Armenian Assembly of America, Inc. v. Cafesjian

MEMORANDUM OPINION

COLLEEN KOLLAR-KOTELLY, District Judge.

“Who, after all, speaks today of the annihilation of the Armenians?

”

These chilling words are said to have been spoken by Adolf Hitler in 1939 in reference to the largely successful efforts by the Ottoman Turkish government to eliminate the Armenian population living on its historic homeland during the World War I era, known today as the Armenian Genocide.

1

Beginning around the year 2000, a group of dedicated individuals agreed to organize their efforts to build a museum in Washington, D.C. devoted to the understanding and memorialization of the Armenian Genocide. Unfortunately, that end goal was about all they could agree on, and after seven years of internal debate and struggles over the size and scope of the project, relations between the parties broke down completely, resulting in litigation that led to the three above-captioned cases. The parties to these actions are The Armenian Assembly of America, Inc. (the “Assembly”), Armenian Genocide Museum

&

Memorial, Inc. (“AGM & M”), Gerard L. Cafesjian (“Cafesjian”), John J. Waters Jr. (“Waters”), and The Cafesjian Family Foundation, Inc. (“CFF”). On March 9, 2010, this Court issued a series of rulings granting-in-part and denying-in-part the parties’ various motions for summary judgment.

See Armenian Genocide Museum & Mem’l, Inc. v. Cafesjian Family Found., Inc.,

691 F.Supp.2d 132 (D.D.C.2010);

Armenian Assembly of Am., Inc. v. Cafesjian,

692 F.Supp.2d 20 (D.D.C.2010);

Waters v. Armenian Genocide Museum & Mem’l, Inc.,

692 F.Supp.2d 57 (D.D.C.

*27

2010).

2

The parties subsequently agreed to consolidate these cases for a single trial by the court without a jury.

See

Joint Stip. to Nonjury Trial, ECF No. [102]; Stip. of Consolidation, ECF No. [108].

3

Based on the parties’ proposals during pretrial hearings, the Court ordered the parties to file consolidated complaints and answers with specific factual allegations supporting their remaining claims and counterclaims in the three cases. The Assembly and AGM & M (collectively, “Plaintiffs”) filed their Consolidated Complaint (hereinafter, “Complaint”), which alleges that Cafesjian and Waters each breached their fiduciary duties to AGM

&

M (Count One) and to the Assembly (Count Two), that Cafesjian breached his duty of good faith and fair dealing to the Assembly (Count Three), and that Cafesjian and Waters each misappropriated trade secrets of the Assembly (Count Four).

See generally

Consol. Compl. (hereinafter, “Compl.”), ECF No. [109]. Cafesjian, Waters, and CFF (collectively, “Defendants”) filed their Streamlined Answer and Counterclaims, which asserts claims for breach of contract against the Assembly (Count I) and AGM & M (Count II), breach of implied covenant of good faith and fair dealing against the Assembly (Count III) and AGM & M (Count IV), third-party beneficiary against AGM

&

M (Count V), unjust enrichment against the Assembly and AGM & M (Count VI), and indemnification against AGM & M (Count VII).

See

Streamlined Countercls. (hereinafter, “Countercls.”), ECF No. [104]; Answer to Consol. Compl., ECF No. [141]. Before trial, the parties also filed proposed conclusions of law.

See

Defs.’ Proposed Conclusions of Law, ECF No. [144] (hereinafter, “Defs.’ Concls.”); Pis.’ Proposed Conclusions of Law, ECF No. [145] (hereinafter, “Pis.’ Concls.”).

A bench trial commenced on November 9, 2010. Plaintiffs called thirteen witnesses and introduced deposition testimony from five additional witnesses. Defendants called eight witnesses and introduced deposition testimony from one additional witness. To avoid having witnesses testify twice (once during Plaintiffs’ case and once during Defendants’ case), the parties agreed that Defendants could cross-examine Plaintiffs’ witnesses beyond the scope of direct examination. At the close of Plaintiffs’ casein-chief, Defendants orally moved for judgment on partial findings under Federal Rule of Civil Procedure 52(c). Plaintiffs also moved orally for judgment on partial findings at the close of Defendants’ case-in-chief. After hearing brief argument, the Court took those motions under advisement.

4

Plaintiffs did not present any evidence in rebuttal to Defendants’ case. The trial concluded with closing arguments on the twelfth trial day, November 29, 2010. There were 453 exhibits admitted into evidence, 282 marked as Plaintiffs’ exhibits (“PX-”) and 171 marked as Defendants’ Exhibits (“DX-”).

See

Amended Exhibits Entered During Trial: Nov. 9-24, 2010.

5

At the

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request of the Court, the parties did not file proposed findings of fact or revised conclusions of law after trial. However, Defendants did file a [190] Notice of Untruthful Testimony of Plaintiffs’ Witnesses summarizing what they perceived to be inconsistencies in the testimony presented by Plaintiffs, to which Plaintiffs filed a[191] Response. The Court has placed no special weight on these filings and has made its own conclusions with respect to the credibility of the witnesses.

This memorandum opinion contains the Court’s findings of fact and conclusions of law. In making the findings enumerated below, the Court has relied on the testimony of the witnesses, the exhibits admitted into evidence, and the record as a whole. The Court has not relied on any exhibits that were not admitted into evidence or testimony that was stricken from the record at trial. In addition, the Court has considered only the legal arguments made by the parties on the record during the course of the trial, in the pleadings, or in the proposed conclusions of law.

I. INTRODUCTION

A. Preliminary Observations

Before the Court proceeds with a recitation of the facts, a few preliminary comments are in order. The factual record in this case is voluminous, and the Court has reviewed every exhibit admitted and reviewed the transcripts of each witness’s testimony. The key events relevant to this dispute occurred over a period of approximately eight years leading up to the filing of the first lawsuit and continued while the parties were in litigation. Although the parties strongly disagree about what motivated them to take certain actions, the facts of what actually occurred are largely undisputed. However, because context is critical to understanding the relationships between the parties and the reasons for their actions (or their inaction), the Court has endeavored to make its findings of fact as specific and detailed as possible.

Several key witnesses were unable to recall specific details from the meetings and events that gave rise to the claims in these lawsuits. In some cases, the witnesses were unable to remember

any

details from such meetings or events. To a certain extent, these witnesses’ lack of memory is unsurprising. After all, the events took place between four and ten years ago, and the Court is also mindful of the fact that several of these witnesses are octogenarian. However, in many instances, lack of memory appeared to be driven more by convenience than cognition. Some witnesses were unable to recall their attendance at critical meetings even when presented with written records of the actions they took. Some witnesses could recall in detail events that were favorable to them (or unfavorable to their opponents) but were hazy about similar events that were unfavorable to them (or favorable to their opponents). Additionally, most of the witnesses who testified at trial are biased in some manner, either because they have a financial stake in the outcome of the trial or because their reputation has been called into question by the allegations raised in this litigation. The Court considers all of this as a factor in assessing the credibility of the witnesses.

Because of concerns about the reliability of some of the witnesses’ testimony, the Court relies heavily on the admitted exhibits to document what transpired at the time. With the exception of a few exhibits that were admitted only for a limited pur

*29

pose, the parties have largely waived objections as to the authenticity of or hearsay contained in the vast array of emails, letters, meeting notes, minutes, and other records admitted during the trial.

6

Although there are some minor inconsistencies and a few major ones in the documentary evidence submitted, the Court finds that the exhibits are generally the best evidence of what occurred because most of them were created at the same time as the events they describe or shortly thereafter. Therefore, in the face of a conflict between the exhibits and witness testimony, the Court has sided more often with the story told by the exhibits. With a few exceptions, however, the inconsistencies are not great, and more often the testimony corroborates the other evidence in the record.

One witness whose testimony is not reflected in the factual narrative below is that of Defendants’ expert in corporate governance, Robert Krasne. Plaintiffs objected to Mr. Krasne’s testimony before trial, and the Court deferred ruling on Plaintiffs’ motion

in limine

until trial. Following voir dire of Mr. Krasne, the Court ruled that he was qualified to testify as an expert on issues of corporate governance.

See

11/19 PM Tr. at 4. However, the Court noted that as the finder of fact, it would determine how much weight to give his testimony. After hearing his testimony in light of the record as a whole, the Court finds that Mr. Krasne’s testimony does not aid the Court in understanding the evidence or in determining any fact in issue. Accordingly, the Court has given no weight to Mr. Krasne’s testimony and has not relied on it in any manner.

Having set forth those preliminary issues, the Court shall now relate in narrative form the story underlying the claims in this litigation. The Court shall begin by describing the parties and the other key individuals who play major roles in the drama that unfolded at trial. The Court shall then lay out the factual background in a predominantly chronological fashion, grouping together incidents relating to particular claims. Then, the Court shall review in detail each of the claims and counterclaims asserted based on the facts credited by the Court. After setting forth the Court’s legal conclusions, the Court shall address the issue of remedies.

B. Cast of Characters

— the

Parties and Key Individuals

Below is an introductory description of all the major players in the story; these individuals and organizations appear continuously throughout the period of events relevant to this litigation. The evidence cited below is credited by the Court as undisputed and/or uncontroverted.

The Armenian Assembly of America (the “Assembly”) was formed in 1972 as a charity for the purpose of undertaking educational, cultural and advocacy efforts in support of human rights and genocide prevention of concern to the Armenian American community, and it remains so to this day. Stip. Facts

7

¶ 1. The Assembly is a District of Columbia non-profit corporation

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classified by the Internal Revenue Service as tax-exempt pursuant to § 501(c)(3) of the Internal Revenue Code.

Id.

Hirair Hovnanian (“Hovnanian”) is one of the founders of the Assembly and has served as the Chairman of the Assembly’s Board of Trustees since the mid-1970s.

See

11/9 AM Tr. at 53-55. Hovnanian began working as a builder and property developer in 1958 and continues to operate his successful business in New Jersey, California, and Florida.

Id.

at 51-52. Hovnanian now lives in New Jersey and focuses mostly on commercial property development.

Id.

Hovnanian has devoted much of his time and resources to Armenian causes, raising money for the people of Armenia and building four factories there to manufacture building supplies.

Id.

at 56-57. Hovnanian has contributed approximately $50 million to the Assembly over the past 35 years.

Id.

at 57-58. Hovnanian’s investments in Armenia are strictly charitable in nature, and he has refused on principle to take any profits from his activities in Armenia.

Id.

at 58-59. His grandfather’s entire family perished during the Armenian Genocide, except for his father, and Hovnanian has a deep personal connection to that aspect of Armenian history.

Id.

at 60.

Robert Aram Kaloosdian (“Kaloosdian”) is another one of the founders of the Assembly. 11/10 AM Tr. at 133. He is now eighty years old and semi-retired from the practice of law, living in Massachusetts.

Id.

at 132-33. He has held a variety of leadership positions within the Assembly and is currently a member of the Assembly’s Board of Trustees.

Id.

at 133-34. Kaloosdian serves as Chairman of the Board of Governors for the Armenian National Institute (“ANI”), which was established in 1997 as an entity dedicated to the study, research, and affirmation of the Armenian Genocide.

Id.

at 135; Stip. Facts ¶¶ 15-16. ANI was initially formed as a subsidiary of the Assembly and is classified by the IRS as a tax-exempt entity under § 501(c)(3) of the Internal Revenue Code. Stip. Facts ¶ 2.

Dr. Rouben Adalian (“Adalian”) is the director of the Armenian National Institute. 11/15 PM Tr. at 86. He has a doctorate in history from the University of California, Los Angeles, specializing in the history of Armenia, the Middle East, and the Caucasus.

Id.

at 87. Through his position at ANI, Dr. Adalian has extensively researched the Armenian Genocide and worked to document its history. 11/15 PM Tr. at 90.

Anoush Mathevosian (“Mathevosian”) is an Armenian American philanthropist who has devoted much of her time and money to the Assembly. She currently resides in New York. Stip. Facts ¶ 10. Her grandfather was killed in the genocide, and her father was deported to Persia, where Mathevosian was born. Mathevosian Dep. Tr. at 8-9. Her family’s suffering in the genocide left Mathevosian with a deep emotional scar.

Id.

at 9. Beginning in 2003, Mathevosian suffered a series of health problems, including a collapsed lung, a heart attack, and a stroke. Mathevosian Dep. Tr. at 69.

The Armenian Genocide Museum & Memorial, Inc. (“AGM & M”) was formed in October 2003 as a non-profit corporation in the District of Columbia. Stip. Facts ¶ 3. AGM

&

M was established for the purpose of constructing, owning, operating, and maintaining a permanent museum and memorial devoted to the victims and survivors of the Armenian Genocide.

Id.

AGM & M is classified by the IRS as tax-exempt under § 501(c)(3) of the Internal Revenue Code.

Id.

¶ 4. The initial members of the Board of Trustees for AGM & M were Hovnanian, Kaloosdian, Mathevosian, and Gerard L. Cafesjian.

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Gerard L. (“Gerry”) Cafesjian was born in 1925 in Brooklyn, New York to immigrants from Armenia and Constantinople.

See

DX-305.

8

Cafesjian’s father came to America after the rest of his family was killed in the genocide.

Id.

After serving in the Navy in World War II, Cafesjian received a degree in economics from Hunter College and a law degree from St. John’s University.

Id.

In 1952, Cafesjian began a 44-year career with West Publishing and was very successful.

Id.

In 1996, West Publishing was acquired by the Thompson Corporation, and Cafesjian sold his shares in the company and retired.

Id.

Cafesjian received between $250-300 million for his stock in West, and he turned his attention to philanthropic pursuits. Cafesjian Dep. Tr. at 23. One of Cafesjian’s areas of interest is art — he had created an art program while working at West and he is a collector of contemporary art, particularly glass sculpture.

See

DX-305. He founded the Gerard L. Cafesjian Pavilion at the Scottsdale Museum of Contemporary Art, which houses some of his collection.

Id.

Cafesjian also became interested in Armenian causes upon retiring from West. Cafesjian and his family donated $30 million to establish The Cafesjian Family Foundation, Inc. (“CFF”) in 1996. 11/15 PM Tr. at 14; DX-305. Cafesjian is the founder and president of CFF, and CFF is a non-profit corporation organized under Florida law. Stip. Facts ¶¶ 6-7. CFF was founded to help Armenians around the world, particularly those located in Armenia, and its primary focus is economic development. DX-305. CFF invests in a number of programs in Armenia through various subsidiaries. CFF’s projects include the development of solar and wind energy in Armenia with the aim of establishing energy independence for the country, building a professional and independent media, fostering the development of high-tech industry, and developing real estate.

Id.

As of 2002, CFF employed over 400 people in Armenia.

Id.

CFF is funded almost entirely by the Cafesjian family, with contributions made as needed for charitable or tax planning purposes. 11/15 PM Tr. at 14. Between 2003 and 2006, CFF’s general account balance was typically less than $1 million. 11/15 PM Tr. at 13-14.

Cafesjian’s various enterprises are coordinated through GLC Enterprises, Inc. (“GLC”), which has been described as a “family office” based in Minnesota. 11/15 AM Tr. at 22. Both CFF and GLC are governed by the same individuals. Cafesjian Dep. Tr. at 24. From 1996 to 2000, Cafesjian controlled between five and twenty companies, and Cafesjian later had as many as thirty-five companies. 11/15 AM Tr. at 20-21. Nearly all of these companies (except for CFF and an entity called the Cafesjian Museum Corporation) were for-profit entities, many doing business in Armenia.

Id.

at 21-30. Although operated as for-profit entities, Cafesjian does not earn any profits from these businesses. 11/18 PM Tr. at 16; 11/19 AM Tr. at 64. Rather, Cafesjian reinvests the profits in the businesses to foster job creation and sustainable economic development in Armenia. 11/18 PM Tr. at 16; 11/19 AM Tr. at 64. CFF has invested approximately $50 million in various enterprises in Armenia. In addition, Cafesjian has invested approximately $43 million to develop the Cafesjian Center for the Arts

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in Armenia’s capital city of Yerevan. 11/18 PM Tr. at 15.

Cafesjian has devoted most of his time since retirement to CFF, but he does not involve himself in the “nitty-gritty” details of day-to-day management. 11/19 AM Tr. at 66, 68. Instead, he relies on his right-hand man, John Waters Jr. (“Waters”). John Waters attended Georgetown University and got an MBA from the University of Minnesota. 11/15 AM Tr. at 8-9. Waters met Cafesjian while working at West Publishing.

Id.

A few months after Cafesjian left West, he hired Waters to do some consulting work for him.

Id.

at 15. Although not of Armenian descent, Waters became aware of Armenian issues in college through a friend who took him to a genocide recognition rally at the White House; the experience resonated with Waters because his father had served as a linguist officer in Turkey, and Waters was born in Istanbul.

Id.

at 16.

Waters became an employee of GLC in late 1996. 11/15 AM Tr. at 19. Ultimately, Waters became Vice President of both GLC and CFF.

Id.

at 20. In those roles, it was Waters’s job to take any action as directed by Cafesjian, and Waters became involved in every Cafesjian enterprise between 1996 and his departure from the Cafesjian organization in March 2009.

Id.

at 20-21; 11/24 AM Tr. at 23. Waters was responsible for acting on Cafesjian’s behalf in managing, operating, and implementing each of Cafesjian’s personal investments. 11/15 AM Tr. at 30. Cafesjian described Waters’s job as being his “personal assistant, something bordering on, but not quite, alter ego, pretty much what I wanted him to do.” Cafesjian Dep. Tr. at 106. Waters’s duties required him to travel to Armenia between 50 and 60 times over the course of his employment with Cafesjian. 11/15 AM Tr. at 32. Waters testified that he believed at all times that he owed his highest duty of loyalty to Cafesjian. 11/24 AM Tr. at 70.

