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The Wilmington Star

North Carolina, Thursday, July 22, 2004

Fortress Re. reaches deal in fraud case

By Margaret Moffett Banks,
Staff Writer Greenboro News & Record [more on this] [more such 9/11 fraud stories]

TWO Greensboro [North Carolina] businessmen and their now-defunct reinsurance company will pay more than $400 million -- including proceeds from the sale of Irving Park's most distinctive mansion -- to settle a billion-dollar fraud case.

click for origin

David Irving comments:

SUMMARY - A CAN OF WORMS FALLS OPEN: This is the story of two high-flying Oligarchs, or "philanthropists," from Greensboro, North Carolina, who embezzled hundreds of millions of dollars from their re-insurance company. Chico had 'donated' $100m of the money thus siphoned off, to build a Jewish academy from scratch. For this 'generosity,' he was named a top "philanthropist" by Business Week magazine! All would have been well except for those blasted Arab hijackers in their flying machines.
   The Oligarchs of North Carolina had taken millions of dollars from the Japanese insurers, to reinsure their insurance on airplanes. Including all four of the 9/11 airplanes destroyed that day. Oops.
   Now the philanthropists didn't have the money to reimburse the Japanese insurers.
   Hardly their fault, surely? As President George W Bush says, who could have foreseen such an event? 

Millionaires Maurice "Chico" Sabbah and Kenneth Kornfeld will hand over cash, antiques, luxury vacation homes and commercial property from the North Carolina coast to Israel to three Japanese insurance giants.

Those insurers are trying to reach a settlement with the American Hebrew Academy, the boarding school Sabbah financed with $100 million -- money the Japanese claim Sabbah defrauded from them. The companies will pursue the lawsuit against the academy if they can't reach a settlement, said Howard Hawkins, an attorney for one of the Japanese companies.

"(Sabbah) didn't have the lawful ability to gift those assets," said Hawkins, a partner with Cadwalader, Wickersham & Taft in New York City.

Sabbah and Kornfeld declined to be interviewed.

Glenn Drew, their attorney and Sabbah's nephew, declined to discuss the settlement, saying it was confidential. He said the academy is working on a settlement and is planning for the upcoming school year. Forty-five new students will arrive in August, bringing the school's enrollment to 130 students, Drew said.

Hawkins said the $400 million is only an estimate of the final total. The amount could be higher, he said.

He called the amount "tremendous. Greater than what we realistically expected. (Sabbah and Kornfeld) decided to live out their lives in peace rather than fight the action until all their assets were taken," he said.

Matthew Wulf, an attorney for the trade group Reinsurance Association of America in Washington, D.C., said "even in the insurance and reinsurance industry, $400 million is a lot of money."

Wulf said it's an especially large sum for one company to pay.

The settlement ends a nearly three-year-long legal struggle between Sabbah, Kornfeld and the Japanese.

Fortress Re was a reinsurance manager, a complicated business that provides insurance to insurance companies. For years, it was virtually unknown outside of reinsurance circles, operating from a nondescript brick building near downtown Burlington.

Few people knew the company was a thriving, multibillion dollar business.

Even fewer understood what Fortress Re did: manage an aviation-reinsurance "pool,'' a risk-sharing insurance group, for the three Japanese companies.

The company was the pool manager for the four airplanes hijacked on Sept. 11, 2001; accountants estimated that the pool lost $1.4 billion that day.

The Japanese companies claim the tragedy revealed years of deception by Fortress Re: It couldn't pay those losses because Sabbah and Kornfeld kept hundreds of millions for themselves instead of saving it to cover claims.

In December, a three-man arbitration panel in New York City awarded the Japanese companies $1.12 billion in damages. The $400 million, which includes a $265 million down-payment the men made in January, represents what Sabbah and Kornfeld agreed to pay out for that billion-dollar award.

The process of paying the settlement already has begun. Hawkins said Kornfeld's Irving Park mansion has been deeded to the Japanese and is for sale.

The house at Country Club and Cleburne drives was built in 1936 by Cone Mills President Herman Cone, the son of Cone Mills co-founder Ceasar Cone. During their ownership, the Cone family kept the lawn open -- convenient for gawking Sunday drivers. Kornfeld changed the 3.5-acre estate to suit his personality. An intensely private man, he landscaped the lawns with trees and shrubs that block the house from view.

When the News & Record sought to interview the Kornfelds when they bought the home in 1992, they declined through their attorney. At the time, the $2.15 million sale price was believed to be the largest for a North Carolina residence.

The Kornfelds already have moved out of the house, said Alan Duncan, a local attorney representing one of the Japanese companies. Duncan said people have "expressed interest" in the house.

Realtor Katie Redhead, who has handled the sale of many Irving Park properties for Yost & Little Realty, says she estimates the Kornfeld house would bring $6 million to $6.5 million. "It's a signature Irving Park property and it speaks for itself,'' she said.

The price would be high but there are certainly people willing to pay it, Redhead said.

She said rumors about the house have been swirling for weeks and at least five clients have called her wanting to know the status.

