Two years ago, at the annual Conference on Jewish Material Claims Against Germany board meeting, directors representing the World Jewish Congress, the Jewish Agency and others failed in their efforts to introduce meaningful reforms to the organization.
This week, the annual board meeting will take place in New York in the wake of the crude punitive parting of the ways with ombudsman Shmuel Hollander and the subsequent explosive allegations contained in his letter to the directors.
As I finished writing this column, I learned from reliable sources within the Claims Conference that, although the New York State Office of the Attorney General does not confirm ongoing inquiries, it has in fact launched a probe into the management of the Claims Conference.
An investigation of the Claims Conference by an outside law enforcement body would disgrace the Jewish community and desecrate the memory of victims of the Shoah and survivors. The responsibility for this rests exclusively with the arrogant Claims Conference management, which ignored repeated warnings that dispersing billions of dollars of sacred restitution funds necessitated impeccable governance, transparency, accountability and greater oversight.
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Over the past decade, the leadership failed to provide adequate oversight for the funds that were entrusted to them. Their refusal to accept accountability or even commission a genuinely independent audit and review of all the operations of the organization after the greatest theft in Jewish organizational life was a scandalous dereliction of responsibility.
The disclosure by Hollander that Claims Conference president Julius Berman told him explicitly that the decision not to extend his contract was due to his 2013 report, which was a scathing indictment of the organization’s management, may have been the final straw which induced the New York attorney general to intervene.
It is also symptomatic of management behavior that it sidelined the controversial “ombudsman” issue to the last item on the agenda of this week’s board meeting, assuming that the vast majority of directors would already have departed by that time.
However, the latest scandalous revelations will oblige the board to belatedly institute long overdue reforms, failing which they will be confronted with grave questions relating to their fiduciary responsibilities.
In line with this, I suggest that directors consider the following questions:
1) New York attorney general’s investigation of the Claims Conference
• Has the attorney general initiated inquiries with the Claims Conference?
• If so, have the Claims Conference, its legal counsel and other personnel been instructed to fully cooperate with the Attorney General’s Office?
• Why were directors not immediately informed of this serious development?
2) Exposure of fraud
Initially president Julius Berman referred to a theft of $350,000. Subsequently we were informed that it was $7 million. It then transpired that it was in excess of $57m.
• Is it true, as former ombudsman Shmuel Hollander stated, that the amount of this fraud has now risen substantially beyond the $57m.?
• If additional funds were purloined, why were board members not formally advised?
• Were board members aware that executive vice president Greg Schneider and Berman had both been tipped off about the fraud eight years prior to its “discovery” but failed to adequately follow up?
• Is it true that Schneider received a bonus payment for “discovering” the fraud? If so, was this authorized by the board?
• Was the board informed prior to the decision not to renew Hollander’s contract as ombudsman?
• Is the board concerned about Hollander’s disclosure that Schneider “perceived him as a hostile element whose actions must be blocked” and further attesting that “punitive actions towards my office quickly followed. ...Relevant information was withheld from us and formal obligations were violated, and staff members in the organization even received an instruction at one point not to reply to inquiries from us without approval from New York. ...This instruction constituted a gross violation of the mandate which empowers the ombudsman to receive replies from any staff member ... as established in the mandate approved by the board.”
• Did the board seek the services of a genuine ombudsman with authority or merely employed him as a “fig leaf”?
4) Berman’s conflict of interest
• Once it became apparent that Berman had been charged to investigate the anonymous letter warning of the fraud and had referred the matter to his law firm, did Berman recuse himself from deliberations due to his conflict of interest?
• Did the board investigate whether there were potential legal grounds to file for gross negligence against Berman or his law firm for failing to discharge their duties?
5) Term limits
Berman has led the organization without challenge for 13 years. He is chairman of the all-powerful allocations committee, enabling him to control where and how money is allocated.
• Is the board concerned that despite all the scandals and damage caused to the reputation of the Claims Conference by Berman retaining office, he refuses to relinquish control of an organization managing billions of dollars, which he directs as though it were his personal fiefdom?
6) Conflicts of interest
Members of the board represent or are connected to organizations and projects that receive allocations from the Claims Conference.
• Does this not constitute a conflict of interest?
• Given the role of Berman as president of the organization and chairman of the allocations committee, does this enable him to unduly influence directors receiving funds for their organizations?
7) March of the Living (MOTL) scandal
In 2007, I wrote about the scandal surrounding March of the Living, originally controlled by disgraced and convicted former Israeli finance minister Avraham Hirschson, which was largely funded by the Claims Conference. I queried mysterious payments of $700,000 from MOTL to a consultant who was unable to detail what service he had provided to the organization. In response to that and other allegations against MOTL relating to missing funds, the Claims Conference undertook to conduct an audit and suspend all payments to MOTL until the matter was resolved.
In 2010, the Claims Conference stated that it was unable to progress with this matter because the general controller had received “limited cooperation” from MOTL in the investigation on a number of issues, including lack of information about an overseas account from which funds were transferred to the US and Israel.
• Was the disappearance of the funds reported to the relevant law enforcement authorities?
• Has the board been informed of the situation?
• If payments to MOTL were suspended because of the failure to cooperate with the audit, why was $500,000 allocated in 2014 to March of the Living?
8) Heirless Jewish property
In December 2010, in the face of fierce protests from heirs of survivors claiming that the Claims Conference denied them access to information to enable them to recover property stolen from their families, the Board of Deputies of British Jews commissioned an independent inquiry by Jeffrey Gruder QC. In a scathing report, Gruder concluded that the Claims Conference had a moral obligation to inform heirs of their rights and that “ignoring requests for information by heirs, or indeed, even worse, the obstruction of their attempts to obtain information, is, in my view, regrettable to say the least.”
According to the report, “The Claims Conference regards it as significant and conclusive that once it became the owner of the properties or assets, it owed no duties to the previous owners or their heirs under German law.” If that is still the position of the Claims Conference, then it has repudiated its mandate as custodian to act on behalf of the interests of survivors, victims and their heirs.
• Is the board satisfied that the Claims Conference has fully addressed the legitimate claims of heirs?
• Has the internal audit undertaken in Germany relating to the sale of heirless properties been disclosed to directors?
9) Ukraine fraud
• Has the board been informed of the current investigation of fraud and misappropriation of restitution funds in Ukraine?
10) Independent review
There have been repeated calls for a genuine independent review of the Claims Conference, especially since the 2013 ombudsman’s report in relation to the $57m. fraud, which ominously noted that “only the tip of the iceberg was revealed to us.” Yet these calls have been bitterly opposed by the management.
• Do the directors realize that in light of recent developments, they will be in breach of their fiduciary responsibilities if they fail to act now to commission a genuine independent external review and audit of all the operations of the Claims Conference?
• Given the desperate plight of aged, ailing survivors, will the board now consider – belatedly – freezing payments for all projects that are not directly Holocaust-related and diverting them to needy survivors in order to enable them to live out their few remaining years in dignity?
The writer’s website can be viewed at www.wordfromjerusalem.com.
He may be contacted at [email protected]