Ross Vartian (“Vartian”) has worked in support of Armenian causes for nearly his entire career. After being discharged from the Army after service in Vietnam, Vartian earned a degree from Michigan State University and accepted a job as the founding principal for an ethnic day school in Detroit. 11/19 PM Tr. at 70. After five years in that position, the Assembly hired him in 1979 for the number-two position in their Washington, D.C. office.

Id.

at 71. Shortly thereafter, Vartian was elevated to the position of Executive Director.

Id.

He continued to work for the Assembly until 2005. Vartian is now retired, lives in Michigan, and serves on the board of directors for CFF.

Id.

at 70.

Van Krikorian (“Krikorian”) is the Chairman, CEO, and General Counsel of Global Gold Corporation. 11/17 AM Tr. at 141. He attended college at George Washington University and earned his law degree from Georgetown.

Id.

Krikorian first became involved with the Assembly in 1977 as a college intern, and he has been involved ever since.

Id.

at 141-42. He has served on the Assembly’s Board of Directors

9

since at least 1993, and he served as Chairman from 1998 to 2002, after which he remained on the executive committee.

Id.

at 142. Krikorian is also a life trustee of the Assembly.

Id.

II. FACTUAL BACKGROUND

A. Initial Interest in an Armenian Genocide Museum

The Armenian Genocide is widely recognized as the first genocide of the 20th

*33

century. Stip. Facts ¶ 13. Of the estimated 2.1 million Armenians living in the Ottoman Empire on the eve of World War I, approximately 1.5 million were killed, and hundreds of thousands more were deported.

Id.;

11/15 PM Tr. at 88-89. During this period the Armenian people were subjected to deportation, expropriation, forced conversion, abduction, torture, massacre, and starvation. Stip. Facts ¶ 13. This historical tragedy is the single most resonant occurrence in modern Armenian culture.

Id.

¶ 14. Armenians worldwide seek to ensure that the Armenian Genocide experience will never be forgotten.

Id.

Beginning in the 1990s, the Assembly decided that a museum would be a mark of respect that could both pay homage to the victims and survivors of the genocide and educate Americans about what happened to the Armenian population before, during, and after World War I.

Id.

On or about April 1, 1996, Hirair Hovnanian made a pledge of about $1.6 million to establish the Armenian National Institute for the study, research, and affirmation of the Armenian Genocide. Stip. Facts ¶ 15; 11/9 AM Tr. at 60. ANI began its operations on or about April 1, 1997. Stip. Facts ¶ 16. Dr. Rouben Adalian was hired to be the director of ANI. Dr. Adalian explained that “affirmance” of the genocide is an important goal of the Armenian community because the Turkish government, among others, has denied that there was a genocide. 11/15 PM Tr. at 89-90.

Inspired by Hovnanian’s pledge, Anoush Mathevosian decided in 1996 to pledge $3 million to be used for the purpose of constructing a permanent museum in Washington, D.C. dedicated to the victims and survivors of the Armenian Genocide. Stip. Facts ¶ 17; 11/9 AM Tr. at 60-61. In 1996, the Assembly began to explore properties in Washington, D.C. that would be suitable for a museum. Stip. Facts ¶ 18. The search was focused on double-townhouse-type properties with roughly 10,000 square feet. 11/19 PM Tr. at 72.

Around this same time, Cafesjian was independently planning to build a memorial to the Armenian Genocide. 11/19 PM Tr. at 72. When Cafesjian heard about the creation of ANI, he had Waters contact Rouben Adalian to find out more about the project. Stip. Facts ¶ 20. Cafesjian and Waters met with Adalian in New York on April 30, 1997, and Adalian informed them of the plans to build a museum. Stip. Facts ¶ 21; PX-4. Cafesjian expressed an interest in potentially associating his planned memorial with the museum project. Stip. Facts ¶ 21; 11/19 PM Tr. at 72; PX-4. Because he had not been involved in the Assembly, Cafesjian invited Hovnanian, Kaloosdian, and Adalian to meet with him and Waters at Cafesjian’s home in Minnesota, where they discussed the Assembly’s advocacy efforts and the museum project. Stip. Facts ¶ 23; 11/10 AM Tr. at 142-45; 11/15 AM Tr. at 38-39; PX-8. Cafesjian officially joined the Assembly as a trustee in August 1998, and Waters was designated as an Associate Trustee based on Cafesjian’s gift of $25,000 on his behalf.

See

PX-262; Stip. Facts ¶ 25. At that point in time, Cafesjian and Waters continued to search separately for a location for a memorial.

See

PX-13; Stip. Facts ¶ 24. In April 1999, Cafesjian pledged $1,050,000 to the Assembly and was designated a life trustee.

See

DX-192.

B. The Acquisition of the National Bank of Washington Building

In or about late 1999, the Assembly identified the National Bank of Washington, located at 619 14th Street, NW, Washington, D.C., as a possible site for the museum. Stip. Facts ¶ 26. Although it was much larger than the properties they

*34

had been looking at to date, everyone involved in the search was impressed by the National Bank of Washington building (the “Bank Building”). 11/19 PM Tr. at 72-73; 11/22 AM Tr. at 72-73. The Bank Building has a prime location — -just blocks from the White House — and its exterior and part of the interior have been designated as historic landmarks in the D.C. Inventory of Historic Sites and the National Register of Historic Places. Stip. Facts ¶ 26. The property on which the Bank Building is located also includes a vacant back lot which would allow for the construction of an annex.

In or about January 2000, Tom Kevorkian, then-Chief Operating Officer for the Assembly, sent a package of documents to Cafesjian and Waters regarding the Bank Building and other potential sites for the project. Stip. Facts ¶ 27. Cafesjian was very interested in the Bank Building, and he dispatched Waters to do due diligence on the property.

See

PX-38; 11/19 PM Tr. at 73. Because there was another buyer who had likely submitted an offer, they had to act expeditiously to secure the property. 11/15 AM Tr. at 45-46. Waters worked with Tom Kevorkian to arrange the purchase.

Id.

at 46-47. Cafesjian agreed to donate $3.5 million to the Assembly to create a consolidated location at which the genocide museum, the genocide memorial, and offices for ANI could be located. Stip. Facts ¶ 28; DX-12. Anoush Mathevosian agreed to increase her pledge to $3.5 million to acquire the property. Stip. Facts ¶ 28; PX-16.

The Assembly closed on the Bank Building on February 16, 2000, purchasing the building for $7.25 million. Stip. Facts ¶ 29. The funds for the purchase were comprised of a $3.5 million pledge from Mathevosian, a $2.5 million grant from CFF, and a $1 million grant from Cafesjian’s Vanguard Charitable Endowment ProgramCafesjian Family Foundation Charitable Trust.

Id.

¶ 30. Because Mathevosian could not access funds in sufficient time to wire them to the Assembly prior to the closing, CFF provided the Assembly with a $4 million interest-free bridge loan to cover Mathevosian’s pledge and to complete the transaction.

Id.

¶ 31. On March 8, 2000, after the Assembly had received Mathevosian’s pledged donation, the Assembly repaid CFF $3.5 million by wire transfer.

Id.

On March 17, 2000, the Assembly executed a promissory note produced by and for the benefit of CFF for the remaining $500,000. Stip. Facts ¶ 32; PX-115. The note was interest-free and payable in full on May 16, 2000. Stip. Facts ¶ 32; PX-115. The note also contained a Minnesota choice-of-law provision.

See

PX-115.

The parties agreed that as a condition of Cafesjian’s donation of funds for the purchase of the Bank Building, the Assembly was required to include a memorial named after Cafesjian as part of the project. Stip. Facts ¶ 33; DX-12. On March 30, 2000, the Assembly sent Cafesjian a letter confirming his donations and its obligation to build a memorial. Stip. Facts ¶ 34; PX-111. The letter noted that Cafesjian’s proposed design for the memorial had not been finalized but that his concept consisted of “a walk-in, contemplative, chapel-like space, with interior walls of native Armenian stone and a glass sculpture by Stanislav Libensky as the focal point.” PX-111. The memorial was expected to take up approximately 1200 square feet of floor space and 40,000 cubic feet of overall volume.

Id.

The Assembly agreed to cooperate with the design firm or artist chosen by CFF to complete the memorial.

Id.

The anticipated completion date for the project was March 2002, and CFF agreed to make contributions to the Assembly to finance the memorial.

Id.

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The Assembly’s letter also confirmed that the Assembly would form a planning and development committee for the project. PX-111. The planning committee was to be responsible for establishing the vision for the project; for preparing and adopting a site redevelopment plan to address the design, development, renovation, potential expansion, and initial utilization of the property; and for adopting and executing a contribution and endowment program to fund the completion of the project and the operation of the property, the museum, and the memorial.

Id.

The committee was to be comprised of one representative from CFF, Anoush Mathevosian (or her designated representative), the Chairmen of the Assembly’s Board of Trustees and Board of Directors and ANI’s Board of Governors, and any person who agreed to donate $1 million or more to the project.

Id.

The letter explained that decisions of the committee, “in accordance with the Assembly’s and ANI’s history, shall be by consensus.”

Id.

Because of the size of the Bank Building (34,000 sq. ft.) and the property on which it sits, it was contemplated that the Assembly and ANI would move out of their existing offices when their lease expired in March 2002 and occupy space on the new site.

See

PX-111; 11/22 PM Tr. at 87. Accordingly, it was agreed that the development of suitable office space on the property would be a priority. PX-111. Ross Vartian, then-Executive Director for the Assembly, testified at trial that in retrospect, they were naive to think that the museum, the memorial, and offices for the Assembly and ANI could all be housed within the Bank Building. 11/22 AM Tr. at 114.

After the closing, on February 28, 2000, Anoush Mathevosian wrote a letter to the Assembly restating the purpose of her pledge, which she dedicated to her parents.

See

PX-110. The letter stated that the purpose of her gift was to foster the development of an Armenian Genocide museum with educational exhibits, and Mathevosian expressed her desire that the Bank Building be used solely for the Assembly, ANI, the museum, and the memorial.

Id.

She wrote:

To be certain that future generations remain true to the intent of our donations, it should be clear that no changes will be made to the purpose and usage of the Museum; that no mortgages are taken against the property and that the Museum’s perpetuation is not jeopardized as such or encumbered in any way; and that there will be no subsequent changes to the name of the museum.

Id.

At her deposition, Mathevosian explained that she wanted to ensure that they paid for the property in full so that it would not be mortgaged or sold in the future. Mathevosian Dep. Tr. at 14-15. Mathevosian asked that these understandings be incorporated into the permanent records of the organization. PX-110. However, there is no evidence that Mathevosian’s expressed desires were ever formally incorporated by the Assembly into a binding obligation. Mathevosian testified that Hovnanian agreed to her conditions, but she did not recall whether he had done so orally or in writing. Mathevosian Dep. Tr. at 16-17. John Waters testified that he did not see Mathevosian’s letter until several years later, in late 2003. 11/15 AM Tr. at 49.

C. Acquisition of the Properties Adjacent to the Bank Building

Once the Bank Building was acquired by the Assembly, Cafesjian began to acquire property adjacent to the Bank Building. John Waters testified that it was typical for Cafesjian to look at adjacent properties when acquiring real estate. 11/22 PM Tr. at 92. Cafesjian considered several possi

*36

bilities with respect to these properties, initially planning to use them to build a contemporary art museum called the Cafesjian Contemporary Art Museum.

Id.;

11/19 PM Tr. at 95; Cafesjian Dep. Tr. at 151. Cafesjian thought that an art museum co-located with the genocide museum would draw more visitors. Cafesjian Dep. Tr. at 151; 11/19 PM Tr. at 95-96. Ultimately, that plan was abandoned when Cafesjian decided to build a contemporary art museum in Yerevan, Armenia. 11/22 PM Tr. at 92-93. At that point, Cafesjian decided to donate the properties to the Assembly for the purpose of expanding the footprint of the museum project.

Id.

Ultimately, Cafesjian acquired four parcels adjacent to the Bank Building: (1) 1342 G Street, NW; (2) 1340 G Street, NW; (3) 1338 G Street, NW; and (4) 1334-36 G Street, NW (collectively, the “Adjacent Properties”). Each of the properties was acquired in an arms-length transaction by one of Cafesjian’s entities, TomKat Limited Partnership (“TomKat”). 11/23 AM Tr. at 35; Stip. Facts ¶36. TomKat executed an agreement to purchase 1338 G Street for $1.2 million on March 10, 2000 and closed on May 15, 2000. Stip. Facts ¶ 37. TomKat purchased 1342 G Street for $1.2 million on March 16, 2000 and closed on September 30, 2000.

Id.

¶ 38. On October 24, 2000, TomKat entered into an Installment Purchase and Sale Agreement to purchase 1340 G Street for a total of $3 million.

Id.

¶ 39. Under the installment agreement, payments of $150,000 are due each year for a period of ten years, with a final balloon payment of $1.5 million due in March 2011.

Id.;

11/19 AM Tr. at 55. The property was owned by the Ana Sherman Revocable Trust, and the deed is being held in escrow until the final payment is made. 11/23 AM Tr. at 41-42; DX-624N. The final adjacent property, 1334^16 G Street, NW, also known as the “Families U.S.A.” building, was acquired later by TomKat, which purchased the building from a third-party seller for $6.5 million in September 2003. Several of the Adjacent Properties were taken subject to leases.

D. Initial Efforts to Develop the Museum

— Museum

Planning Committee

As opposed to the previous sections, where the facts were largely undisputed and/or uncontroverted, the findings made below increasingly reflect the Court’s credibility determinations and weighing of conflicting evidence in the record.

The Armenian American community was euphoric about the acquisition of the Bank Building. 11/19 PM Tr. at 73. However, the real work in creating an Armenian Genocide museum and memorial lay ahead. A planning committee was formed to develop the museum project.

10

The planning committee was a somewhat fluid body; there were about a dozen different individuals who became involved to varying degrees in the planning of the museum.

See

11/15 AM Tr. at 57. The committee included both Assembly leadership and staff, including Hirair Hovnanian, Anoush Mathevosian, Gerry Cafesjian, Robert Kaloosdian, Van Krikorian, John Waters, Rouben Adalian, Tom Kevorkian, and Ross Vartian. 11/19 PM Tr. at 74-75. Ultimately, any decision made by the planning committee had to be approved by the Assembly. 11/15 AM Tr. at 57. The planning committee was chaired by Hirair Hovnanian.

Id.;

11/18 PM Tr. at 45; 11/19 PM Tr. at 74; DX-14. The planning committee largely operated by consensus, and there were rarely any formal votes

*37

taken. 11/22 PM Tr. at 98-99. According to John Waters, any decision that was approved by Hovnanian was adopted on behalf of the Assembly, whereas decisions he did not agree with did not move forward.

Id.

at 99. At trial, Hovnanian testified incredibly that he did not recall being chair of the planning committee or having any involvement in the early development of the museum, apart from attendance at a few occasional meetings for which he did not prepare. 11/9 AM Tr. at 112-15. In fact, Hovnanian testified that prior to November 2003, he “had nothing to do with this project. Absolutely zero.”

Id.

at 125. The Court finds this testimony not credible in light of the extensive evidence in the record of Hovnanian’s involvement during this period.

The planning committee held its first meetings in March and April of 2000.

See

DX-13; DX-14; DX-15; DX-16. During those meetings, the committee discussed potential uses of the property, budgetary issues, and a six-month work plan. DX-13; 11/19 PM Tr. at 75. At a meeting on April 12, 2000, the committee approved three proposals drafted by Van Krikorian: (1) a use plan for the Bank Building whereby the first floor would be commercial/mixed use, the second and third floors would house the museum with an archway to the memorial, and the fourth floor would be used as offices for the Assembly and ANI; (2) a fundraising campaign to raise $40 million for building and endowment; and (3) creation of a Project Manager staff position to manage the project. 11/19 PM Tr. at 75-76; DX-15; DX-16.

The planning committee met again on May 4, 2000.

See

DX-17. John Waters and Tom Kevorkian gave a presentation at this meeting providing an overview of the project, including a discussion of the budget, space limitations, needs of the various stakeholders, and a proposed timeline.

See

PX-347; 11/15 AM Tr. at 59-63. The plans at this time called for the museum to be ready for move-in by March 2002 and open to the public by April 2002.

See

PX-347. Waters also reported on the status of the negotiations over the first three adjacent properties.

See

DX-17; PX-347. Hirair Hovnanian raised the issue of fund-raising and suggested the creation of a Founders Circle with the goal of locating up to four individuals who could bequest $10 million to the project. DX-17.

11

The committee also agreed that vision statements should be created for ANI, the Assembly, and the museum project, which had been designated as the Armenian Genocide Museum and Memorial.

Id.

John Waters and Tom Kevorkian were tasked with conducting the search for a project manager and were expected to recommend candidates for final interviews by the end of May 2000.

Id.

They began this process, but it was not completed by month’s end. 11/15 AM Tr. at 68.

On July 13, 2000, Kevorkian and Waters wrote a confidential memorandum to the planning committee entitled “Immediate Decisions.”

See

DX-19. “[W]e are concerned with the pace of our deliberations,” they wrote.

Id.

“Specific actions are required throughout the next 45 days to ensure we continue in a coordinated fashion.”

Id.

They asked the committee to complete the vision statements discussed during the May meeting, approve a draft job description for the Project Coordinator staff position, hear presentations from project management firms, and form a capital campaign subcommittee.

Id.

In light of the anticipated costs of hiring professionals, the outstanding promissory note of $500,000 to CFF, and an account balance of $155,000, Kevorkian and Waters wrote

*38

that “our cash position becomes paramount.”

Id.