Kornfeld will keep one of his four apartments in New York City's exclusive Millennium Tower, Hawkins said.

The fate of the American Hebrew Academy is less certain.

The school, which rests on 100 wooded acres along Hobbs and Jefferson roads, is lavish even by private-school standards.

To design the academy, Sabbah reached across the continent to hire Aaron Green, an 82-year-old San Francisco architect and one of Frank Lloyd Wright's last surviving associates.

Hawkins said academy officials want to keep the school in business, but that his clients' want to get their money back.

Last year, Business Week magazine named Sabbah to its list of the 50 most generous American philanthropists. The magazine cited his donations to the academy, estimated at $100 million.

Sabbah, who shuns publicity, was unfazed by the honor.

"For years I operated anonymously. I really don't consider myself newsworthy," Sabbah said at the time. "I'm just a private individual who lucked up and earned a bunch of money.

"I guess my ego is good enough that I don't need you telling me, 'Chico Sabbah, you're a nice guy.' "



A partial list of items included in the Fortress Re settlement and approximate value, if known:


House at 806 Country Club Drive in Irving Park. Tax value: $4.15 million
Three apartments, each valued at about $900,000, in Figure Eight Island: $2.8 million
House in Aspen, Colo. Market value: $8 million to $9 million
Three apartments in New York City's Millennium Tower
Furnishings from homes in Irving Park and Aspen, including various antiques. Estimated value: $1.3 million
Gulfstream III jet
Automobiles: $120,000
Cash and other securities


Cash and other securities, which comprised the bulk of his payment
Commercial and residential property in Pennsylvania, New York and Israel. Estimated value: $6 million
Sources: Guilford County Tax Department; Lexis Nexis; Cadwalader, Wickersham & Taft



Thursday, July 23, 2004

Greensboro businessmen to settle lawsuit for over $400 million

The Associated Press

TWO businessmen have agreed to pay more than $400 million to settle fraud allegations by Japanese insurance companies following the terror attacks of Sept. 11, 2001, according to a lawyer for one of the insurance firms.Among the assets to be handed over by Maurice Sabbah and Kenneth Kornfeld are cash, antiques, vacation homes and commercial property.Howard Hawkins, a lawyer for one of the three Japanese companies, told the News & Record for a story published Thursday that the insurers also are trying to reach a settlement with the American Hebrew Academy.Sabbah financed the Greensboro boarding school with $100 million that the Japanese claim he defrauded from them.

"(Sabbah) didn't have the lawful ability to gift those assets," Hawkins said.Sabbah and Kornfeld's firm, Fortress Re of Burlington, was a reinsurer - an insurer for insurance companies, allowing them to pool financial resources they might need in the event of massive claims.

The Japanese firms paid premiums and management fees to Fortress Re, which was the pool manager for the four airplanes hijacked in the Sept. 11 attacks.One of the insurers, Sompo Japan Insurance, sued Fortress Re in federal court, accusing Sabbah and Kornfeld of taking hundreds of millions of dollars that should have gone to cover claims from the losses caused by the planes.

Accountants estimated the pool lost $1.4 billion that day.Fortress Re denied the allegations in the lawsuit, saying pool members had a long, profitable relationship with the firm until the terrorist attacks - an extraordinary event that could not have been foreseen.In December, an arbitration panel sided with Sompo, saying Fortress Re leaders engaged in fraud and "willful and deliberate misconduct" when doing business with Sompo.

Fortress Re was ordered to pay Sompo $1.1 billion.The $400 million, which includes a $265 million down payment the men made in January, represents what Sabbah and Kornfeld agreed to pay out for that billion-dollar award.Sabbah and Kornfeld declined the News & Record's interview request.

Their lawyer, Glenn Drew, who is also Sabbah's nephew, declined to discuss the settlement, saying it is confidential.Hawkins, the lawyer for Sompo, said the settlement was

"(greater) than what we realistically expected. (Sabbah and Kornfeld) decided to live out their lives in peace rather than fight the action until all their assets were taken."

The two other companies receiving payments are Aioi Insurance Co. and Taisei Reinsurance Co.

One asset that has been deeded to the Japanese and is being sold is the Greensboro mansion where Kornfeld lived. He and his family have already moved out, and a real estate agent estimated the estate - built in 1936 by Cone Mills president Herman Cone - could bring between $6 million and $6.5 million.Drew said the American Hebrew Academy - the country's only non-Orthodox Jewish boarding school - is working on a settlement and planning for the upcoming academic year.



More September 11, 2001 insurance squabbles, horror stories, and fraud attempts:

Dutch insurance giant resists WJC blackmail, is threatened with ruin
Ugly squabble over who picks up World Trade Center insurance tab
German insurance giants sue Twin Towers' Silverstein: Attack was one insurable event, not two
World Trade Center Developer Larry Silverstein Suffers Insurance Setback
Jury discounts tale of 'verbal agreement' - WTC Leaseholder Silverstein Loses $3.5bn Insurance Battle: Sept 11 was 1 incident, not 2

SEPTEMBER 3 to 6, 2002
© Focal Point | Parforce UK Ltd 2001