$100 Million Family Squabble Over a Trust

BROOKLYN (CN) - Fiduciaries of an irrevocable trust that owns nursing homes stole as much as $100 million over decades to line heirs' pockets, two trust beneficiaries claim in court.

Plaintiffs Abraham Sieger and Chanie Brachfeld sued on their own behalf and as beneficiaries of the Michael and Pola Tenenbaun Inter Vivos Trust.

Sieger and Brachfeld are grandchildren of the Tenenbaums, who formed the trust and named their five children as beneficiaries in December 1989, according to the complaint in Kings County Supreme Court.

They inherited their mother Helen Sieger's 20 percent of the trust when she died in April 2011. The defendants include the plaintiffs' aunt and an uncle, various in-laws, their attorney, and entities they control, including the Michael Tenenbaum Educational Trust, the Pola Tenenbaum Charitable Trust, the MYT Family Trust, and the Michael Tenenbaum Personal Residence Trust.

The trust owns several nursing homes, and income and rent from which are issues in the 39-page complaint. One of them owes $13 million in rent, according to the complaint.

Sieger and Brachfeld say that from its inception, the trust established by their grandparents consisted of four broad categories of assets: real property, cash and cash-equivalent investment accounts, corporate interests, and outstanding loans to trustees.

They claim the defendants "systematically abused their duties to the Trust through bad faith self-dealing and outright theft."

They claim that lead defendant Briendy Melnicke, a cousin, who was appointed trustees' attorney in 1999, signed off on many of the alleged misdeeds.

For instance, in February 2003, a nursing home owned by the trust was sold for $10.6 million, and "Briendy transferred about $1 million of the sale proceeds directly to her husband Melnicke," according to the complaint.

Previously, Sieger and Brachfeld claim, Melnicke received more than $1 million in loans from the trust that he never repaid.

"Violating her ethically bound duties as an attorney, as well as a co-trustee and sibling, Briendy conspired with her husband and brother to divert funds from the Trust to wherever Trustee Defendants and her husband directed her to do so," the complaint states.

"Over the years Melnicke and the Trustee Defendants have used the Trust as their own personal ATM machine, secretly transferring millions of dollars out of the Trust, selling valuable Trust assets and allowing valuable Trust assets under their control to be lost. This is a blatant violation of the Trust Agreement as well as their fiduciary duties to the plaintiffs.

"The Trustee Defendants found other creative ways to loot money from the Trust and use it for their own personal benefit. While plaintiffs have not yet unraveled the full extent of defendants' misconduct, upon information and belief, it has been uncovered that since 1992, under the guise of 'charitable donations,' approximately $2.6 million was withdrawn from the Trust by defendants. In 2003 alone the co-conspirators took nearly $1 million from the Trust and disbursed it to various 'charities.'

"Upon information and belief, Melnicke and the Trustee Defendants jointly decided to make each of the unauthorized charitable transfers. Briendy, in her obviously misguided role as attorney in fact, provided the necessary signatures."

The plaintiffs claim that the exact amount missing is not known. What is clear, they say, is that "Defendants have utilized and abused the Trust for decades, using it as their own personal piggybank."

As a result, "the Trust is no longer profitable and continues to hemorrhage money. In fact, despite owing millions (if not hundreds of millions) of dollars in property, the Trust makes no distributions and holds no money," according to the complaint.

Sieger and Brachfeld claim that they sued because it would be futile to demand restitution from the board, as its members are the wrongdoers.

They seek removal of the defendant trustees, dissipation of the trust, an accounting of the defendants' activities and of the trust's assets, and $100 million in compensatory and punitive damages, for fraud, breach of fiduciary duties, self-dealing, aiding and abetting breach of fiduciary duties, conversion, unjust enrichment, breach of trust, and non-payment of rent for some of the trust's nursing home holdings.

The plaintiffs are represented by Seth Eisenberger of Brooklyn.

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