They proposed that the committee hold a two-day meeting during August to discuss these issues. M

12

Without dedicated staff to shepherd the project along, the pace of the project remained deliberate. By the end of 2000, the Assembly had agreed to employ a full-time staffer. Ross Vartian, the Assembly’s long-serving Executive Director, volunteered for the position, and on January 3, 2001, he became the Director of Planning for the museum project. Stip. Facts ¶ 41; 11/19 PM Tr. at 79. Vartian believed that his working relationships with the key stakeholders could help the planning committee build consensus.

Id.

at 79-80. In his new position, Vartian began consulting widely within the Armenian community of professionals and within the community of museum experts in Washington to acquire as much information as possible about the museum planning process.

Id.

at 80. On January 10, 2001, Vartian drafted a memorandum outlining an agenda and a set of goals for the museum project to achieve in the first quarter of 2001.

See

PX-344. This document was sent to Hirair Hovnanian’s daughter Edele, who was chairing an advisory committee of professionals consulting on the museum project.

13

See id.

Vartian noted that there was not yet any consensus from the planning committee on how to proceed with the selection of professional consultants and contractors.

Id.

Vartian also indicated that there had been a discussion by the planning committee about potentially hiring a “name” architect to draw attention to the project, but Cafesjian had expressed concerns about the added costs and other potential negatives such as the loss of creative control over the project.

Id.

14

Vartian indicated that this issue needed to be resolved as soon as possible in order to stay on the project timeline, which at this point called for the museum to be opened in April 2004.

Id.

Vartian’s memorandum also indicated that there were estimated expenses for 2001 of at least $225,000 (excluding any further obligations), yet there were- no unobligated funds to cover pre-construction operating costs, and the Assembly’s promissory note to CFF was still outstanding.

Id.

After a few months of consulting with experts and other professionals who gave him free advice, Ross Vartian prepared an executive summary to be presented to the museum advisory committee on March 3, 2001.

See

DX-22. Vartian had drafted a preliminary mission statement for the museum project and assembled various cost estimates for the building.

Id.

At this point, it was assumed that the Bank Building would be co-developed with the three adjacent properties acquired by Cafesjian.

See id.

Vartian proposed an “aggressive” timeline with a museum opening date in April 2004.

Id.

The advisory committee did not believe that an April 2004 opening was feasible.

See

PX-125.

Vartian revised the timeline to reflect an April 2006 opening and forwarded a summary of his materials to the planning committee in advance of their combined meet

*39

ing with the ANI Board of Governors in Boca Raton, Florida on March 16, 2001.

See

PX-125. Vartian indicated in his summary that he believed the project would require at least $32 million to prepare for the opening and an additional $40 million endowment to fund operations.

Id.

Based on the advice he had received from other experts and consultants, Vartian believed that it would be easier to use the earnings on an endowment to fund operating costs than to rely directly on donations. 11/19 PM Tr. at 85-86. At the planning committee meeting, Vartian’s presentation was cut short when Hirair Hovnanian saw the cost estimates.

Id.

at 88-89. Hovnanian thought these figures were far too high and believed that the upper limit for the project should be closer to $15 million.

Id.;

11/23 AM Tr. at 47-48. According to Waters, Hovnanian criticized Vartian and his daughter Edele for the budget, and Edele left the meeting upset, ending the discussion. 11/23 AM Tr. at 47-48. There was also discussion at this meeting about the process of choosing an architect to design the new buildings to be attached to the Bank Building. 11/19 PM Tr. at 86-87. Hirair Hovnanian had been told by one large charitable foundation that it might be willing to make a significant donation to the project if a “name” architect like Frank Gehry could be attracted to the project.

See

PX-125. The planning committee, including Ross Vartian, was in favor of this idea because the planning committee members believed that the project would be more marketable. 11/19 PM Tr. at 86-87. The committee also discussed the issue of how to allocate space in the Bank Building and the new construction on the Adjacent Properties among the museum, memorial, art museum, and offices for ANI and the Assembly.

See

DX-25. However, the committee did not reach any agreements about the allocation of space. 11/19 PM Tr. at 89-90.

The following week, Ross Vartian wrote a memorandum to Edele Hovnanian. “By any measure,” he wrote, “the ANI Board of Governors/AGMM Planning Committee meeting was a disappointment.” DX-26. Vartian said he had not anticipated some of the negative reactions to the information he had prepared.

Id.

Vartian was disappointed because the committee’s inability to reach agreement on major issues meant that progress would be delayed. 11/19 PM Tr. at 90. Vartian indicated that the project needed a feasibility study conducted to determine the options for developing the space available. DX-26. Vartian was also concerned about the lack of agreement over the role ANI should play in developing the museum.

Id.

Following the meeting, Vartian worked on a proposal to seek expert opinion on space utilization options, refine the budget for 2001, and propose a scope of work to define an exhibit storyline.

See

DX-28. Vartian spoke with John Waters about allocating space in the Adjacent Properties, but Waters indicated that Cafesjian’s plans for them were too tentative at that point to make any definitive decisions. DX-26. In early April, Ross Vartian, Rouben Adalian, and John Waters met with four firms that were invited to submit proposals for a space utilization/feasibility study: (1) Martinez & Johnson, an architecture firm that had prior familiarity with the Bank Building, (2) Leo Daly, another architecture firm, (3) Gallagher & Associates, an exhibit design firm, and (4) Concord Partners, a property development firm.

See

DX-28. In a memorandum to the planning committee dated April 9, 2001, Vartian wrote that during the next four months, he expected to,

inter alia:

(1) have a space utilization/feasibility study on the best development option for the properties acquired by the Assembly and Cafesjian; (2) obtain approvals for the scope of work for ANI;

*40

and (3) obtain approvals for the initial major donor campaign and the first round of community outreach.

See

DX-28.

On or about May 22, 2001, Edele Hovnanian resigned all of her positions with the Assembly, including her role as Assembly Treasurer and chair of the advisory committee. “I don’t know if this letter will shock you or not,” she wrote, “but I have been thinking about something for a very long time and now feel strongly that it is the right time to announce it.” DX-28. Addressing the aging leadership of the Assembly, she wrote, “I believe the Assembly no longer is the progressive, forward thinking, dynamic organization is [sic] was for so long and that it is being held together by the talent and dedication of you all and that its future, without you, is destined toward a slow demise.”

Id.

She criticized the Assembly for failing to transition the organization to the leadership of a new generation and indicated that the Assembly would have to change before she could return.

Id.

She added that “[a]s far as the museum [is concerned], I think this brief experience really just highlighted the internal problems we have and at this point see no value I can add in ensuring this project is successful.”

Id.

Edele Hovnanian ultimately did become active again in the Assembly, but the record does not reflect precisely when this occurred, and she did not have an active role in museum affairs going forward.

15

11/19 PM Tr. at 92. Ross Vartian was disappointed by Edele Hovnanian’s resignation, as was John Waters.

Id.

at 91; 11/23 AM Tr. at 49. Vartian agreed with her assessment of the Assembly and the museum project. 11/19 PM Tr. at 92. From this point forward, Waters became more heavily involved in the planning committee. 11/22 AM Tr. at 82.

On June 25, 2001, Ross Vartian sent a memorandum to the planning committee entitled “Action Items.”

See

DX-30A. The memorandum outlined nine issues that needed review and action by the committee, including decisions about the structure of the project, the space utilization/feasibility study, the scope of ANI’s work, the revised budget, the hiring of professionals, and fundraising.

Id.

Vartian described this memorandum as “an example of rethinking the project, working on what was doable and presenting it to the members of the Museum Planning Committee.” 11/19 PM Tr. at 93. Vartian proposed streamlining the structure by eliminating the advisory committee and bringing the key decision-makers under one group so that decisions could be made more expeditiously.

Id.

at 94; DX-30A.

A few days later, Vartian emailed Robert Kaloosdian about dedicating part of the museum to other 20th century genocides and genocide prevention in the 21st century.

See

DX-31. Vartian thought this would be a “public relations bonanza,” and he cited it as a reason to push for “the maximum physical footprint as we consider development options.”

Id.

Vartian forwarded this email to Waters, writing, “I am trying to use every opportunity to enlarge the vision of the AGMM.”

Id.

The next planning committee discussion occurred in the context of a meeting of the Consultative Group, a high-level body within the Assembly, on June 27, 2001.

See

DX-32 at l.

16

Hovnanian, Kaloosdian,

*41

and Krikorian were in attendance, along with several other Assembly members; staff did not participate.

Id.

Cafesjian and Waters participated in the discussion by phone because they were not members of the Consultative Group and thus not privy to the rest of the discussions about Assembly business.

Id.;

11/15 AM Tr. at 74-76. This was the source of some tension between Cafesjian and Hovnanian because Cafesjian wanted to become more active in the Assembly’s affairs but was not yet part of the leadership, and Hovnanian made a comment during the meeting that Cafesjian should have attended in person. 11/15 AM Tr. at 74-76; DX-32 at 3.

During the meeting, they discussed the space allocation issues between the Adjacent Properties and the Bank Building, such as a joint entrance between what at that point was to be the Cafesjian art museum and the Bank Building. DX-32 at 2-4. Cafesjian thought that a joint entrance was critical to the success of both and that they should be viewed as a single project with two separate users with common interests.

Id.

at 3. Waters indicated that Cafesjian had already initiated a competition for architects for the Cafesjian art museum.

Id.

Hovnanian felt that uncertainty about the Cafesjian art museum plans was holding up progress on the genocide museum, saying “without a footprint from G[erry] Cafesjian, we are stymied on how to proceed.”

Id.

Waters said that Cafesjian’s vision for the project had grown and that he was concerned about making the genocide museum as relevant as possible.

Id.

at 3. This statement may have caused some tension; the minutes indicate that Cafesjian and Waters were “trying to avoid an ‘us’ versus ‘them’ mentality.”

Id.

at 3-4. Hovnanian indicated that they could not move forward until they knew how the common entrance was to be utilized and said that the “ball is in Cafesjian’s court.”

Id.

at 4. After Cafesjian and Waters hung up the phone, the others continued their discussion.

See id.

One of the attendees, Carolyn Mugar, questioned the idea of a “joint project” and noted that there was no relationship between the Cafesjian art museum and the genocide museum.

Id.

The group agreed that it should be considered a cooperative project, not a joint project.

Id.

Hovnanian commented that he “want[ed Cafesjian] to be close.”

Id.

The group also agreed that a development plan was needed, but there was no agreement on whether to proceed with a development plan before hiring architects and designers.

Id.

Shortly after this meeting, Cafesjian decided that he would build his art museum in the Armenian capital of Yerevan rather than on the Adjacent Properties. Cafesjian and Waters discussed the issue and agreed to donate the Adjacent Properties to be used for the genocide museum project. 11/23 AM Tr. at 53-54. Waters discussed this decision informally with Ross Vartian, but no official proposal was made to the Assembly until October 15, 2001, when Cafesjian wrote a letter to Hovnanian outlining the terms of a proposed grant of the three properties that had been acquired.

Id.

at 54; PX-327. This letter was the first in a series of draft grant agreements that would ultimately be exchanged between Cafesjian and the Assembly. The letter proposed that Cafesjian and/or CFF donate $5.8 million to the Assembly to purchase the properties from TomKat.

See

PX-327 at 2-3. The proposed grant agreement would require the Assembly to use the properties solely as part of the genocide museum project, subject to plans approved by the Assembly’s planning committee.

Id.

at 3. The letter also proposed that if the Assembly failed to develop the property according to those plans, CFF would be entitled to a return of either the grant funds or the properties.

*42

Id.

The letter also proposed a number of conditions on the grant, including relief from several other financial pledges made by CFF, as well as the reissuance of the $500,000 promissory note to CFF that had been executed on March 17, 2000.

Id.

at 3-4. Following the draft grant agreement language, Cafesjian wrote:

We need to keep this entire project moving forward. Our efforts to date have been less than adequate. Every time I think about the time value of money invested in this project, the incomprehensible daily waste of the money saddens me. We simply cannot afford to keep throwing it away. I think we should move immediately to retain the services of the various consultants recommended by John [Waters] and Ross [Vartian], The professionals at Concord Partners, Martinez & Johnson, etc., have the expertise that should be able to help us move this project forward.

Id.

at 5. Cafesjian also recommended hiring someone with museum experience to serve as director for the museum project.

Id.

at 5-6. He noted that Ross Vartian had worked hard, but everyone’s lack of experience in museum planning had hindered the Assembly’s ability to make progress.

Id.

Cafesjian explained at trial that he was frustrated with the lack of progress that had been made and that he wanted to see the genocide museum built during his lifetime. 11/18 PM Tr. at 48.

Cafesjian’s proposal was generally well received at the Assembly, although the Assembly never responded in writing to Cafesjian’s letter.

See

11/19 PM Tr. at 99; PX-19 at 4. Ross Vartian testified that he was delighted that the genocide museum would be getting three additional properties to expand and fulfill a greater vision. 11/19 PM Tr. at 99. However, there was no meaningful progress throughout the rest of 2001. In a memorandum to Robert Kaloosdian and Rouben Adalian dated December 18, 2001, Ross Vartian wrote that “[i]n essence, 2001 has been lost time which must be more than made up in 2002.” DX-34 at 1. Vartian felt that the lack of progress could be attributed to six different factors: (1) ambiguity over the footprint for the museum site and the entities that would occupy it; (2) lack of agreement by the planning committee on budget, footprint, and how to proceed; (3) changes in leadership on the planning committee, with Edele Hovnanian’s resignation and Kaloosdian’s increased involvement; (4) lack of finances; (5) failure to implement a community outreach campaign; and (6) Vartian’s increasing Assembly responsibilities taking up more time.

Id.

at 1-3.

On January 8, 2002, a few select members of the Assembly’s Board of Trustees met in Miami to discuss several issues of concern to Cafesjian.

See

PX-308. One of those issues was the Turkish Armenian Reconciliation Commission (“TARC”), an effort at reconciling contentious issues of dispute between Turkey and Armenia such as the Armenian Genocide and other contemporary issues.

See id.;

11/19 PM Tr. at 101. TARC was controversial within the Armenian community, and the Assembly supported it notwithstanding objections from a number of its members. Hovnanian and Krikorian were the strongest supporters of TARC, whereas Cafesjian was highly critical of it. 11/19 PM Tr. at 101; 11/18 PM Tr. at 49-50. During the meeting, Hovnanian expressed regrets on behalf of the Assembly that Cafesjian did not have an opportunity to express his objections before the Assembly supported it. 11/18 PM Tr. at 50; PX308 at 1.

The museum project was also discussed extensively at the meeting. Cafesjian expressed his concerns regarding the progress over the past two years.

See

PX-308

*43

at 2. Cafesjian also discussed his belief that the museum should be a “signature building” in Washington, D.C. and indicated that he thought the funding requirements could increase substantially to between $50 and $100 million.

Id.

Cafesjian explained at trial that he thought the Bank Building alone, as a repository for books and pictures, lacked the “emotional factor” that would be critical to attract public interest. 11/18 PM Tr. at 52. After some discussion, the Assembly Board agreed to proceed with a proposal put forward by Waters and Vartian to commission Concord Partners to conduct a space utilization/feasibility study.

See

PX-308 at 2. There were also serious discussions about how best to structure the management and operation of the museum. Ross Vartian and John Waters were tasked with analyzing the options for a formal structure and bylaws for the project.

See

DX-39. On February 28, 2002, Vartian and Waters drafted a confidential memorandum to Cafesjian and Hovnanian discussing three possible options: (1) formalizing the museum as a subsidiary of the Assembly; (2) making the museum a component of ANI; and (3) establishing the museum as an independent entity.

See

DX-39. They recommended that the museum continue to be a subsidiary of the Assembly until the opening of the museum, after which they believed it should be spun off as an independent entity.

Id.

Following the meeting in Miami, Ross Vartian contacted Concord Partners to solicit a revised proposal for the space utilization/feasibility study.

See

PX-17 at 1. Much had changed since Concord Partners submitted its proposal back in April 2001, and Vartian wanted to ensure that the project team, which included architects Martinez

&

Johnson and exhibit design firm Gallagher

&

Associates, was adequately prepared. As a property developer, Concord Partners had the expertise necessary to coordinate the development of the properties.

See

11/22 PM Tr. at 17-18. Martinez

&

Johnson was an architecture firm which had created a design for the Bank Building in 1998 for a client that was interested in using the property for its headquarters. 11/12 PM Tr. 58-59. Gallagher & Associates was a museum planning and design firm with a long list of illustrious clients such as the Smithsonian Institution and the National Archives. 11/12 PM Tr. at 7-8. On February 4, 2002, Vartian sent Concord Partners a project description explaining that the project consisted of the Bank Building and the three adjacent properties donated by Cafesjian; Vartian also noted that Cafesjian was considering the acquisition of a fourth adjacent property at 1334-36 G Street.

See

PX-17 at 2. Vartian further explained that they planned to clear the adjacent properties after the leases had expired and build a new structure with up to 80,000 square feet of space.

Id.

at 2. It was anticipated that the memorial would be housed within the new construction and occupy between 1000 and 1500 square feet.

Id.

at 3. The Concord team prepared and submitted a feasibility study proposal in late February 2002. Stip. Facts ¶ 46.

On March 16, 2002, the Assembly Board of Trustees held its annual meeting in Boca Raton, Florida. Hovnanian began the meeting by acknowledging that the past six or seven months had been a very difficult time for the Assembly due to controversy over the TARC issue, among other things.

See

DX-40 at 1. After a discussion of other Assembly business, Robert Kaloosdian and Rouben Adalian gave a report on the status of ANI.

See id.

at 3-4. Edele Hovnanian, who by this point had returned to the Assembly as Treasurer, reported that the Assembly was depleting its cash reserves and the principal in its endowment.

