Two survivors of the Nazi Holocaust (search) have sued the commission created to help them recover financial losses from World War II, charging the organization with corruption, inefficiency and what they call an unholy alliance with the insurance companies who owe them money.

Last month, Manny Steinberg, 78, and Jack Brauns, 79, who were young men during the Holocaust, launched the first lawsuit against the International Commission on Holocaust Era Insurance Claims (search) in Los Angeles Superior Court.

“My father said, as we were taken away in a cattle car to the concentration camp, that 'should anything happen, we have insurance,’” said Steinberg, who spent six years in the camps, and claims he has spent decades trying to get his father’s policy paid by Italian insurance giant Assicurazioni Generali (search).

The lawsuit alleges that ICHEIC failed in its mission to help him get the policy paid, and instead worked with Generali to reduce or dismiss survivor claims across the board.

“They are working together — the insurance companies with the commission — to defeat the claims and diminish the claims, rather than helping them process the claims and getting them full value,” said Bill Shernoff, the plaintiffs’ attorney, who is also overseeing 20 other federal cases against foreign-based insurance agencies holding Nazi-era policies.

“My clients and a lot of survivors don’t feel that the process is a fair one,” he added.

Generali insists that Steinberg's father’s policy didn’t exist. It and commission members flatly deny charges of collusion.

“The lawsuit is baseless, misleading and does not reflect the reality that thousands of individual claimants … have and will continue to be paid and offered generous amounts through the commission,” said Christopher Carnicelli, president of Generali in New York.

“It is unconceivable to me that I would ever work against the interests of the survivors,” said Roman Kent, a commissioner and survivor of the Auschwitz concentration camp.

ICHEIC was created in 1998 through an agreement signed by representatives of international Jewish organizations, six European insurance agencies and U.S. insurance regulators. Millions of dollars in funding from the insurance companies went to set up the commission, with the money earmarked for claims payments, humanitarian purposes and the commission’s operating expenses.

Critics of ICHEIC contend that since the commission gets its funding directly from the companies, it has a built-in disincentive to go to bat for survivors.

“The money that is coming in to run the commission is coming from the insurance companies, and everyone knows that the insurance companies are interested in paying as little as possible,” said Shernoff, whose plaintiffs allege that the commission has failed even to press the companies to release the names of their Nazi-era policyholders.

The commission has for years been hobbled by bad press, lackluster statistics and negative grades from Congress, which has no formal oversight authority but has held several hearings over ICHEIC complaints.

Critics say the structure of the commission has made it ineffective as an independent body, while others point out that while it has reportedly spent upwards of $40 million on administrative costs, it has only overseen $35 million in payments to survivors.

“[The commission] was supposed to function more rapidly as an alternative to court cases,” said Harvey Rosenfield, director for the Foundation for Taxpayer and Consumer Rights (search) in California, which helped file the lawsuit.

Instead, Rosenfeld said, “They have been spending more money paying their own bureaucrats than the claims of the Holocaust survivors.”

Lawrence Eagleburger (search), former secretary of state for President George H.W. Bush and the paid chairman of the commission, testified last month before the House Government Reform Committee that ICHEIC is doing the best it can to facilitate payments, put pressure on companies to disclose their policyholders and help survivors and their heirs connect with the companies that owe them.

“In short, we did everything we could possibly think of to help potential claimants, all without cost to them,” Eagleburger said during the hearing. “We are all focused on getting claims processed as quickly, effectively and fairly as possible.”

Eagleburger’s office declined to comment on the lawsuit, but his testimony revealed that many of the inquiries that come through his office do not have proper paperwork, like proof that a policy exists.

Nonetheless, the commission has listed close to 500,000 names of Nazi-era policyholders on its Web site in hopes that those people will come forward and collect their payments.

Still thousands of names have yet to be released by insurance companies who have the information, say critics, and two congressional lawmakers, Rep. Mark Foley, R-Fla., and Rep. Henry Waxman, D-Calif., each have introduced legislation to permit states to force insurance companies to release their lists.

“The mentality of these companies is to hold onto the money,” said Rabbi Abraham Cooper, associate dean of the Simon Wiesenthal Center (search) in Los Angeles. “It’s been nickel and diming and double-dealing all the way.”

The Associated Press contributed to this report