoever relating to or arising in any way from Looted Assets or Cloaked Assets or any effort to recover Looted Assets or Cloaked Assets.
Settlement Agreement, Section 8.2(b). As the Special Master correctly reasoned, "[t]here is scarcely a victim of the Nazis who was not looted, and on nearly an incomprehensible scale." Plan of Allocation, at 111. After all, "it is well accepted by historians, including those representing Switzerland, that a primary purpose of the Nazi plunder was to transform loot (especially, but not only gold) into foreign currency by marketing these items in neutral nations, including Switzerland." Id. at 114. "With only limited exceptions, however, the current historical record simply does not permit precise determinations even as to the material losses in total, much less the nature and value of the loot traceable to Switzerland or Swiss entities." Id. at 112. To prevent the expenditure of incredible sums on administration, the Special Master recommended that for allocation purposes, I assume that all survivors of the Holocaust and their heirs were valid members of this class, even if they could not prove an injury directly tied to a Swiss entity. I agreed.
I then was faced with two obvious and unsatisfactory possibilities for how to govern the distribution of money to this enormous class. I could have used a claims resolution facility to determine the validity and value of claims on a case-by-case basis, or I could have ordered a pro rata distribution to every member of the class. The first option, given the complete lack of adequate records, would have resulted in "an unwieldy and enormously expensive apparatus to adjudicate hundreds of thousands of claims, for losses which can barely be measured and hardly be documented, and whose connection to Switzerland, or a Swiss entity, if ever it existed, probably no longer can be proven." Id. at 114-15. The second option . . . was equally problematic. . . . [F]or allocation purposes, the class includes all those who were victims of the Holocaust and their heirs. A pro rata distribution would have resulted in the payment of literally pennies to each of the millions of individuals who would fall into this class. . . .
Fortunately, there [was] a more reasonable alternative. The Special Master recommended excluding heirs from any pro rata distribution, as was done with the Refugee and Slave Labor classes. While this would have increased the pro rata share of survivors, it would still have resulted in one-time individual awards that would not have been enough to provide any assistance to needy survivors and would have been insignificant to those who are not needy. Consequently, I adopted the accompanying recommendation of the Special Master and ordered a cy pres remedy targeting the neediest survivors in the Looted Assets Class. See Special Master's Interim Report, at 3 n.3. The Special Master reasoned that these individuals "perhaps would be less in need today had their assets not been looted and their lives nearly destroyed" during the Nazi era. Plan of Allocation, at 117. I agreed that using the funds to provide relief to these neediest survivors over the course of ten years would be the way to most benefit the class as a whole. In order to reduce administrative costs, these funds were funneled through organizations that were already providing relief to survivor communities and could quickly provide aid. I reserved the right to grant other cy pres remedies as worthwhile proposals are presented, but my principal decision was consistent with Second Circuit law. See In re Agent Orange Product Liability Litig., 818 F.2d 145, 158 (2d Cir. 1987) (explicitly authorizing a district court to "give as much help as possible to individuals who, in general, are most in need of assistance" because it is "equitable to limit payments to those with the most severe injuries"). Indeed, the Second Circuit agreed. See In re Holocaust Victim Assets Litig., 14 Fed. Appx. 132 (2d Cir. 2001) (finding that appellants' challenge to my decision to apply the cy pres doctrine to the Looted Assets Class "lack[ed] merit").
In re Holocaust Victim Assets Litig., 2004 WL 423186, at *5-6.

  Initially, $100 million was set aside for the neediest survivors of Nazi persecution. Later, that sum was augmented by $105 million from excess funds that had accumulated on the settlement fund. See id., at * 1. Any further distribution to the neediest survivors will come from the residual funds, if any, that remain unclaimed from the amount set aside for the Deposited Assets Class.

  In order to facilitate a speedy and equitable distribution, I ordered that 90% of the funds allocated to the Looted Assets Class be distributed to needy Jewish victims, and 10% be distributed to needy victims who were Romani, Jehovah's Witness, homosexual, or physically or mentally disabled or handicapped. The International Organization of Migration (IOM) has handled the distribution of money allocated to needy survivors in the latter categories, and by the time of the Special Masters Interim Report, the IOM had reached over 50,000 such survivors. Interim Report, at 102. Most have been Roma. The IOM has had far less success identifying homosexual targets of Nazi Persecution.

  The lack of success in identifying homosexual victims has not been for want of effort. The Special Master reported, "the IOM continues to consult with experts and non-governmental organizations as to how best to locate and serve needy disabled and homosexual Nazi victims." Id. at 105. He continued:
IOM has been in contact with an interlocutor for homosexual survivors regarding a needs assessment for the provision of HSP [humanitarian] assistance. IOM still awaits a response from this interlocutor, which should include a list of potential beneficiaries, before making additional enquiries in this regard. Since submitting the Supplemental Proposal [of June 10, 2002; approved by Court order dated June 24, 2002], in an effort to reach survivors, IOM has also contacted a further fifty (50) homosexual NGOs, foundations and organizations which work in support of this community throughout Europe. To date the response has been extremely limited.
Id., at 105 n.147 (citing "Humanitarian and Social Programmes (HSP) Quarterly Report for the Period July-September 2002," dated October 11, 2002, at 12). It has simply been extremely difficult to identify survivors of Nazi persecution who were targeted for victimization because they were homosexual.

  The Pink Triangle Coalition readily admits that survivors targeted for being homosexual are hard to find. Indeed, the Coalition itself has only identified seven living needy survivors who were targeted by the Nazis on account of their sexual orientation. See Pink Triangle Memorandum, at 16 ("Extensive efforts to locate remaining gay survivors of Nazi persecution have yielded a total of seven needy survivors who remain alive and are willing to come forward."). The Coalition contends only that providing assistance to these seven individuals inadequately represents the amount of suffering inflicted on homosexuals by the Nazis.

  The Pink Triangle Coalition Proposal for a Cy Pres Allocation for Homosexual Victims of the Nazis extensively chronicles the history of Nazi persecution of homosexuals. The following is a brief summary:
One goal of the Nazi regime was to suppress all private same-sex sexual activity and all public expression of gay and lesbian culture and community in Germany and the annexed territories. The persecution was far more extreme in its range and severity than that experienced by gay men and lesbians in the pre- and post-Nazi periods in Germany or in other Western European counties.
The facts known about the targeting of gay men and lesbians under the Third Reich reveal a pattern of effective and merciless repression. The Nazi regime's campaign to eradicate homosexuality began in 1933 with the deliberate destruction of research centers, cultural resources, businesses, communications media, and social organizations that formed the backbone of the gay community throughout Germany. Historians have estimated that under the Nazi regime as many as 100,000 homosexuals may have been arrested or tracked on the basis of section 175 of the Reich Penal Code, which outlawed not only sexual activity, but even touching, `looking,' and hugging between men, and of section 179 of the Austrian Penal Code, which criminalized both male and female same-sex intimacy.
As many as 15,000 gay men were deported as such to concentration camps and compelled to perform slave labor for corporations or for entities owned or controlled by the Nazi regime. A small number of lesbian women also were deported to camps specifically because of their sexual orientation, and some were forced into prostitution in camp brothels. Those interned for their homosexuality were among the most abused in the camps, which abuse, for some, included subjection to heinous medical experimentation, including forcible castration. As many as 9,000 men interned as gay were killed in the camps.
In addition to persecuting individuals, the Nazi regime plundered gay community organizations, meeting places, and centers of political and scholarly activity, and ...

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