Id.

at 4. After lunch, Ross

*44

Vartian gave a report on the progress of the museum project.

Id.

at 5; DX-41. Vartian told the crowd that “all of the museum experts advise that it takes 5 to 7 years to create a museum from scratch” and that “the clock is ticking.” DX-41 at 6. Vartian announced for the first time to those not on the museum planning committee that Cafesjian had agreed to donate the Adjacent Properties for the museum project.

See id.

at 3M. He also announced that the Assembly, together with ANI and CFF, intended to create an independent entity to oversee the museum project “as soon as it is prudent and responsible to do so.”

Id.

at 4. The primary reason for creating an independent entity was community buy-in, to ensure that donors from all Armenian advocacy organizations would be willing to contribute and not see the museum as an Assembly-focused project. 11/22 AM Tr. at 19. In light of the controversy surrounding the TARC issue, there were concerns that the Assembly could not raise the funds on its own to cover the cost of the museum. 11/15 AM Tr. at 104-05. In addition, the museum planning committee began to realize that the museum project would overwhelm the Assembly in size and scope and detract from the Assembly’s core mission.

Id.

Waters testified that one other concern animating the need for an independent entity was the museum planning committee’s inability to make binding decisions and get funding and authorization from the Assembly. 11/15 AM Tr. at 89-90.

In addition to the establishment of an independent entity, several other agreements were reached during the discussions in Boca Raton. It was agreed that CFF would donate the Adjacent Properties to the museum, with conditions, and the Assembly would donate the Bank Building and adjacent vacant lot, with conditions.

See

PX-19 at 2. It was further agreed that CFF and the Assembly would combine their conditions with prior gifting commitments, which the newly-formed independent entity would be obliged to honor.

Id.

CFF and the Assembly agreed to jointly design and approve the governing documents for the new entity, and that CFF, the Assembly, and ANI would each be represented on all levels of governance for the new entity.

Id.

Following the meeting, Ross Vartian outlined these agreements, along with a list of unresolved issues that remained outstanding.

See id.

Among the unresolved issues were the status of ANI, the budget for 2002, and selection of an experienced museum director.

Id.

at 3-4.

It was also agreed during the Boca Ra-ton meeting that the museum planning committee would not proceed with the space utilization/feasibility study as planned.

See

PX-19 at 3. Instead, the parties agreed to hire Concord Partners to select an architect and exhibit design firm through a request for qualifications (RFQ) process. Id

17

There were tradeoffs involved with this decision: a feasibility study could give greater definition for the project and help with budget and fundraising planning, but selecting an architect first would allow the planning to be tailored to the chosen architect. 11/22 AM Tr. at 20. Concord Partners told Ross Vartian that the RFQ process — including solicitation of candidates, requesting proposals from finalists, and final selection— would take approximately four months, with an additional six months needed thereafter to conduct a site study.

See

PX-352.

*45

The museum planning committee held its next meeting in Naples, Florida on May 2, 2002.

See

DX-49. The meeting focused primarily on analyzing the consequences of the decisions made at the Assembly’s meeting in March. It was agreed that the Armenian Genocide Museum & Memorial would be incorporated as a 501(c)(3) organization as soon as it was possible to do so responsibly and sustainably.

See id.

at 2. It "was further agreed that the Assembly offices would not be housed within any portion of the museum complex.

Id.

at 3. This decision was made in part to keep the museum independent from any advocacy organization and in part because it was thought that there would not be adequate space in the complex for the Assembly. 11/22 AM Tr. at 22-23. To ensure that the Assembly would get sufficient credit for launching the museum (and to combat the perception that the Assembly was abandoning the project), Cafesjian and Hovnanian agreed to channel their contributions through the Assembly.

Id.

at 23-24; DX-49 at 3. The committee agreed to hire a museum director by August 1, 2002 to replace Ross Vartian, who was planning to retire and return to Michigan. DX-49 at 3. However, no director was hired, at least in part for budgetary reasons. 11/22 AM Tr. at 24-25. In fact, the museum project was having significant cash flow problems, and Cafesjian agreed after the Naples meeting to advance funds necessary to complete the work that was scheduled for 2002. DX-49 at 4. Ross Vartian testified that this was a constant problem because the museum project was asset — rich but cash — poor. 11/22 AM Tr. at 25.

Progress was being made, but the pace was deliberate. Robert Kaloosdian warned Ross Vartian that he should not take major action until the parties had reached a “comprehensive agreement,” which Vartian understood to mean formalization of the gifting conditions for the Assembly and CFF, agreement on the status of ANI, and a set of by-laws and articles of incorporation for the new entity.

See

DX-56. The new entity would ultimately become the Armenian Genocide Museum

&

Memorial, Inc. (“AGM & M”).

18

The museum planning committee met again in New York on August 22, 2002.

See

DX-58. It was agreed that AGM & M should be overseen by a committee of major donors who agree to make a minimum contribution (somewhere between $1 and $15 million), each of whom would have a veto over “major decisions.”

See id.

at 1; 11/22 PM Tr. at 97-98. CFF also provided a revised draft grant agreement letter, which was discussed at length during the meeting.

See

DX-58 at 1; 11/18 AM Tr. at 29; Krikorian Dep. Tr. at 114. Like the previous draft grant agreement sent in October 2001, it contained a reversion clause stating that if the three adjacent properties were not developed in accordance with a plan approved by the AGM

&

M (with the necessary approval of CFF), CFF would be entitled to a return of either the adjacent properties or the funds used to purchase them.

See

DX-59 at 4. There was some discussion at the meeting that such an open-ended reversion clause would not be appropriate.

See

11/22 PM Tr. at 99. The committee also discussed the architect selection process and the status of ANI in relation to AGM & M. DX-58 at 1-2.

John Waters and Ross Vartian proceeded to work with Concord Partners on the RFQ process. Jeffrey Arnold, co-owner of Concord Partners, testified that he worked primarily with Waters and Vartian during this period.

See

11/22 PM Tr. at 18. Ka

*46

loosdian was concerned that decisions about the RFQ process were being made without total agreement from the planning committee.

See

PX-27. On October 8, 2002, Cafesjian, Waters, Adalian, and several professionals held a conference call with Concord Partners to discuss the RFQ and make decisions about the architect selection process.

See

PX-29. Based on Concord Partners’s recommendations, they decided to send the RFQ to top-tier architects identified by Concord and all interested Armenian architects.

Id.

They also revised the RFQ documents to better reflect the mission statement for the museum and agreed to forward them to the full museum planning committee for approval.

Id.

Around this same time, several members of the museum planning committee began to meet with Gallagher & Associates to discuss exhibit design and content. Although there is some evidence in the record that the Assembly planned to select an exhibit design firm through an RFQ process, it appears that Gallagher & Associates was chosen fairly early in the process without competition from other firms. Patrick Gallagher, the principal of Gallagher

&

Associates, worked primarily with Rouben Adalian in developing plans for the content of the museum. 11/12 PM Tr. at 10. Gallagher

&

Associates was tasked with creating a conceptual master plan for the museum that identified a storyline and described the functional requirements for the museum, such as office and storage space, archives, libraries, etc.

Id.

at 11. The purpose of this work was to create a plan that could be used to engage an architect to design the building for the museum.

Id.

A brainstorming meeting was held on October 28, 2002, with representatives from Concord Partners, Gallagher & Associates, and several members of the planning committee, including Kaloosdian, Adalian, Yartian, and Waters.

See

PX-31 at 20-26.

19

On October 19, 2002, the Assembly held its annual gala meeting for its members in Philadelphia.

See

DX-305. The Assembly honored Cafesjian for his donations to the Assembly, his multi-million-dollar investments in Armenia through CFF, and his generosity toward the museum project.

See id.

Speaking at the meeting, Hovnanian called Cafesjian a “trusted colleague” and a “dear friend” who believes that “time is a precious commodity that cannot be wasted.”

Id.

Cafesjian did not appear in person to receive the honors but instead prepared a biographical video narrated by Waters that described Cafesjian’s Armenian advocacy efforts and expressed his appreciation to the Assembly.

See id.

A week later, on October 25, 2002, the museum planning committee convened a meeting in New York.

See

DX-67; 11/10 PM Tr. at 4. Attendees included Hovnanian, Kaloosdian, Adalian, Krikorian, Vartian, Waters, Carolyn Mugar, and Peter Vosbikian, a life trustee who also served as Chairman of the Assembly’s Board of Directors in 2002 and 2003.

See

DX-67 at 1. The meeting began with an extensive discussion of finances for the project.

Id.

Hovnanian expressed his concern that they would be unable to raise enough money to fund a project with a $100 million budget, and he raised the possibility of phasing in the project, with later expansion tied to better economic circumstances.

Id.

Hovnanian also reaffirmed his pledge of $5 million to the project but expressed disap

*47

pointment that his recent $200,000 donation had been spent on architect selection efforts and other expenses.

Id.

Others also expressed concerns about the operating deficit.

Id.

Vartian, who by this time had relocated to Michigan but continued to work on the project, did not share Hovnanian’s concerns about fundraising. 11/22 AM Tr. at 27. Waters told the committee that Cafesjian was optimistic that the funds could be raised from the community and that, if necessary, Cafesjian was prepared to donate $50-75 million to ensure that the project was completed.

20

DX-67 at 1; DX-68 at 2. The rest of the committee was elated to hear this news; Kaloosdian testified that “it was like a message from heaven.” 11/10 PM Tr. at 7. Based on this reaction, Waters feared that he had overpromised and that the rest of the members of the committee would assume they were relieved of any further obligations to bring funds into the project. 11/15 AM Tr. at 95. According to one draft summary of the meeting, “[a]ll felt that G. Cafesjian’s commitment, characterized as a ‘safety net,’ alleviated the fiscal concerns.” DX-67 at 2. Everyone agreed that the safety net should be kept confidential so as not to deter fundraising.

Id.

During a break in the meeting, Waters telephoned Cafesjian to convey his fear, and Cafesjian instructed Waters to clarify that he was not making any firm commitment or guarantee. 11/15 AM Tr. at 100. Waters then told the committee that Cafesjian was confident that the community could raise the full amount of funds required to support the project and that if there were shortfalls, Cafesjian was prepared to donate additional funds.

Id.

at 101-02; DX-67 at 3.

During the meeting, Waters commented on the slow pace of the project.

See

DX-67 at 2. Kaloosdian called for a “comprehensive understanding” on all major aspects of the initiative before launching any significant element.

Id.;

11/15 AM Tr. at 30-31. Vartian testified that he believed Kaloosdian’s emphasis on consensus decision-making prolonged the planning process. 11/22 AM Tr. at 30-31. The museum planning committee ultimately reached a series of agreements during the meeting. It was agreed that the Board of Trustees for AGM & M should consist of $5 million donors, making an exception for Anoush Mathevosian based on her founding efforts, with decisions made by consensus. DX-67 at 2-3; DX-68 at 1. It was further agreed that a single professional museum director be appointed and empowered to drive the project forward. DX-67 at 2; DX-68 at 1. The committee also approved the RFQ. DX-67 at 2; DX-68 at 1. There was still no agreement about the future status of ANI. DX-67 at 2-3.

Concord Partners sent the RFQ to a group of selected architects on November 15, 2002.

See

PX-31 at 28-35; PX-25; PX-26. The timeline called for responses to be submitted to Concord Partners by December 13, 2003, a short list of architects to be chosen to interview in late January 2003, a design competition to be held among the finalists with presentations in mid-April 2003, and final selection to be made by May 2003.

See

PX-31 at 31. It was anticipated that as many as five firms would participate in the design competition, with each firm receiving $30,000 compensation for their design.

Id.

The RFQ described the project as consisting of the Bank Building and a new building on the

*48

Adjacent Properties

21

of approximately 60,000 square feet, with a total estimated project cost of $76 million.

Id.

at 30. Concord received between thirty and thirty-five responses to the RFQ. 11/22 PM Tr. at 23. Among the responses received was an unsolicited proposal from a young Armenian American architect named Edgar Papazian.

See

PX-215. After the responses were received, the RFQ process “died on the vine.” 11/23 AM Tr. at 56; 11/22 PM Tr. at 24-25. Waters testified that this was due to a lack of finances and a lack of agreement by the committee on how to select an architect. 11/23 AM Tr. at 56. In an internal memorandum dated May 6, 2004, Concord Partners attributed the delay in selecting an architect to several factors, including the acquisition of the Adjacent Properties, the lack of a single decision-maker to shepherd the process, and indecision about whether to recruit a “name” architect.

See

PX-35 at 4.

On January 16, 2003, Assembly Treasurer Gail O’Reilly sent a memorandum to the executive committee of the Assembly Board of Trustees regarding operational spending for the museum project.

See

DX-75. Her memorandum indicated that the Assembly had received a total of $7,239,835.49 in unrestricted donations for the museum, plus the $500,000 loan from Cafesjian, and there was an additional $519,966 in restricted funds.

Id.

at 1. As of November 2002, the Assembly had spent $7,918,865.12, exhausting the unrestricted funds, the entirety of the loan from Cafesjian, and $179,030.03 of the restricted funds.

Id.

The memorandum does not indicate the nature of the restrictions on the funds, but it states that “[i]n the past the assumption has been made that the purposes for which these restricted funds have been donated, as well as the loan, will be fulfilled with future operating receipts.”

Id.

O’Reilly wrote, ‘What I need from the EC [Executive Committee] of the BOT [Board of Trustees] is a ‘yes’ vote to continue to spend down the restricted funds to '0' or a ‘no’ vote to stop the practice immediately.”

Id.

22

The record does not reflect what action was taken with respect to this request.

On January 21, 2003, Peter Vosbikian sent a memorandum to Cafesjian, Hovnanian, and Carolyn Mugar entitled “Time for Action.”

See

DX-77. “I believe the Armenian Assembly of America has reached a point of crisis,” he wrote.

Id.

at 1. “I further believe that the downward spiral that we are faced with began March of 2000 when we announced our AGM & M initiative. Although the news of this great new project was exhilarating, it resulted in certain decisions that have negatively impacted our organization.”

Id.

Vosbikian felt that Ross Vartian’s departure from the position of Executive Director to become the planning director for the museum project had left the Assembly as a “rudderless ship.”

Id.

Vosbikian proposed bringing Vartian back as Executive Director for the Assembly with the understanding that he would mentor and train his replacement.

Id.

He also stated his belief that the failure to bring the museum to market, combined with the TARC fiasco, had damaged the Assembly’s position as a leading advocacy

*49

organization.

Id.

He urged the Assembly to act quickly to spin off AGM

&

M and ANI.

Id.

at 2. Ultimately, Vartian reached an agreement with Vosbikian that he would come back to the Executive Director position for two years, with one year devoted to getting the Assembly back on track, and the second year focusing on mentoring the Assembly’s future Executive Director. 11/22 AM Tr. at 33-35.

On January 22, 2003, CFF sent a revised draft grant letter to the Assembly for review.

See

DX-78. As with the previous drafts, the letter contained a reversion clause, but this time it contained a triggering date: if the three donated adjacent properties were not developed according to plans approved by AGM & M by December 31, 2008, then those properties (or the cash used to acquire them) would revert to CFF.

See id.

at 2. The letter also provided that a new $500,000 promissory note would be issued to CFF by the Assembly to replace the previous one, and that the obligation may be transferred to AGM & M.

Id.

at 3. The letter proposed that decisions of the AGM & M Board of Trustees be decided by an 80% affirmative vote.

Id.

at 5. This draft letter was discussed at a meeting in Delray, Florida, where Hovnanian, Vartian, Kaloosdian, and Adalian were present. 11/22 PM Tr. at 106-07. Hovnanian suggested a series of changes to the agreement, including making the transfer of the promissory note to AGM & M mandatory.

See

DX-80 at 1. He also suggested changing the 80% vote requirement to a unanimity requirement.

Id.

at 2.

In February 2003, Gallagher

&

Associates completed its Draft Museum Program.

See

PX-31. This document contained an outline of themes for the exhibits and described the basic requirements for the museum’s operations. The program called for approximately 25,000 square feet of exhibit space, with a total of 89,000 square feet for the museum, including underground parking.

Id.;

11/12 PM Tr. at 13, 41, 48. Rouben Adalian helped prepare the Draft Museum Program.

See

11/15 PM Tr. at 94. Adalian presented the program to the ANI Board of Governors at a meeting on February 27, 2003.

See

PX-31 at 39; 11/16 AM Tr. at 39. When Hovnanian saw the program, he became upset that he was not consulted about it. 11/16 AM Tr. at 35, 39-41. Hovnanian also criticized ANI’s performance and the pace with which it had accomplished its objectives. 11/16 AM Tr. at 42-43; DX-623N at 6. Gallagher & Associates did not perform any further work for the project after the Draft Museum Program was completed. 11/12 PM Tr. at 24.

The Assembly Board of Trustees held another annual meeting in Boca Raton on March 1, 2003.

See

DX-82. By the time of this meeting, everyone agreed that AGM & M should be launched as an independent entity with a budget of around $100 million and a new building constructed on the three adjacent properties to be donated by Cafesjian.

See id.

at 1-2. Hovnanian announced this decision to the attendees at the meeting, approximately a hundred people.

See id.;

11/24 AM Tr. at 37. The reaction to this announcement was uniformly positive, and Vartian felt that this was a significant milestone after years of intense deliberations. 11/22 AM Tr. at 37, 94. Vartian delivered a report in his renewed role of Executive Director.

See

DX-82 at 4. Kaloosdian and Adalian each gave reports on the work that had been performed by ANI, and it was announced that ANI would be transferred to the control of AGM

&

M.

