A senior leader of the New York-based World Jewish Congress at the center of a bitter dispute over control of the group's Israel office has made an ethnic slur against the president of the European Jewish Congress for refusing to back Matthew Bronfman's candidacy as WJC president, officials said Thursday. The controversial remarks appear in an internal memo by WJC Secretary-General Stephen E. Herbits to Bronfman which likens the Tunisian-born European Jewish Congress President Pierre Besnainou to an Arab. "He is French. He cannot be trusted. He is Tunisian. Do not discount this either. He works like an Arab," reads the memo which was sent to The Jerusalem Post from the Israel Discount Bank of New York, where Bronfman used to have offices. The New York office of the WJC denied that Herbits made such remarks in a memo. "This is not true and such remarks were never made by Mr. Herbits or any official of the WJC. The use of such materials is but another attempt by Shai Hermesh to divert attention away from the financial irregularities and corporate governance improprieties at the branch that he chairs, in direct violation of US laws and regulations," the organization said in a statement. The controversy comes just days before a critical group meeting in New York, which is liable to end with a split in the seven-decade old organization, following a month-long internecine struggle in the organization. "I was deeply shocked and saddened by the remarks," Besnainou said in a telephone interview with The Jerusalem Post from Paris. "Every day I am fighting against anti-Semitism, against [Iranian President Mahmoud] Ahmadinejad and then this. You can imagine how beyond sad I am." Besnainou noted that the memo came shortly after a meeting he held with Herbits in which he refused to support the candidacy of Matthew Bronfman as next president of the organization. Bronfman is expected to be a main contender in the race for president of the organization after his father, Edgar M. Bronfman, 77, steps down after serving in the position for the last quarter century. Veteran European leader Besnainou, who has been a senior official of the World Jewish Congress, has previously accused the New York leadership of the organization of "going crazy" following a series of controversial steps taken by the group. Herbits's remarks were immediately condemned by the chairman of the World Jewish Congress in Israel as both hateful and racist. "It appears that the struggle in the World Jewish Congress has now turned racist," said MK Shai Hermesh (Kadima), who heads the Israeli board of the WJC. "Instead of creating unity among the Jewish people, this organization is just creating division and hatred." WJC officials said Thursday that in writing the memo, Herbits had violated his position as secretary-general by taking sides in the upcoming election. The latest incident comes on the heels of a months-long struggle over control of the Jerusalem office, in an organization long plagued by internal wrangling. The original dispute in the organization stemmed from the appointment of Israeli Ambassador to the European Union Oded Eran to head the WJC's Jerusalem office. The appointment was seen by members of the Israeli board as an attempt by the organization's controversial New York-based secretary-general to bypass the Jerusalem office with a hand-picked appointment who would serve as his personal emissary. After the Jerusalem office balked at the appointment and efforts at reaching a compromise hit a dead end, New York suspended all funding of the Jerusalem office, citing "cash flow problems." The organization subsequently alleged unspecified financial improprieties at the Jerusalem office as the reason for the cut-off in funds, and announced plans to initiate an audit of the Jerusalem office's finances over the last decade. As a split in the organization appeared increasingly imminent, Eran took up his position as chief administrative officer in Israel on April 1, although he does not work out of the organization's Jerusalem office. "Ambassador Eran is presently working to prepare and manage an international project involving a public and diplomatic campaign on Jewish security and the global Jewish reaction to the Iranian threat," a WJC statement said. Herbits was originally brought to the organization by the elder Bronfman as part of an attempt to clean up the group following much-publicized allegations of financial mismanagement within the organization. Last year, Herbits established a new office of the World Jewish Congress in Israel which was registered with the Justice Ministry as a foreign daughter company of a Swiss-based NGO. The new office was viewed by members of the original Israel office as an illicit attempt to create a duplicate organization in the country, and they have vowed to fight the move in court. Herbits, who is listed as one of 11 directors of the new company along with 10 members of the organization's steering committee, has said that the new international office was created with the backing of the WJC Steering Committee. The establishment of the new company - with the very same name as the longstanding non-profit organization of the same name - was done without the knowledge of the Israeli board members of the organization, Israeli officials countered. Jewish Agency Chairman Zeev Bielski, who is listed as one of the directors of the new company, has said that he is not a member and has no intention of ever being one. Herbits has noted that as a member of the WJC steering committee, Bielski was listed on the company even though he had failed to attend even a single meeting of that group since he became Jewish Agency chairman. Meanwhile, in a separate affair, the New York-based March of the Living reportedly illegally paid more than $700,000 to a New York consultant and associate of Finance Minister Abraham Hirchson, who is facing corruption charges in Israel, according to a report in the New York Jewish Week.