Record $10-Million Death Benefit Paid in Christensen Case : Lawyers, Others Contest Award to S&L; Owner’s Consultant

Prudential Insurance Co. has paid $10.5 million--its largest death benefit ever--on a policy insuring North America Savings & Loan Assn. owner Duayne D. Christensen, who was killed in a Jan. 16 car crash just hours before regulators seized his troubled institution.

The payment, however, is being withheld from the policy’s sole owner and beneficiary, Janet F. McKinzie. Prudential placed the money Wednesday in the custody of the U.S. District Court in Los Angeles, which has frozen all assets owned by Christensen’s estate and by McKinzie.

Eleven individuals, including McKinzie and Christensen’s three children, as well as the Federal Savings and Loan Insurance Corp., claim they are entitled to receive all or part of the payment.

The FSLIC, as receiver for the Santa Ana institution, has sued McKinzie for allegedly aiding Christensen in defrauding North America of more than $40 million. State regulators have called it the biggest fraud case in state S&L; history.

McKinzie was Christensen’s business manager and personal confidante. Besides being the beneficiary of the insurance policy, she is named as the sole heir and beneficiary of his will and trust, both of which were created three days before his death.

Meantime, The Times has learned that McKinzie, who operated a real estate mortgage company in Elk Grove and worked as a consultant for North America before Christensen’s death, recently established real estate and mortgage consulting companies in Laguna Hills with her sister, Rebecca S. Thrall, and an apparently unrelated person, Rick Cochran Swank.

None of the three have responded to repeated efforts over the last two weeks to contact them. But one of McKinzie’s lawyers, Michael Essmyer of Houston, confirmed the existence of the new business activities.

McKinzie’s lawyers are trying to stall the FSLIC’s lawsuit, claiming that the government is using the civil suit to obtain information about possible criminal actions. They contend that the FSLIC is violating McKinzie’s constitutional privilege against self-incrimination in the “anticipated indictment and criminal proceedings.”

The FBI has been investigating bank fraud and embezzlement claims arising out of the scandal.

Prudential had withheld payment of benefits on the policy, which was issued May 17, 1986, while it attempted to determine if Christensen’s death was accidental or a suicide.

If his death had been ruled a suicide, Prudential would not have been required to pay the $10.5 million. Instead, it would have returned to McKinzie or the court only $121,000 in policy premiums paid last year.

“After we had conducted an investigation and consulted with experts, we were unable to determine conclusively the reason for his death,” said Joseph A. Vecchione, Prudential’s vice president for public relations. “And its our first responsibility as an insurer to pay claims.”

Payment on the $10.5-million policy represents the first substantial amount of money available from either Christensen’s estate or McKinzie. David L. Ray, a court-appointed receiver hired to determine what has happened to the S&L;’s assets, said he has been able to trace only about $300,000 so far.

North America’s reported assets declined from $221 million at the end of 1986 to $199.5 million at March 31, leaving it with a negative net worth of $24.8 million.

“This gives us something to fight about,” said William Reifman, a Los Angeles lawyer with Mayer, Brown & Platt, which is representing the FSLIC.

Prudential, the nation’s largest life insurance company, normally keeps its policy decisions secret, Vecchione said. But information released in court filings earlier this year made the final decision on Christensen’s policy a matter of public record.

The company deposited with the court a total of $10,512,455, which Vecchione said was the largest death benefit ever paid by Prudential. Of that amount, $472,002 represented accumulated interest, and $40,454 was a rebate of a portion of a prepaid premium.

By depositing the money with the court, which was to put the funds in an interest-bearing account, Prudential essentially acknowledged that it owes the money, but it is not sure to whom.

Besides the FSLIC, McKinzie and the three Christensen children, others who are claiming a stake in the policy proceeds are two of McKinzie’s previous lawyers, former brother-in-law Jerry Graham and H. Vincent Jacobs, both of Sacramento; three California women, Jo Ellen Post, Lois C. Harding and Thelma Mickelson; David Ray as receiver for North America Savings, and Douglas Gehweiler as special administrator of Christensen’s estate, which is being probated in Nevada.

The two lawyers and the three California women want a combined total of about $5 million for their efforts on behalf of McKinzie. According to Essmyer, Graham is attempting to obtain a 40% contingency fee for representing McKinzie in January and February, when regulators were investigating North America Savings’ financial records.

Graham could not be reached for comment.

Christensen died about 6:30 a.m. on Jan. 16 when his 1985 Jaguar crashed into a bridge support in the middle of a wide median on the Corona del Mar Freeway. A month earlier, he had been ordered by state regulators to come up with $6 million in new capital for his ailing institution by noon on the day that he died.

In early May, the Orange County coroner’s office classified the cause of Christensen’s death as “undetermined.” A two-month-long inquiry into his psychological profile left investigators with enough evidence to support a finding of either suicide or accidental death but not enough evidence to tip the scales either way, Deputy Coroner James D. Beisner said at the time.

McKinzie, meanwhile, recently joined her sister, Thrall, and Swank in the new Orange County business ventures.

In May 29 filings with Orange County court clerk, McKinzie and Swank are listed as proprietors of United West Consultants, Thrall and Swank are listed as proprietors of United West Mortgage & Management and all three are listed as proprietors of United Properties Services. In addition, Swank is listed as sole proprietor of United West Construction.

All four companies list the same business address--a sparsely furnished set of rooms in a building near the front gate of Leisure World, the gated retirement community. And all three share the same “home” address--a slot at a private post office box rental company in Newport Beach.

Essmyer said that McKinzie “has a lot of people who are legitimate real estate people asking her to help them determine fair prices for real estate and to look for buyers.” He said she was consulting only with other real estate agents and working under the license of her former husband, Kenneth McKinzie.

Thrall had overseen North America Savings’ lending activities in Alaska.

North America Savings posted a $23.2-million loss for the first quarter, raising its total losses in the last five quarters to $33.4 million. The S&L; has become a new, federally chartered institution with new managers hired by federal regulators.

Times staff writer Jane Applegate contributed to this report.