Id.

at 5-6. Ultimately, it was agreed that ANI would retain its status as an independent 501(c)(3) organization, but that it would become a subsidiary of the new museum entity. 11/22 AM Tr. at 21. John Waters, who was now the

*50

primary staff person working on the museum project, delivered a report on the status of the museum. DX-82 at 9. Waters briefly described the history of the project and expressed his appreciation for the hard work of those involved, saying, “I am happy at how well this project is moving along and moving forward.”

Id.

Those words were mostly tactful; the truth was that Waters and Cafesjian were dismayed at the sluggishness with which the project had evolved over the previous three years. 11/15 AM Tr. at 52-53; 11/19 AM Tr. at 82. At this point, however, it was clear that the project was entering a new phase. While the details still had to be finalized, everyone was optimistic that the creation of AGM

&

M would finally enable the project to become a reality.

E. Final Negotiation of the Grant Agreements and the Creation of AGM&M

It took seven months following the March 2003 meeting to finalize the agreements and governing documents that would create AGM & M. One reason for the delay was the acquisition of the fourth adjacent property, the Families U.S.A. building. Through TomKat, Cafesjian entered into a purchase agreement to buy the property for $6.5 million on September 22, 2003. DX-502N; Stip. Facts ¶ 52. The closing date was scheduled for October 30, 2003. DX-502N.

The draft grant agreement from Cafesjian continued to be discussed and negotiated. Because Cafesjian had agreed to channel his donations to AGM

&

M through the Assembly, it was decided that Cafesjian would enter a grant agreement with the Assembly (hereinafter, the “Grant Agreement”), and the Assembly would transfer all of the museum-related assets and obligations to AGM

&

M in a separate agreement, to be known as the “Transfer Agreement.” The law firm of Caplin & Drysdale was hired to draft the Transfer Agreement as well as the organic documents for AGM & M, including the Articles of Incorporation, the By-Laws, and a Unanimous Written Consent agreement signed by all of the initial trustees of AGM

&

M. 11/23 AM Tr. at 12-13.

The record shows that the language in the Grant Agreement was reviewed by most of the major figures involved in AGM & M during the months leading up to its execution on November 1, 2003. On October 13, 2003, Waters emailed an updated draft of the Grant Agreement, which included the donation of the Families U.S.A. building, to Hovnanian, Vartian, Kaloosdian, and Vosbikian.

See

PX-330. The revised draft also included a new trigger date of December 31, 2010 for the reversion clause; it was felt that seven years was a reasonable timeline for the completion of the project.

See id.

at 3; 11/22 PM Tr. at 119. Because the Families U.S.A. building transaction was scheduled to close on October 30, Waters urged everyone to act quickly so that title to the building could be transferred directly to AGM & M, eliminating the need to transfer the property from TomKat to AGM

&

M and saving hundreds of thousands of dollars in transfer and recordation fees.

Id.

at 1; 11/22 PM Tr. at 117-18. On October 28, 2003, a conference call was held with,

inter alia,

Hovnanian, Cafesjian, Vosbikian, Kaloosdian, Waters, and Vartian to discuss the four key documents: the Grant Agreement, the Articles of Incorporation for AGM & M, the AGM & M By-Laws, and the Unanimous Written Consent agreement.

See

DX-94. During this meeting, Kaloosdian suggested that the language in the reversion clause in the Grant Agreement be clarified so as to avoid ambiguity about when the right of reversion might be triggered.

Id.

at 1-2. The final language

*51

of these documents was approved shortly after this conference call.

Kaloosdian testified, rather incredibly, that he did not recall being involved in any of these discussions relating to the Grant Agreement and that he was unaware of the document until years later.

See

11/12 AM Tr. at 11-14, 21. Hovnanian also remarkably testified that he was not aware of the reversion clause in the Grant Agreement until years later and that he trusted Cafesjian so much that he did not read the agreements that were being made at the time.

See

11/9 AM Tr. at 99. Similarly, Peter Vosbikian testified that he did not recall being involved in the conference call discussing the Grant Agreement and that he signed the agreement on behalf of the Assembly without reading it. 11/15 PM Tr. at 79-80. It appears to the Court that these individuals’ convenient lack of memory is an attempt (conscious or otherwise) to minimize their involvement in an agreement that turned out badly for the Assembly. It also appears, however, that despite their involvement in the process, these individuals did not take the time to fully understand the terms and conditions of the agreements.

The Articles of Incorporation for AGM & M were signed on October 29, 2003, and AGM & M officially became incorporated as a nonprofit corporation in the District of Columbia.

See

PX-121; Stip. Facts ¶ 53. The Articles of Incorporation and the ByLaws for AGM

&

M were ratified and adopted, respectively, pursuant to the Unanimous Written Consent agreement, which was executed on October 30, 2003. Stip. Facts ¶ 54. The Grant Agreement and Transfer Agreement were signed on November 1, 2003 during an Assembly gala in Palm Desert, California. 11/22 PM Tr. at 124. Because the content of these documents is critically important to disputed issues in this litigation, the Court shall review each of these documents in some detail.

1.

The Grant Agreement

The Grant Agreement was signed by Cafesjian on behalf of himself and CFF and by Hovnanian and Vosbikian on behalf of the Assembly.

See

DX-2 (hereinafter, “Grant Agreement”).

23

The eleven-page document sets forth the terms and conditions of the grants made by Cafesjian and CFF to the Assembly for the museum project and obligates the Assembly to comply with those terms and conditions.

Pursuant to the Grant Agreement, Cafesjian and/or CFF (jointly defined as the “Grantor”) agreed to donate $10.3 million for the purchase of the Adjacent Properties from TomKat and any related transaction costs. Stip. Facts ¶ 60; 11/23 AM Tr. at 32. In addition, Cafesjian and/or CFF agreed to make the annual $150,000 payments under the installment agreement for 1340 G Street and the final balloon payment of $1.5 million due in March 2011.

See

Grant Agreement §§ 2(D)-(E). The amounts paid under the Grant Agreement were calculated based on the purchase price paid by TomKat for the Adjacent Properties, plus the holding costs paid by TomKat pending transfer minus any rents earned during this period, plus the legal costs associated with the transfer. 11/23 AM Tr. at 35-36.

For purposes of this litigation, the most critical feature of the Grant Agreement is the reversion clause. Under § 3.1 of the Grant Agreement, the “Grant Property”— defined as the Bank Building and the Adjacent Properties — “may only be used as

*52

part of the AGM & M,[

24

] subject to plans for the AGM & M approved by the Board of Trustees of the American Genocide Museum & Memorial, Inc. (the ‘Plans’).... ” Grant Agreement § 3.1(A). The next section reads as follows:

If the Grant Property is not developed prior to December 31, 2010 in accordance with the Plans, or if the Grant Property is not developed in substantial compliance with the Plans including with respect to the deadlines for completion of the construction, renovation, installation and other phases detailed in the Plans, then:

(i) in the event any portion of the Grants has not been funded, this Agreement terminates;

(ii) to the degree any portion of the Grants has been funded, at the Grantor’s sole discretion, the Assembly shall return to the Grantor the Grant funds or transfer to the Grantor the Grant Property.

Id.

§ 3.1(B). Cafesjian testified that the purpose of the reversion clause was to provide an incentive to complete the museum expeditiously, so that it might be built before Cafesjian died. 11/19 AM Tr. at 10-11; 11/15 AM Tr. at 113. Waters testified that the reversion clause was most likely his idea; he explained that CFF often inserted reversion clauses into its grant agreements. 11/15 AM Tr. at 113; 11/22 PM Tr. at 88-89.

The Grant Agreement also obligates the Assembly to make available a space, not less than 1200 square feet or 40,000 cubic feet, for a memorial to be named the “Gerard L. Cafesjian Memorial” or another name approved by CFF. Grant Agreement § 3.2. It provides that the Assembly shall “cooperate with the design firms, artists and others selected by [CFF] to design and ensure the successful completion of the Memorial” and “permit [CFF] to participate in all material decisions regarding the Memorial.”

Id.

Moreover, the Grant Agreement obligates the Assembly to operate and maintain the Memorial in perpetuity and be solely responsible for the costs of maintaining it.

Id.

The Grant Agreement also provides that neither CFF nor Cafesjian have any obligation to provide additional funding to the Assembly or to AGM & M.

Id.

§ 3.8.

The Grant Agreement also contains a breach clause:

(A) If the Assembly fails to use the Grants solely for the purposes set out in this Agreement or if the Assembly fails to satisfy any of the conditions of this Agreement, Grant- or is released from any remaining obligation under this Agreement to provide funds or property to the Assembly.

(B) If the Assembly uses any portion of the Grants either for a purpose other than those set out in this Agreement or for a purpose other than those described in Section 501(c)(3) of the [Internal Revenue] Code, as amended, the Assembly shall repay the portion of the Grants so spent to Grantor, plus interest.

(C) The remedies set out in this Section 3.9 are in addition to any other remedies that may be available to the Grantor at law or equity.

Grant Agreement § 3.9.

The Grant Agreement also contains conditions relating to the creation of AGM & M. It requires that AGM & M be created

*53

as a nonprofit entity; that it be governed by a Board of Trustees appointed by individuals and organizations that contribute at least $5 million to the museum project; that each such donor be entitled to receive at least one vote for each $5 million contributed; that Anoush Mathevosian be ensured at least one vote on the Board of Trustees; that the Assembly accept only one vote; that decisions of the Board of Trustees require an 80% vote to carry; and that the initial Board of Trustees consist of Anoush Mathevosian, Hirair Hovnanian, Robert Kaloosdian, and Gerard Cafesjian.

See

Grant Agreement § 5.2. The Grant Agreement also required the Assembly to enter into a Transfer Agreement with AGM & M to transfer all of its interest in all cash, pledges, property, and other assets being held by the Assembly for the museum project.

Id.

§ 5.8(A). The Transfer Agreement would obligate AGM

&

M to honor all existing donor requirements at the time of transfer and to assume all obligations in the Grant Agreement relating to the Memorial.

Id.

§ 5.3(B)-(C).

The Grant Agreement also required that the Assembly issue a new promissory note to replace the previous promissory note issued in March 2000 to CFF for $500,000. Grant Agreement § 5.4(A). The new note was to be interest free and mature on December 31, 2005.

Id.

§ 5.4(B). Along with the other museum-related obligations, the Assembly was required to transfer the promissory note to AGM & M.

Id.

§ 5.4(C). The Grant Agreement also provided that the Assembly would assign its right to appoint the Trustees of the Armenian National Institute to AGM & M.

Id.

§ 5.5.

2.

The Transfer Agreement

The Transfer Agreement was executed on November 1, 2003 by the Assembly and the newly-incorporated AGM

&

M.

See

PX-114 (hereinafter, the “Transfer Agreement”). The agreement is signed by Hovnanian and Vosbikian on behalf of the Assembly and Waters on behalf of AGM

&

M.

See id.

at 8. The Transfer Agreement requires the Assembly to contribute to AGM & M “all of its rights, title and interest in and to all cash, pledges, real property, tangible property, intangible property, and other assets contributed to the [Assembly] and/or held by the [Assembly] for the development, renovation, and construction of the AGM & M.”

Id.

§ 1.1. The approximate aggregate value of the grant was listed as $27.8 million, including $7.25 million in property, over $19 million in pledges, and approximately $670,000 in cash and other assets.

Id.

§ 1.1(C).

Pursuant to § 1.2 of the Transfer Agreement, “AGM & M, Inc. must honor all of the [Assembly]’s donor requirements existing at time of transfer, or in the alternative, obtain donor consent to the transfer and any modification of donor terms.” Transfer Agreement § 1.2(A). The agreement also explicitly requires AGM

&

M to comply with the obligation to construct a memorial as set out in the Grant Agreement.

Id.

§ 1.2(B). The Transfer Agreement also requires the Assembly to transfer the promissory note (either the original or the replacement note, if issued) to AGM & M.

Id.

§ 1.2(D). The agreement also requires AGM

&

M to use the funds and property transferred “solely to develop, construct and operate” the Armenian Genocide Museum & Memorial.

Id.

§ 1.3.

The Transfer Agreement also contains provisions relating to the governance of AGM & M that are substantively identical to those contained in the Grant Agreement. The agreement also contains an arbitration clause.

See

Transfer Agreement § 5.3. However, none of the parties is presently seeking to enforce that arbitration clause.

*54

3.

The AGM & M Articles of Incorporation

The Articles of Incorporation for AGM & M were executed on October 29, 2003.

See

PX121. The Articles provide that AGM & M is a nonprofit corporation organized for charitable purposes within the meaning of § 501(c)(3) of the Internal Revenue Code.

Id.,

Art. PV(A). The purpose of the corporation is defined as,

inter alia,

“to own, operate, and maintain a permanent museum and memorial to the victims and survivors of the Armenian Genocide.” Id. The Articles provide that AGM & M has no members and that the board of directors for the corporation shall be referred to as the Board of Trustees. See id., Arts. V-VI. The manner of election or appointment to the Board of Trustees is to be set forth in the By-Laws of the corporation. Id., Art. VI. The Board of Trustees must have at least three trustees at all times, and the initial trustees are defined to be Gerard L. Cafesjian, Hirair Hovnanian, Anoush Mathevosian, and Robert Kaloosdian. Id., Art. IX.

The Articles provide that in the event of dissolution or final liquidation of the corporation, none of the property of the corporation shall be distributed to or divided among any trustees or officers or inure to the benefit of any individual. Id., Art. VII(CXl).

4.

The AGM & M By-Laws

The By-Laws of AGM

&

M provide that the corporation shall conduct its programs and activities under the name of the Armenian Genocide Museum and Memorial.

See

PX-122 (hereinafter, “By-Laws”) § 1.2. Under the By-Laws, the term of office of each of the initial trustees (i.e., Cafesjian, Mathevosian, Hovnanian, and Kaloosdian) “shall be perpetual.” ByLaws § 2.4. Each donor that elected an initial trustee (CFF, Mathevosian, Hovnanian, and the Assembly) is entitled to appoint a successor trustee in the event that the initial trustee is unable to serve for any reason.

Id.

Additional trustees may be elected to the Board of Trustees by making a contribution of $5 million to AGM & M, provided that the Board of Trustees has accepted the contribution by an 80% affirmative vote and the donor has appointed a successor.

Id.

§ 2.5. Each donor (including initial donors) is entitled to one vote on the Board of Trustees for each $5 million contributed.

Id.

§§ 2.4-2.5.

The By-Laws provide that “[ujnless otherwise provided herein or in the Articles of Incorporation, all questions shall be decided by an 80 percent affirmative vote of the Trustees present at a meeting where a quorum is present.” By-Laws § 2.7. A quorum is defined as persons representing one-half of the aggregate eligible votes.

Id.

§ 2.6. “Any action required or permitted to be taken at any meeting of the Trustees may be taken without a meeting if all Trustees then in office consent to the action in writing and the written consents are filed with the records of meetings of Trustees.”

Id.

§ 2.8. The By-Laws call for at least annual meetings of the Board of Trustees, and notice of each meeting must be delivered to each trustee at least five days prior to the meeting.

Id.

§§ 2.12, 2.14. The By-Laws provide that the Board of Trustees shall elect from among its members a Chairman, a President, one or more Vice Chairmen, a Treasurer, and a Secretary.

Id.

§ 2.15.

The By-Laws provide that a trustee may be removed without cause by the unanimous affirmative vote of the trustees present at a meeting where a quorum is present, not counting the vote or votes of the trustee whose removal is voted upon. By-Laws § 2.17. The By-Laws also provide that Robert’s Rules of Order shall govern in matters of parliamentary proce

*55

dure not otherwise prescribed by law, the Articles of Incorporation, or the By-Laws.

Id.

§ 3.1. The By-Laws may be amended by a unanimous affirmative vote of the trustees present at a meeting where a quorum is present.

Id.

§ 3.2.

The By-Laws also include an indemnification clause providing that AGM & M shall indemnify any current or former trustee or officer of the corporation against any and all expenses and liabilities incurred in connection with any claims brought against him or her as a result of his or her position with AGM & M, unless he or she is determined to be liable to the corporation for damages as a result of negligence or breach of a duty.

See

ByLaws § 4.1.

5.

The Unanimous Written Consent Agreement

On October 30, 2003, each of the four initial trustees of AGM & M signed a document titled Unanimous Written Consent in Lieu of the Organization Meeting of the Board of Trustees of AGM & M.

See

DX-1 (hereinafter, “UWC”). By unanimous written consent, the Board of Trustees adopted a series of resolutions. First, the actions of the incorporators were ratified and the By-Laws were approved.

See

UWC at 1. Second, the initial donors (and their appointed trustees) were recognized to be CFF (Cafesjian), Hirair Hovnanian (himself), Anoush Mathevosian (herself), and the Assembly (Kaloosdian).

Id.

at 1-2. Cafesjian was appointed Chairman and President, Hovnanian was appointed Vice Chairman, and John Waters was appointed Secretary and Treasurer.

25

Id.

at 2.

Through the Unanimous Written Consent agreement, the AGM & M Board of Trustees authorized the officers to pay all of the organizational expenses of the corporation.

See

UWC at 2. The actions of the Chairman (Cafesjian) and the Secretary/Treasurer (Waters) in negotiating the purchase of the Adjacent Properties were ratified and approved, and the Secretary/Treasurer was authorized “to enter into and execute any and all documents necessary to effect the purchase” of the Adjacent Properties and “to take such other action as deemed necessary or desired to effect such transactions.”

Id.

at 3. The AGM & M Board also approved and ratified the negotiation of grant agreements with donors and the Assembly, and the Secretary/Treasurer was authorized to negotiate further grant agreements with donors.

Id.

The Board also accepted from the Assembly control over the Armenian National Institute.

Id.

6.

The Hovnanian Grant Agreement

A separate grant agreement was created to memorialize Hirair Hovnanian’s $5 million pledge.

See

DX-4. Hovnanian’s grant agreement provides that he shall grant the Assembly $5 million, which shall be used solely to support the development, renovation, and construction of the museum project.

See

DX-4 §§ 1.1, 1.2. According to Waters, Hovnanian asked that a reversion clause be included in his grant agreement. 11/23 AM Tr. at 7. The reversion clause in Hovnanian’s grant agreement provides that if the museum is not developed prior to December 31, 2010 in accordance with plans approved by the AGM & M Board of Trustees, Hovnanian is entitled to a return of the grant funds. DX-4 § 2.1. Hovnanian does not recall signing this agreement,

*56

but he confirmed at trial that it bears his signature. 11/9 PM Tr. at 89.

F. The Transfer of Assets to AGM & M

The transfer of control over the museum project from the Assembly to AGM & M was a gradual process that took several months. 11/23 AM Tr. at 20-21. In the weeks following the execution of the Grant and Transfer Agreements and the organic documents creating AGM & M, Cafesjian and CFF transferred $10.3 million to the Assembly to cover the purchase of the Adjacent Properties.

See

DX-196, DX-197, DX-198. During November and December, AGM & M engaged in a series

of

transactions in which it acquired title to all of the Adjacent Properties from TomKat, except for the Families U.S.A. building, with respect to which AGM & M obtained TomKat’s rights under the Installment Purchase and Sale Agreement. Stip. Facts ¶¶ 64-70.

26

The funds being held by the Assembly for AGM

&

M consisted largely of pledges and contributions memorialized in grant letters, some restricted for specific uses, which were kept in the Assembly’s endowment account. 11/23 AM Tr. at 20. As of November 1, 2003, the estimated amount of funds being held in the Assembly’s endowment for AGM & M was approximately $860,000.

Id.

at 21. Waters explained that it took several months of reconciling the books with the Assembly to determine which of these funds could be immediately spent on operations and which funds needed to be held for future use.

Id.

at 20-21. During this reconciliation process, the Assembly continued to fund operations for AGM & M, drawing down some of these funds.

Id.

at 21-23. Sometime in 2004, it was agreed that the Assembly was holding $565,000 for AGM & M and $411,000 for ANI in its endowment account.

Id.

However, the Assembly did not formally transfer these funds out of its endowment account into the control of AGM

&

M.

Id.

at 23.

Another issue that was unresolved during the initial transfer period was the reissuance and transfer of the promissory note. 11/22 PM Tr. at 133. There is no record that the promissory note was reissued or transferred to AGM

&

M, and Waters testified that to the best of his knowledge, the Assembly never reissued the note.

See id.

However, at some point, the parties operated under the assumption that the note was transferred. AGM

&

M’s tax return for 2003 reflects a $500,000 interest-free loan from Cafesjian as an obligation of the corporation.

See

PX-380 at 3, 15. However, CFF’s 2004 tax return shows that the obligation transferred from the Assembly to AGM

&

M at some point during 2004.

See

PX-360 at 25; 11/15 PM Tr. at 51-52. Based on the fact there is no evidence of any reissued note in the record, the Court finds that the Assembly did not reissue the promissory note as required by the Grant Agreement.

Throughout the trial there were questions about whether Cafesjian ever agreed to forgive the promissory note. Cafesjian and Waters both denied that the note was ever forgiven.

See

11/18 PM Tr. at 45; 11/19 AM Tr. at 35-36; 11/22 PM Tr. at 134. Waters testified that there may have been discussions about using the note to offset a grant obligation, but no setoff was ever agreed upon. 11/22 PM Tr. at 134-35. The only evidence in the record suggesting that the note might have been forgiven was testimony from Hovnanian that Cafesjian and Waters told him at

*57

various Assembly meetings that the note had been forgiven.

See

11/9 AM Tr. at 68; 11/10 AM Tr. at 65-66. However, Hovnanian was unable to remember any details about the circumstances under which these statements were allegedly made, and the Court does not find this testimony to be credible. Kaloosdian testified that he never heard Cafesjian say he would forgive the note but that he had heard Hovnanian say during discussions prior to November 1, 2003 that he expected Cafesjian to forgive the note. 11/12 AM Tr. at 122-25. Based on this record, the Court finds that Cafesjian never forgave the promissory note.

G. Cafesjian and Waters’s Early Efforts to Manage AGM & M

Upon the creation of AGM

&

M in November 2003, the organization was largely run by John Waters as Secretary/Treasurer. Although Cafesjian was formally the Chairman and President of the new entity, he preferred not to be involved in the “nitty-gritty” details of management and delegated those tasks to Waters, his trusted confidant.

See

Cafesjian Dep. Tr. at 241-42.

27

Hovnanian, despite accepting the role of Vice Chairman, had said that he did not want to be closely involved in the decision-making process.

See

11/9 AM Tr. at 69, 83, 88. And Anoush Mathevosian’s involvement was seriously limited by health issues — between 2003 and 2005, she suffered a stroke, a heart attack, and a collapsed lung. Mathevosian Dep. Tr. at 69; 11/22 AM Tr. at 80. With no employees on staff or professionals hired to move the project forward, it fell to Waters to move the project forward. Waters enlisted Rouben Adalian to assist with museum preparation and made it clear to him that ANI would be servicing AGM & M until the museum opens.

See

DX-621N. Cafesjian bought Adalian a library of books for research purposes. 11/16 AM Tr. at 29. An email from Adalian to Kaloosdian in December 2003 described the transition in the following manner:

In any case what is shaping as AGMM is likely to be a highly decentralized process managed by the principal founder.... Right now the AGMM complex involves a series of properties, a development firm under contract in Washington steering the architect selection process [Concord Partners], probably a new museum design firm, an architectural consulting firm in New York, the Cafesjian Family Foundation out of Minnesota, and John is hiring staff and bringing in people as he goes, all of its [sic] under the CFF or the GLC umbrella. ANI is just one piece of this growing network that is working on AGMM, and an architect has not even been selected.

DX-621N. As the transition from the Assembly was completed, the administrative affairs of AGM & M were handled through Cafesjian’s offices in Minnesota. 11/19 AM Tr. at 113. During the first several months of 2004, Waters was focused on the transition of assets from the Assembly to AGM & M. 11/23 AM Tr. at 63. In addition, he worked on collecting resumes and identifying candidates for the position of executive director.

Id.

at 63-64.

The AGM & M Board of Trustees held its first meeting on June 9, 2004, following a meeting of the Assembly Board of Trustees.

See

DX-102. There are no minutes of this meeting in the record, nor are there official minutes from any of the meetings held while Waters was Secretary/Treasur

*58

er.

See

11/24 AM Tr. at 34-35.

28

As with the planning committee, the AGM & M Board of Trustees operated by consensus with few formal votes ever taken.

Id.

In fact, there is no firm record of any votes being taken during the time that Cafesjian and Waters were officers (through September 2006), although the AGM

&

M Board clearly did make some decisions by consensus. Waters testified that votes were taken on financial/budget issues during each meeting,

see

11/23 PM Tr. at 46-47, but others testified that no votes were ever taken. 11/9 PM Tr. at 103; 11/16 AM Tr. at 66. The Court finds that even if no formal votes were taken, the Board of Trustees did authorize Waters to pay the operating expenses for AGM & M.

During the June 2004 meeting, the first item on the agenda was a review of the formation documents.

See

DX-102. There was a discussion about how the ByLaws might be amended, but otherwise no one raised any concerns about the documents. 11/23 AM Tr. at 8. There was also a discussion of the appointment of successor trustees.

See

DX-102 at 1. Following this meeting, Anoush Mathevosian designated Rouben Adalian as her successor.

See

DX-104. Waters also gave a status report as to the finances, during which he discussed the reconciliation with the Assembly over the amounts in the endowment account owed to AGM & M and ANI. 11/23 AM Tr. at 64. Next, there was a discussion about hiring an executive director. Waters had placed an advertisement and identified four candidates, each of whose resumes were presented to the AGM & M Board for review before the meeting.

Id.

at 65. One of these candidates was a woman named Deborah Devedjian. 11/15 AM Tr. at 132-33. The Board decided that Waters and Kaloosdian should contact each of these candidates for an interview. 11/23 AM Tr. at 65. However, after Kaloosdian and Waters discussed the issue, they decided they should not proceed with hiring an executive director because they did not have funds in the budget to do that.

Id.

29

The last issue discussed at the June 2004 meeting was selection of an architect. The Board discussed how they should proceed with selecting an architect, whether they should continue the RFQ process or conduct a competition for architects. 11/23 AM Tr. at 63. However, no agreement was reached. The Board also heard a presentation from the architect Edgar Papazian.

1.

Edgar Papazian

Edgar Papazian was selected by Cafesjian from among the architects who responded to the RFQ because Papazian’s conceptual vision and preliminary sketches demonstrated a strong emotional attachment to the project.

See

Cafesjian Dep. Tr. at 232, 262. As a young, unproven architect, Papazian’s initial proposal invoked the spirit of Maya Lin, the young architect whose controversial yet striking design for the Vietnam Veterans Memorial on the National Mall was an inspiration to Cafesjian. Papazian Dep. Tr. at 21-22; 11/18 PM Tr. at 56-57. Waters had flagged the proposal because it had more emotion than the other responses and was the only submission that actually included a discussion of the conception for the pro

*59

ject along with some sketches. 11/23 AM Tr. at 58. Although the RFQ process had been formally halted, Cafesjian privately encouraged Papazian to develop his ideas further so that they could be more carefully considered by the AGM & M Board. Cafesjian and Waters met with Papazian in 2003 and discussed his ideas with another architect, David Hotson, who was also impressed with Papazian’s designs. Papazian Dep. Tr. at 25; Cafesjian Dep. Tr. at 263; 11/19 AM Tr. at 13. Papazian later met with Rouben Adalian and toured the museum site. Papazian Dep. Tr. at 26.

In March 2004, Papazian wrote to Cafesjian renewing his interest in the project and describing a plan for further design work that could be performed if underwritten.

See

PX-218. Cafesjian agreed to support Papazian as he continued to work on the project, using his own funds. On April 19, 2004, Waters arranged for Papazian to meet with Concord Partners, David Hotson, Adalian, and a few other individuals to discuss specific details for the project such as zoning and historic preservation requirements and demolition/construction issues.

See

PX-226. Papazian’s recollection of this meeting was that his proposal would not conflict with the zoning regulations governing the Bank Building and the Adjacent Properties (together, the “Properties”). Papazian Dep. Tr. at 30-33.

Papazian’s grand vision for the project was to construct a “husk” within the new building, a void space that would represent the cultural annihilation of the Armenian Genocide and act as a memorial to the victims. Papazian Dep. Tr. at 23-24. Subsequent sketches showed the husk as the dominant architectural feature of the building, extending from the new construction on the Adjacent Properties over the Bank Building and clearly visible from the street.

See

PX-248 at 36-45. According to Cafesjian, Rouben Adalian loved the design and embraced its symbolism. 11/18 PM Tr. at 48.

Papazian gave a “very preliminary” presentation to the AGM

&

M Board of Trustees at its June 2004 meeting, consisting of a few sketches and basic themes. 11/15 PM Tr. at 21-22; Papazian Dep. Tr. at 34. The reaction to the presentation was mixed. Hovnanian did not like Papazian’s design and was somewhat dismissive of the proposal. 11/19 AM Tr. at 13. Kaloosdian was impressed by Papazian’s design but was skeptical that it would appeal to “Joe Six-Pack,” the average man on the street. Papazian Dep. Tr. at 35; 11/19 AM Tr. at 13-14; 11/10 PM Tr. at 26-29. Cafesjian told the other trustees that Papazian could be hired cheaply and that Cafesjian had already spent about $5000 to support him. 11/10 PM Tr. at 25; 11/12 AM Tr. at 53.

Shortly after this meeting, Papazian emailed Waters with his reflections on the comments that the museum design should be accessible to the general public.

See

PX-235. “I think that above and beyond immersive Disney exhibits, this museum needs to be an emotive, powerful building, making a grave statement at an urban scale.”

Id.

In the following months, Cafesjian supported Papazian’s further development of his ideas. Cafesjian told Papazian not to be intimidated by the criticism and to defend his vision for the project. 11/19 AM Tr. at 15. In late 2004, Cafesjian sent Papazian to Armenia with David Hotson to become better acquainted with Armenian architecture and history.

See

Papazian Dep. Tr. at 37-38; PX-240. Cafesjian ultimately spent approximately $100,000 of his own funds to support Papazian’s development of plans for the museum. 11/23 AM Tr. at 68-69.

After refining his designs to address some of the concerns raised at the July

*60

2004 meeting, Papazian delivered a more extensive presentation at the second AGM & M Board of Trustees meeting, held on February 10, 2005.

See

PX-247. He came to the meeting with schematics of his updated design, and some of the materials had “Cafesjian Family Foundation” written in small print at the bottom because CFF had paid for his work. 11/19 AM Tr. at 15-16; 11/23 AM Tr. at 74-75; Papazian Dep. Tr. at 47. Hovnanian became extremely upset when he saw this, saying that if it was a Cafesjian project, then perhaps Cafesjian ought to pay for the entire thing. 11/19 AM Tr. at 16.

30

Cafesjian asked Hovnanian what design he preferred, but Hovnanian just repeated his persistent refrain: he did not want to be involved in the details.

Id.

at 17. Hovnanian was critical

of

Papazian’s presentation and interrupted it several times. Papazian Dep. Tr. at 40-42.

After the meeting, Cafesjian asked Papazian to revise his designs to address Hovnanian’s criticisms. Papazian Dep. Tr. at 43. Papazian complied, reigning in the more exuberant aspects of his design and creating a more restrained model in the hopes that it would be more palatable to the AGM

&

M Board.

Id.

at 43-44. It was Papazian’s understanding that Cafesjian supported his vision for the museum but that they had to galvanize the support of the Board in order to make it a reality.

Id.

at 54. Papazian believed that he had been selected as the architect for the museum and that there would not be competition from anyone else.

Id.

at 54-55. Papazian created a spiral-bound booklet with his refined proposals, which was presented at the next AGM & M Board meeting in July 2005.

See

PX-248; 11/12 AM Tr. at 52-54. However, the Board did not agree to move forward with Papazian at this time.

See

DX-125. After this, Papazian began to work on other projects.

See

PX-254.

2.

Deborah Devedjian

John Waters first met Deborah Devedjian at an Assembly outreach event in Philadelphia in 2002. 11/15 AM Tr. at 131. She attended the Assembly’s 2002 gala in Philadelphia and was reintroduced to Hovnanian.

31

Id.

at 131-32. Kaloosdian described Devedjian as “a very brilliant woman” who was articulate and had a background in business consulting.

See

11/10 PM Tr. at 29-32. When Waters posted the advertisement to hire an executive director for AGM & M, he asked Devedjian if she was interested in submitting her resume. 11/15 AM Tr. at 132. After the AGM

&

M Board failed to move forward with hiring a candidate after the July 2004 meeting, Waters contacted Devedjian separately to see if she would be interested in presenting a business plan to the Board.

Id.

at 133. Waters then invited her to give a presentation at the February 2005 Board meeting.

Id.

Devedjian made a good impression at the meeting, and the AGM & M Board agreed to hire her for a four-month trial period to prepare a preliminary business plan. 11/10 PM Tr. at 29-32; 11/16 AM Tr. at 81-82; 11/23 AM Tr. at 73-74; PX-340. Over the next four months, Devedjian conducted a series of focus groups and written surveys, interviewed over a hundred experts on various issues, and visited dozens of museums and galleries.

See

DX-115 at 3.

*61

The product of Devedjian’s diligence was a forty-four page business plan, which she presented to the AGM & M Board of Trustees at its third meeting on July 26, 2005.

See

DX-115. Devedjian believed the project should be marketed as “The Bank of Moral Courage & Armenian Memorial,” tying the historic Bank Building to the overall theme of the museum as a tribute to the survivors of the first genocide of the twentieth century.

See id.

Devedjian believed that the museum should focus on educating the public about the horrors of genocide and incorporate information about contemporary atrocities such as the Rwandan genocide and ethnic cleansing in Bosnia.

See id.

at 14. Rather than make the Bank a “collections museum,” Devedjian proposed an “experiential center.”

Id.

at 15. The overall cost for the museum was estimated at $215 million, including a $50 million endowment.

Id.

at 29. Devedjian’s plan called for a competition to be held among five internationally-renowned architects, with each architect offered $50,000 for submission of a proposal.

Id.

at 26-27.

The “Bank of Moral Courage” plan met with strong disapproval. Cafesjian thought the concept “was so much of a gimmick that [he was] ashamed to have any association with it.” 11/19 AM Tr. at 123. The only part of the plan that appealed to the AGM & M Board was the educational component. 11/23 AM Tr. at 80-81. The trustees were particularly shocked at the $215 million cost estimate, which they thought was far too high. 11/10 PM Tr. at 34; 11/15 AM Tr. 134-35. After some discussion, Devedjian revised the budget and reduced it to $185 million, but that figure was still perceived as excessive by the Board. 11/10 PM Tr. at 34; 11/15 AM Tr. at 134-35. There was no vote taken on Devedjian’s plan or continuing her engagement into a second phase.

See

11/23 AM Tr. at 84.

According to Devedjian, she continued to work on the project for the next few months, developing a six-month work plan and traveling to Armenia to conduct research and interviews.

See

PX-342. It is unclear whether anyone at AGM & M authorized this work. Hovnanian testified that he and Cafesjian took Devedjian to Armenia to meet with Armenian architects, but it is unclear when this occurred. 11/9 AM Tr. at 87. Waters believed that the AGM & M Board had decided after the July 2005 meeting that Devedjian should not be kept on the project. 11/23 AM Tr. at 84. AGM

&

M paid Devedjian a $50,000 retainer and made two additional payments of $50,000 each for her services.

See

PX-340. Devedjian did not work under a written contract, and ultimately there was a dispute over how much money AGM & M had agreed to pay her.

32

Devedjian believed that she had been engaged at a rate of $50,000 per month for an initial four-month engagement and two months of follow-up work.

See

PX-342. Including expenses, Devedjian believed she was owed a total of $342,380.66.

Id.

Waters believed that AGM

&

M had agreed to pay Devedjian only $120,000 plus expenses for her initial four-month engagement and never authorized additional work.

See

DX-124. AGM

&

M never paid Devedjian the extra amount she believed she was owed. 11/17 PM Tr. at 13.

3.

Financial Problems

Even before AGM & M could hire an architect or executive director, the cost of

*62

insurance and taxes on the Properties and other basic operating expenses were a significant drain on the corporation’s bank accounts. In addition, AGM & M took over from the Assembly the payment of bills for ANI, including office space and the salary for Rouben Adalian.

See

11/16 AM Tr. at 28-29; 11/23 AM Tr. at 28. In September 2004, the chief financial officer for GLC Enterprises, whom Waters and Cafesjian had charged with keeping track of AGM

&

M’s finances, sent a formal request to the Assembly’s finance director asking that the money being held for AGM & M be transferred so that tax bills could be paid.

See

DX-105; 11/23 AM Tr. at 69-70. According to its general ledger, AGM & M ended 2004 with just under $200,000 in its operating account, with net spending that year at nearly $750,000.

See

PX-401.

There were no real fundraising initiatives ongoing during this period. There were discussions about fundraising during the early museum planning committee meetings, and those discussions continued after the formation of AGM & M. 11/15 AM Tr. at 137; Vartian Dep. Tr. at 214-15. The basic concept for the fundraising plan remained fairly constant throughout these discussions: start with a “quiet” campaign targeted at major donors to secure a large percentage of the fundraising goal, then launch a public campaign. Vartian Dep. Tr. at 214-15. Before such a plan could be implemented, however, the Board had to agree on a development plan they could sell to donors. Therefore, without a decision by the Board about the size and scope of the museum and memorial, the fundraising plan had no traction.

Without new donors to replenish the coffers, AGM

&

M had to rely on existing donors to fulfill their existing pledges or agree to commit additional funds. Cafesjian had committed approximately $17 million in the Grant Agreement, but that money was tied up in the purchase of the Properties and did not provide additional cash for operating expenses. Anoush Mathevosian’s $3.5 million contribution had similarly been spent in the acquisition of the Bank Building. Hovnanian had pledged a total of $5 million to the project but had only partially fulfilled his pledge.

On December 21, 2004, Hovnanian’s foundation sent a $500,000 check to AGM & M to be used toward his $5 million commitment, bringing his total contribution to that point up to $1.25 million.

See

PX-504.

33

The letter accompanying the donation stated that the contribution “shall not be used for operating costs but be set aside to earn interest and be reserved for use in future capital improvements.”

See id.

at 1. That language was more restrictive than Hovnanian’s grant agreement, which required only that the funds be used “solely to support the development, renovation, and construction of the AGM

&

M.”

See

DX-4 at 1. Because of this inconsistency, Waters initially treated the check as a new restricted donation by Hovnanian. 11/23 AM Tr. at 16-17. But at the next AGM & M Board of Trustees meeting in February 2005, Waters questioned Hovnanian about it, and Hovnanian told him not to treat it as a new grant but to credit it towards his $5 million pledge. 11/23 AM Tr. at 17;

see also

11/15 PM Tr. at 42-43. Accordingly, Waters treated the check as restricted based only on the grant agreement and used it to defray operating costs. 11/23 AM Tr. at 17-18; 11/15 PM Tr. at 43. By September 2007, Hovnanian had contributed less than half of his $5 million pledge.

See

DX-544N.

*63

H. Tensions Increase Between Hovnanian and Cafesjian

Whatever tensions existed between Hovnanian and Cafesjian over Assembly affairs had sharply increased by the middle of 2005. The first sign of heightened tensions arose in May and June of 2005, when the Assembly and CFF co-sponsored a trip to Armenia for Minnesota Senator Norm Coleman. 11/23 AM Tr. at 89-91. Cafesjian had previously underwritten a series of congressional delegation trips to Armenia, and Cafesjian knew Senator Coleman from his long-time home state of Minnesota.

Id.

at 89-90. The Assembly worked with CFF to prepare for the trip and issued a press release.

Id.

at 90. Cafesjian asked Hovnanian to participate in the trip, but Hovnanian declined and also refused to allow Ross Vartian to attend in his place, sending a lower-level staff person instead.

Id.

Following the trip, Hovnanian felt that the Assembly had not been properly recognized during the trip and refused to issue a press release after-wards.

Id.

The tensions were so great that the Assembly did not even invite Senator Coleman to an advocacy event it held on Capitol Hill in the fall of 2005, and when Senator Coleman happened to stop by the event, he was not even introduced.

Id.

at 89-92.

But the most sensitive issue sparking tensions in 2005 was Cafesjian’s hiring of Ross Vartian. As noted above, Vartian had returned to the Assembly as Executive Director with the aim of grooming a replacement from the next generation who could serve the Assembly for a long period of time. By March of April 2005, his replacement had arrived in the form of Bryan Ardouny, who had previously worked for the Assembly as director of government affairs and who had extensive experience on Capitol Hill.

See

11/17 AM Tr. at 67-71, 117. As Vartian transitioned out of the role of Executive Director, Vartian began to have discussions with the Assembly in late spring of 2005 about his departure.

Id.

at 117; 11/22 AM Tr. at 41-42. Vartian sent a memorandum to Anthony Barsamian, who was then the Chairman of the Assembly’s Board of Directors, discussing various options, including staying with the Assembly in some capacity until he reached retirement age. 11/22 AM Tr. at 42. But there was no response to this memorandum, and Vartian concluded that Barsamian did not want to retain Vartian at the Assembly.

Id.

The Assembly did ultimately offer Vartian other positions to stay on in another capacity, but Vartian had decided that it was time to move on. 11/22 AM Tr. at 122. There were other factors involved in the decision as well. Vartian was not without detractors at the Assembly, and his leaving would allow the organization to have a fresh start with new leadership.

See

DX126.

34

Vartian was also interested in seeking new opportunities after spending nearly the entirety of his career with the Assembly.

Id.

at 44. At the same time, Vartian was dealing with a potential medical problem that made him desire a return to Michigan to be with his extended family.

Id.

Vartian informed Barsamian of his final decision on July 18, 2005.

See

DX-114. Vartian announced that his last day would be July 31, and he declined an offer from the Assembly to pay him the rest of his salary for 2005.

Id.

Vartian explained that he knew the Assembly had limited resources and that he would not accept something for nothing from a chari

*64

ty that he loved.

Id.

Vartian also indicated that he hoped to secure another position within six weeks.

Id.

As he had anticipated resigning, Vartian reached out to Waters to see if there were any opportunities with CFF and its activities in Armenia. 11/22 AM Tr. at 45. Waters had previously extended Vartian an open invitation to work for Cafesjian should he ever leave the Assembly.

See

DX-169. Vartian also considered working for other Armenia-focused advocacy organizations. 11/22 AM Tr. at 46. Cafesjian liked Vartian and felt that his services would be beneficial to his advocacy efforts, so he instructed Waters to offer him a job after Vartian had decided to resign from the Assembly.

See

PX-271 at 3; 11/19 AM Tr. at 18-19. Waters negotiated with Vartian, and by July 28, 2005, Waters told Vartian they were “99% committed” to hiring him.

See

PX-440 at 1-2. During the third AGM

&

M Board of Trustees meeting on July 26, Hovnanian had asked Cafesjian if he was trying to hire Vartian, but Cafesjian denied it since no formal offer had been made.

See

DX-169.

After leaving the Assembly, Vartian was formally offered a job with Cafesjian and became an employee of GLC Enterprises effective October 1, 2005. Vartian Dep. Tr. at 202; 11/22 AM Tr. at 49. Vartian was hired in part to engage in advocacy and develop a fundraising database for Cafesjian. 11/22 AM Tr. at 133-34. Vartian would also have responsibilities for media, politics, and strategic planning relating to the museum project. Vartian Dep. Tr. at 202; 11/22 AM Tr. at 49.

On August 19, 2005, Cafesjian wrote a letter to Hovnanian informing him that he had hired Vartian.

See

PX-265. Cafesjian wrote that he hoped that Vartian would remain actively involved with the Assembly in his new position.

See id.

When Hovnanian found out that Cafesjian had hired Vartian, he was outraged. 11/19 AM Tr. at 19. Hovnanian accused Cafesjian of stealing Vartian away from the Assembly and cancelled a $30,000 bonus that was to be paid to Vartian ($10,000 of which would have been paid by Cafesjian).

Id.

at 19-20; PX-267. Hovnanian also informed Cafesjian that “[a]s the [Assembly] and the CFF will continue to have an institutional relationship, whenever required, Ross may continue to interact with the [Assembly] only through our Executive Director, Brian [sic] Ardouny. In light of all of the circumstances, Ross must not be ‘actively engaged’ with the [Assembly] as you stated.” PX-267. It was also announced to Assembly staff that they should not communicate with Vartian.

See

11/22 PM Tr. at 43.

Van Krikorian testified that the Assembly was upset because Ross Vartian had been the face of the Assembly for decades, and Hovnanian felt that Cafesjian had been dishonest about his intentions. 11/18 AM Tr. at 40, 126. Bryan Ardouny testified that it was somewhat awkward having Vartian leave the Assembly to work for one of its trustees. 11/17 AM Tr. at 82. Vartian testified that no one had raised any concerns about his departure while he was still at the Assembly. 11/22 AM Tr. at 45; 11/22 PM Tr. at 62. Vartian testified that he left the Assembly voluntarily and was not coerced to leave by Waters or Cafesjian. Vartian Dep. Tr. at 200.

Waters met with Bryan Ardouny in October to discuss the mounting tensions between Cafesjian and Hovnanian.

See

DX-169. In a file memorandum summarizing the meeting, Ardouny wrote:

In terms of tension between Gerry and Hirair, John indicated that this has been mounting for years — when we [Cafesjian and Waters] first joined [the Assembly], they liked our money but didn’t want to listen to our ideas — we didn’t have a

*65

seat at the table. Hirair tells the story how he used to have VIP treatment in Armenia and now when he meets with President Kocharian he is asked why can’t you be like Gerry. I indicated that Hirair refuses to pay bribes and thus will not invest in projects/business ventures in Armenia. John indicated that Hirair had tried on two separate occasions and failed miserably. John also indicated that there were tensions with the AGMM project.

John indicated that it was too bad that Gerry and Hirair are at this point— because they are very similar individuals and in his entire career, John has never seen Gerry work closer with anyone. This was my opening to, per Anthony, tell John that Gerry should give Hirair a call directly. John was not sure if that would resolve anything and went on further to say that both Gerry and Hirair operate in the same field and if for the good of the cause Gerry has to leave that playing field than [sic] so be it.

DX-169.

Following this meeting, Cafesjian sent Hovnanian a letter in an effort to ease the tensions.

See

PX-268. Cafesjian wrote that he had been motivated to become involved in the Assembly in large part due to Hovnanian.

Id.

at 1. Cafesjian said that he did not know why Vartian had decided to leave the Assembly and said that neither he nor Waters ever encouraged him to leave the Assembly, and that Vartian was not offered a position until after he had resigned.

Id.

at 2-3.

On January 19, 2006, the Assembly’s Board of Trustees/Board of Directors (now merged into one board) held a meeting in New York. Waters attended the meeting, but Cafesjian did not attend.

See

PX-271. After Hovnanian was appointed chairman of the merged Assembly Board of Trustees and other officers were appointed, there was a discussion about the Assembly’s conflicts of interest policy. 11/23 AM Tr. at 88. All Board members were asked to ensure that they had reviewed and signed the conflicts of interest policy.

Id.

at 88-89. The Assembly’s conflicts of interest policy, which was admitted into evidence, requires all trustees to disclose any involvement in transactions or projects in which the Assembly has an interest.

See

PX-263. During the discussion, Waters felt that there were insinuations that he and Cafesjian had not complied with this policy. 11/23 AM Tr. at 88-89. Waters assured the Assembly Board that from the perspective of the Cafesjian Family Foundation, there were no conflicts and therefore nothing to disclose.

Id.

at 89. Waters left the meeting after a break. Cafesjian Dep. Tr. at 281; 11/23 AM Tr. at 89. Waters believed that Hovnanian was using the Assembly’s conflicts of interest policy as a means to attack Cafesjian personally. 11/23 AM Tr. at 98.

After learning of the accusations that had been made at the meeting, Cafesjian sent a letter to Hovnanian and the other members of the Assembly’s merged Board dated January 27, 2006.

See

PX-271. Cafesjian said that the insinuations about his motivations toward the Assembly are “outrageous and offensive.”

Id.

at 1. Cafesjian professed his belief that the Assembly “should be the most important organization in the Armenian community.”

Id.

at 2. Cafesjian then defended his involvement in Senator Coleman’s trip to Armenia and the hiring of Ross Vartian.

Id.

at 2-4. At the end of the letter, Cafesjian wrote, “It is my intention, at this time, to continue to be an advocate of the Assembly. But this letter will put you on notice that there is a limit to the abuse that I or my designee [Waters] will endure.”

Id.

at 4.

*66

Shortly after this letter was sent, two Assembly Board members contacted Waters to ask how the relationship between Cafesjian and Hovnanian could be repaired.

See

DX-503N; DX504N.

35

One suggested that a meeting be arranged between the two men, but no such meeting occurred, and Waters felt that the onus should be on Hovnanian to extend an olive branch. DX-504N; 11/23 AM Tr. at 98-99. In fact, outside the context of settlement relating to this litigation, the July 2005 AGM & M Board meeting was the last time that Hovnanian and Cafesjian appeared in the same room. 11/23 AM Tr. at 84.

Hovnanian finally responded to Cafesjian’s letter on March 10, 2006.

See

PX-273. “Ever since your letter dated January 27, 2006,1 have been trying to respond as clear as I possibly can without hurting your feelings.”

Id.

Hovnanian expressed disappointment that Waters had walked out of the January 19 meeting and said he would prefer to meet Cafesjian alone in New York City to discuss his letter.

Id.

Hovnanian also brought up the issue of Ross Vartian’s hiring again. “The accusation that we let Ross Vartian go is inaccurate.”

Id.

Hovnanian then suggested that Vartian had been improperly lured away, ending the letter, “I believe an honest review of your own Foundation’s behavior during this time is in order.”

Id.

Cafesjian understood this as an attempt by Hovnanian to drive a wedge between Cafesjian and Waters. 11/19 AM Tr. at 24.

The following week, Kaloosdian wrote an email to Bryan Ardouny about the conflict-of-interest issues.

See

DX-128. “This is not between Hirair and Gerry dispite [sic] what Anthony [Barsamian] says. It is between Gerry/John and the [Assembly].”

Id.

On April 3, 2006, Hovnanian sent out a list of proposed committee assignments for the Assembly’s merged Board of Trustees.

See

DX-129. Cafesjian and Waters were identified simply as members at large, and they were the only ones (out of 20 members) who did not have either an officer position or a committee assignment.

See id.

at 7-8. Cafesjian and Waters had previously served on Assembly committees. 11/17 AM Tr. at 126.

I. Cafesjian and Waters’s Final Attempts to Move the Project Forward

After the first three AGM

&

M Board meetings ended without agreement on a business plan or an architect, Cafesjian and Waters felt an increased urgency to move the project forward. On September 9, 2005, Waters sent an email to the AGM & M Board members proposing a meeting in late September to discuss the proposals that had been presented to the Board for consideration.

See

DX-120. Waters noted that it was important that the Board reach “agreement on the scope, budget, management, and timing for the next phase.”

Id.

Hovnanian replied three days later with the following response:

I received your memo of September 9, 2005 regarding a proposed AGMM meeting. I personally do not think it is necessary for me to attend to discuss budget, management, and details of the next phase. I have not been involved in those things up to this point and have expressed a desire not to be involved with them. I continue my support and belief in this project.

DX-120. No meeting was held in the fall of 2005.

In October 2005, Waters circulated to the AGM

&

M Board a draft letter to be

*67

sent to Deborah Devedjian regarding her termination.

See

DX-124. Based on the feedback received, Waters did not send the letter to Devedjian at that time. Waters sent another draft letter to the AGM & M Board in February 2006.

See

DX-124. The language in the letter stated that “I [Waters] have been asked to formally confirm that [the] Board has decided not to continue beyond Phase I of the engagement with [Devedjian’s consulting firm].”

Id.

The letter also included language stating that AGM

&

M’s position is that Devedjian had been paid in full for her services.

Id.

In his email to the AGM

&

M Board with the draft letter to Devedjian, Waters also implored the Board to focus on fund-raising:

It is important to the Board, the community, and to the success of the project, that there is a solid demonstration of financial commitment to the project before any significant new expenditures are made or committed to. Project expenditures in areas other than fundraising will be postponed until such time that sufficient commitments have been made.

DX-124. Waters indicated that he was in the process of completing a “communication piece” that could be used to target potential major donors.

Id.

Three days later, Kaloosdian replied to Waters’s email, writing, “I must confess that I am having difficulty understanding the position the AGMM is now in as well as the request that you are making.” DX-125. Kaloosdian restated several opinions that he had previously raised in telephone conversations with Waters and Cafesjian:

In those conversations I said that the second phase plan was premature for the projected cost had escalated to $185,000,000 and that it would be unwise to start distributing the plan to an “inner circle” when we ourselves had not determined that the price tag was feasible as well as other considerations which would have cost/budget implications for which I thought the AGMM was not ready to commit.

Further, I stated that I thought that the misunderstanding with Deborah Devedjian must be resolved and that due to her skillful and successful effort in resurrecting the AGMM project and in effect becoming the Face of the project that it would be a mistake to not have her launch a second phase for the sole purpose to determine the ability of the community to finance such a sum. Further that if she found that a $185,000,000 project was not realistic for her to come back with a figure based upon a critical analysis of specific data and meetings to determine how much we could reasonably afford. That it was our responsibility to determine a doable budget whatever that cost might be. When our calls ended I did not have reason to believe that you disagreed with my recommendations.

Also, you state that you are moving ahead in another direction to target major donors. How are you going to explain Deborah’s absence from that effort? Who else now has the credibility to pick where she left off?

DX-125. Kaloosdian said he had received calls from a number of people asking why nothing had happened since Devedjian conducted meetings on the project the previous year. Kaloosdian felt that Devedjian was the key to reviving enthusiasm and excitement for the project, and he wrote, “I do not feel a confrontation with Devedjian is the best way to restart the train.”

Id.

Kaloosdian also expressed his concerns about the design plans submitted by Edgar Papazian:

*68

Also, are you going to show major donors the “Papazian” schematic which if I remember correctly was not approved in NYC? I continue to feel that plan will have great difficulty being approved by Washington, DC review boards. What assurance do we have that the plan has any chance of being accepted in possibly the strictest review area in the country? What happens if we move ahead and much later that “Papazian” plan is deemed unacceptable? Have other issues such as “Jose Six-Pack”, and the name of the complex been resolved? There are other expressed yet unresolved concerns.

Id.

Kaloosdian ended his letter by asking for copies of minutes or summaries from the most recent AGM & M meetings. Kaloosdian said he did not know what negotiations had occurred between Devedjian and Waters, but he believed that there may have been “some misunderstandings which communication could have resolved. Please understand that I want to be helpful but the AGMM process has not been Board driven to date and more information and disclosure is needed if it is going to be so.”

Id.

On February 8, 2006, Hovnanian weighed in with this response:

In response to your email dated February 3, 2006 regarding AGM & M and [Devedjian’s consulting company]. My position is whatever agreement verbal or in writing that had transpired between Gerry Cafesjian and Deborah Devedjian should be adhered to verbatim.

PX-339.

Hovnanian’s email was sent just hours after Cafesjian had formally responded to Kaloosdian’s email, copying Hovnanian and Adalian.

See

PX-339; PX-178. “Your frustration is understandable, and shared,” he wrote. PX-178 at 1. “It has been difficult to find the right way to move forward.”

Id.

Cafesjian agreed with Kaloosdian’s opinion that AGM & M is not as “Board driven” as it could be, noting that Mathevosian was not really able to participate (because of her health) and that Hovnanian wanted limited involvement, as did Cafesjian.

Id.

Kaloosdian disagreed with this assessment because he was generally available and Rouben Adalian had been representing Mathevosian’s interests. 11/10 PM Tr. at 49-50. Cafesjian continued:

As the major contributor to the project, as chairman of the board and the controlling voting member, I am looked to for leadership. It is not a role that I want, but I have a sense of duty to fulfill and will not shy away from it. My goal is to push the project forward....

We have been looking for an individual, or a team, that could drive this project forward. Deborah Devedjian was tried as one potential or partial solution. The 120-day engagement to produce a preliminary business plan was to be a test of her capabilities, her passion, and her ability to interact and work with the Board. Unfortunately, she has failed the test.

Is Deborah smart? Probably. But she was not smart enough to know that directives from the Board are more important than her opinion.... Is Deborah hard working? Perhaps. But do not confuse nervous high energy with hard, effective work.... Did her presence and her activity help to rekindle interest in the AGM & M project? Of course.... But it would be a mistake to ascribe the communities’ enthusiasm to Deborah. Yes, Deborah became “a Face” for the project, but she is not “the Face.” She can be replaced. It would be a serious mistake to allow Deborah to continue forward.

*69

I listened carefully to your concerns when we spoke in October, and based upon those concerns, delayed sending the proposed letter. We should not, we cannot, wait any longer.

PX-178. Cafesjian went on to discuss the need to focus on fundraising:

I agreed with you in October, and I continue to agree with you, that the next step is to determine what level of financial support there is in the community. The cost of the project, and/or the timing and phasing of the project, can be adjusted to correspond to the level of support.

We propose to start by approaching targeted major donors. I have instructed the staff of the Cafesjian Family Foundation to produce a presentation booklet. I have been in contact with several individuals that I think could provide both leadership and invoke additional confidence in the project. When these are in place, we propose to begin contacting the targeted major donors.

I am endorsing the selection of Papazian as the project design architect. His design is powerful and his passion runs deep. Both more than make up for any lack of experience, which can easily be hired in support. The proposed design may be controversial for DC, but we will not know how difficult it will be to get approval until the design is submitted. If modifications are needed, they can be made later.

Id.

Cafesjian closed by saying that he would send out a copy of the package once it is prepared. “Meanwhile, John Waters will be available to answer any questions or discuss options.”

Id.

Kaloosdian testified at trial that Cafesjian often referred inquiries to Waters and that Cafesjian was not always responsive in conversation. 11/10 PM Tr. at 45-46; 11/12 AM Tr. at 149-50. Kaloosdian described him as “sphinx-like.” 11/10 PM Tr. at 45-46.

The record does not reveal any additional discussion about the draft letter to Devedjian. On April 25, 2006, Waters sent the letter to Devedjian, with very little changed from the previous draft.

See

PX-340. That same day, Waters distributed materials to the AGM & M Board in advance of a meeting to be held the following day by conference call.

See

PX-182. The materials included a proposed agenda, a draft prospectus to be shown to major donors, a major donor solicitation plan and list of prospects, a proposed structure for the management of the project, a proposal for an honorary committee, a senior staff recruiting proposal, and a financial overview for 2005 and 2006.

Id.

The fundraising plan called for an initial silent phase aimed at $5 million donors with a target of $75 million, followed by a public phase of solicitation with a goal of raising an additional $75 million.

Id.

at 14.

The financial overview distributed by Waters stated that as of April 25, 2006, AGM & M had expended just under $20 million, approximately $17.3 million of which had been used to acquire real estate, with the balance being spent on property maintenance (taxes, insurance, etc.) and operations.

See id.

at 18. In 2005, AGM

&

M had spent $190,000 on professional fees, $3500 on administration, $37,500 on insurance, $385,000 on property-related expenses, and $215,000 on behalf of ANI, for a total of $831,000.

Id.

In 2006, AGM & M had spent $100 on professional fees, $2500 on administration, $39,000 on insurance, $220,000 on property-related expenses, and $16,500 on ANI, for a total of $278,500.

36

*70

Id.

Waters estimated that AGM & M would incur an additional $423,500 in expenses during the rest of 2006.

Id.

Waters stated that as of April 24, 2006, AGM & M had approximately $35,000 in its cash account and approximately $556,000 in its endowment account.

Id.

A week before this report was sent, Waters had transferred $50,000 from CFF’s account to cover AGM & M’s operating expenses.

See

DX-206; DX-207; 11/23 AM Tr. at 120-21.

J. The April 26, 2006 Meeting of the AGM & M Board of Trustees

On April 26, 2006, the AGM & M Board of Trustees held its fourth meeting, via telephone conference.

37

The participants were Cafesjian, Waters, Hovnanian, Kaloosdian, and Adalian, who was representing Anoush Mathevosian.

See

DX-133 at 1. The first issue discussed was composition of the Board, the status of successor trustees, and voting requirements.

Id.

It was agreed that Cafesjian had three votes based on his level of contributions and that 80% approval was required for passage of resolutions.

Id.

Kaloosdian proposed that decisions be reached by consensus

38

; he also suggested that Anoush Mathevosian’s representation by Adalian be formalized if necessary.

Id.

The discussion next turned to the issue of Deborah Devedjian. Kaloosdian asked about the status of relations with her. Waters reported that he had not spoken to her in about a month. DX-133 at 1; PX-183 at 1. Kaloosdian and Hovnanian wanted to resolve the dispute with her to avoid controversy before the fundraising campaign began, although Cafesjian did not want to pay her more than he believed she was owed. PX-183 at 1-2; DX-133 at 1-2. Attention then turned to language Waters used in the letter to Devedjian: Hovnanian wanted to know what Waters meant when he wrote that “the Board decided” to end her services. PX-183 at 2. Hovnanian felt that because Waters and Cafesjian had negotiated with Devedjian that they should not try to speak on Hovnanian’s behalf.

Id.

Cafesjian then pointed out that Hovnanian had agreed to enforce whatever agreement had been reached, but Hovnanian said that because he did not know what negotiations took place, he did not want to be included in whatever “the Board decided.”

Id.

Waters then explained what happened during the negotiations with Devedjian and said that he and Cafesjian had consulted an attorney for guidance.

Id.

at 2-3. Kaloosdian said that Cafesjian could have taken action as the president of AGM & M and made legal decisions with counsel without stating that the Board had made a decision; Kaloosdian said it was important to understand when the Board was acting and when Cafesjian was acting in his capacity as President and Chairman of the Board.

Id.

at 3. Kaloosdian proposed that Waters and Devedjian have a face-to-face meeting; Waters reported that he had made five

*71

attempts to contact her and that she had repeatedly rejected his requests for a meeting.

Id.

Hovnanian was still concerned about the use of the word “Board” to describe actions that he had not approved, and he told Waters not to include him in that term unless he had explicitly voted for something. PX-183 at 3. Cafesjian apologized for the use of the term and offered to send a revised letter to Devedjian, but Hovnanian said that was unnecessary.

Id.

at 3-4.

The next topic of discussion was Edgar Papazian. Hovnanian stated that he liked Papazian as a person but had a different view of his architectural designs: “I do not like it and everyone I showed it to thinks it looks like a big penis sticking right out of the middle of the building.” PX-183 at 4.

39

Hovnanian acknowledged that Cafesjian liked Papazian’s design but said, “if you are going along with that I am not in favor of that, just let the record show it.”

Id.

Waters defended the Papazian proposal, noting that his designs would evolve as the project moved forward and could be scaled back to meet the concerns raised by the Board.

Id.;

DX-133 at 2. Hovnanian asked what had happened to the RFQ process and the monies that were spent on that, and Waters recounted the history, explaining that the only payments that had been made were to Concord Partners to organize the planned competition and to Gallagher & Associates for exhibit design work. PX-183 at 4-5; DX-133 at 2.

The issue of finances was then brought up, with Hovnanian requesting detailed reports from Waters about the finances of AGM

&

M.

See

PX-183 at 5. Hovnanian said that he had previously indicated a willingness to solicit one major donor he knew but that he refused to show him the Papazian design.

Id.

Kaloosdian added, “I had made my position clear. I have done it twice before and I will do it again and also in writing. I do not think that design has one chance in a thousand of going through the Washington [review] process .... and, I repeat, to push that forward at this point and show that to prospective donors, I think it will turn them off.”

Id.

“Secondly,” he added, “I do not think that' plan is subject to modifications. I think it is going to need too drastic of a change and it will be a tremendous negative down the line and allow people to be critics of the project.” M

40

Kaloosdian then hedged slightly, saying to Cafesjian, “if you want to move on it [that is okay], but I just don’t buy it.”

“You have the votes to block it,” Cafesjian replied.

“I do not want to block anything,” said Kaloosdian.

“That’s not what I mean. I mean, the two of you are against it; it’s not going to happen.” Cafesjian continued, “The question is, we have a choice now of starting all over again and getting an architect or going ahead with another drawing to get fundraising — take your pick.” PX-183 at 5. Frustrated with the lack of agreement, Cafesjian brought up the issue of the reversion clause, noting that they had to make progress on the project or else the property would revert to him.

See id.;

11/15 AM Tr. at 123-24.

“What property?” Hovnanian asked.

*72

“The ones I paid for,” Cafesjian answered. “The other reverts back to the Assembly.”

Waters corrected him. “No, the Bank Building goes back to Gerry and Anoush.” Hovnanian asked if that was in the original agreement, and Waters responded that it was in the grant agreements. PX-183 at 5. Kaloosdian asked if Waters could put these documents together because he had not been at the gala in 2003 when they were signed and did not have a copy of them.

Id.

at 5-6. Waters then clarified that he did not believe that Mathevosian had a reversionary interest.

Id.

at 6.

41

Waters then said that it was time to test the appetite of the community, and he wanted to put together a communication piece for that purpose. PX-183 at 6. “Now if we raise $50 million or $75 million in six months and we build confidence from those pledges that we are in the position to authorize the expenditures of those dollars then we would go forward [with development.] The timing would be driven by the pledges. If we spend six months and can’t raise $20 million, then we will have to come back and see our options, no project, small project, or — say we raise a smaller amount, same kind of question.” Kaloosdian was pleased with this approach, noting that he was skeptical the community would support a $150 million project.

Id.

Cafesjian noted that there was enough friction among the Board members that the project might not go smoothly regardless of the budget. PX-183 at 6. Kaloosdian said, “I do not see any friction. I think we should have honest and candid discussion.”

Id.

“Good,” came Cafesjian’s reply.

Hovnanian then went back to the issue of the reversion clause. He said he thought that the agreements had been signed in a rush and that they had agreed that changes could be made later. PX-183 at 6-7. Waters said he did not recall any changes that were supposed to be made.

Id.

at 7. Kaloosdian said they should review the original documents to make certain that there were no omissions.

Id.

The meeting concluded with a discussion of proposals for an honorary committee of distinguished Armenian Americans to serve the museum. DX-133 at 3.

The minutes of the meeting taken by Adalian include the discussion about fund-raising, during which Hovnanian inquired about a likely fallback position in the event that phase I targets were not reached, and Kaloosdian proposed considering the renovation of only the Bank Building as one option. DX-133 at 2. At trial, Kaloosdian did not recall ever suggesting that the museum project be limited to the Bank Building. 11/10 PM Tr. at 74. However, the Court credits Waters’s testimony that whenever the issue of budget was brought up, there was always a discussion about proceeding with a smaller project or smaller museum footprint. 11/23 AM Tr. at 103. Kaloosdian also testified that he was surprised to learn during this meeting that AGM & M was nearly out of money. 11/12 PM Tr. at 143.

On May 5, 2006, Adalian — who had said little during the Board meeting — wrote a letter to Waters about Anoush Mathevosian’s role in the museum project.

See

PX-185. Adalian wrote this letter on his own and not at Mathevosian’s request. 11/16 AM Tr. at 62; Mathevosian Dep. Tr.

*73

at 26-28. “It is my understanding to date that I am not filling in for Anoush as much [as] attending the Board meetings because she asked me to represent her and to communicate with her about the AGMM process.”

Id.

at 1. Adalian noted that Mathevosian’s health conditions limited her ability to contribute meaningfully to the project and that if her health does not improve, there may need to be further discussion about her representation on the Board.

Id.

Adalian also said that “[o]ther than the pace of progress, Anoush has had no reason to be concerned about AGMM or of her expectations of AGMM.”

Id.

at 2. Adalian’s letter raised the issue of naming rights for Mathevosian for the interior space in the Bank Building, which Adalian believed had been agreed to in the early days of the project.

Id.

Then, Adalian addressed one final issue:

Lastly, since Anoush made her original donations to the Armenian Assembly of America, the question of reversion was not an issue. But as the matter has been raised, even in the unlikely possibility of discontinuing the AGMM project, it is only proper that Anoush’s interest in AGMM be treated with consideration equal to the provisions made by other founding donors.

PX-185 at 2. Adalian explained at trial that he believed, based on the discussion at the April 2006 meeting, that there was a possibility that the project would not come to fruition. 11/16 AM Tr. at 62-63. Mathevosian testified that she never asked Adalian to request a reversionary interest. Mathevosian Dep. Tr. at 27-28. Waters never responded to this letter. 11/15 PM Tr. at 106.

On May 23, 2006, Kaloosdian wrote a brief email to Waters reflecting on the recent meeting.

See

PX-186. He wrote:

I felt that the AGMM meeting on April 25th [sic] was quite helpful in that it gave all of us a base from which to move forward. I was encouraged by the openness, candor and discussion which occurred. We must strive to continue in the same spirit in order to maintain whatever momentum we acquired during the course of the meeting. Thus, I would like to respectfully request that minutes of the meeting be distributed as soon as possible.

PX-186. Waters disagreed with Kaloosdian’s view of the meeting as candid and open. 11/15 PM Tr. at 6.

K. “Competing Visions” and the End of Cafesjian and Waters’s Tenure as Officers ofAGM & M

Waters and Cafesjian had considered the April 2006 meeting to be an opportunity to bring all of the prior conflicts about the project to a head, but by the end of that meeting, they had concluded that the Board was not likely to ever reach agreement about how to build the museum. 11/15 PM Tr. at 10-11. Although Hovnanian and Kaloosdian had said that Cafesjian was in charge, Cafesjian did not believe he had carte blanche to build the museum to suit his own ideas. 11/23 AM Tr. at 103. Rather, Cafesjian felt constrained by the 80% vote requirement in the By-Laws, and the general disapproval of Hovnanian and Kaloosdian meant that Cafesjian’s vision would not prevail.

Id.

at 104. Kaloosdian testified that he never said he would vote against the Papazian proposal if it were put to a vote. 11/10 PM Tr. at 67. But Cafesjian could hardly be faulted for assuming that Kaloosdian would vote against it. Moreover, even if Kaloosdia

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