The board of directors of the Conference on Material Claims against Germany (Claims Conference) should hang their heads in shame. Rather than respond to the growing calls for an independent review of the organization in the wake of the theft by insiders of more than $50 million earmarked for survivors, last month’s annual board meeting in New York saw a handful of key officials orchestrate a series of resolutions designed to cover up the gross – if not criminal – negligence which failed to avert the greatest financial scam in the history of any Jewish organization.
Equally shocking was the acknowledgement by Sheldon Rudoff, chairman of the Task Force on Individual Compensation Investigation, that the Claims Conference would be unlikely to recover more than $ 1 million of the massive sum stolen in the fraud.
Under such circumstances, one would surely have expected the annual meeting of the board of a body disbursing billions of dollars to have prioritized an investigation to ascertain whether the management should bear responsibility and be held accountable for the failure in oversight which enabled its own employees to steal funds earmarked for Holocaust survivors over a fifteen year period.
Yet incredibly, there was no mention whatsoever of the fraud in the official press release issued by the Claims Conference after the meeting. To the contrary, a resolution was passed expressing “complete confidence in the leadership and management of the Claims Conference”.
Rather than expressing apologies or regret, Claims Conference Chairman Julius Berman sought to elicit sympathy for his highly paid executive vice president under whose watch (together with other senior management), the massive fraud occurred. He told the Board that “if anyone has deserved his pay plus, it’s Greg Schneider [the executive vice president]; he has gone through hell this past year”. Berman obviously felt impelled to convey greater concern for Schneider than for the victims of the fraud, ignoring the reality that it was Schneider’s subordinates who were the perpetrators.
At the same time, ominous new revelations are coming to light. There are now reports that the fraud has extended to the previously untouched home care allocations. In a clear breach of organizational obligation, this serious new development was not reported to the Board of Directors, many of whom are probably still unaware of this potentially explosive extension of the fraud.
Last year, the Claims Conference deflected calls for an audit of its operations by heralding the appointment of K2 Global Consulting to review the claims processes for the Hardship Fund and Article 2 Fund (financed by the German Government). However, in reality, the scope of K2 was limited to proposing recommendations to prevent future fraudulent claims to grants provided by Germany. It was not commissioned to audit or investigate the past or institute reviews relating to the administration of funds of the Successor Organization which holds assets in excess of one billion dollars.
What was disclosed only at the meeting and not revealed in the press release was that the K2 review had in fact been rejected by the German Government which had appointed Deloitte & Touche to undertake a “systems audit” of the Claims Conference Frankfurt and New York offices and report directly to the German Government.
Furthermore, contrary to a much heralded announcement by the Claims Conference prior to the meeting, the New York Jewish Week has now disclosed that the “new” $19 million fund to make one time payments to Holocaust victims in Eastern Europe, will not as initially stated, be financed from Germany, but will be diverted from payments that benefit other survivors.
In advance of the meeting, three major Jewish organizations represented on the board – the British Board of Deputies, the American Gathering of Holocaust Survivors and the Executive Council of Australian Jewry (ECAJ) – submitted resolutions to be distributed to the directors calling for review or oversight. However, the chairman Julius Berman refused the request to distribute these resolutions to the board in advance, only circulating them together with copious other materials in the days leading up to the meeting, thus denying the member organizations the opportunity of considering and discussing the issues in advance.
In response to the independent report by Jeffrey Gruder, QC, commissioned by the British Board of Deputies which revealed the efforts of the Claims Conference to deny rightful heirs from recovering stolen properties, the British resolution called for the partial reopening of the Goodwill Fund to enable heirs to seek some limited compensation in respect of properties belonging to them which had been handed over to the Claims Conference by the German government. Yet discussion on the matter was pre-empted by a bizarre demand from Berman in his capacity as chairman that the board first “reject” the Gruder Report which most directors had not even read. Not surprisingly, the British request was also adamantly denied.
The American Gathering resolution proposing to appoint an Ombudsman was unilaterally substituted by Berman’s own watered down resolution, making a mockery of the concept of an Ombudsman by prefacing it with the extraordinary statement that the board had “complete confidence in the leadership and management of the Claims Conference and their commitment to: the principles of transparency (including the presentation of fair, accurate and comprehensive information regarding its activities); the fair processing of claims under the various programs it administers; the principles of integrity, fairness, accountability, dialogue, and service, in operating its programs and overall operations; and to abide by the highest ethical standards”.
To dispel any illusions that the Ombudsman may have a genuine role, the watered down resolution adopted by the Board provided for the Executive Committee (i.e. the inner management, which many would say is the reason why an Ombudsman is required), “to define the precise role and responsibility of the Ombudsman” and to even determine matters which the Ombudsman will be prevented from reviewing. An indication of what may be excluded can be ascertained from Berman’s request at the meeting that “the ombudsman will have no function or power in any circumstances to review…any complaint from a current or former employee of the Claims Conference“.
The Executive Council of Australian Jewry resolution proposing that independent experts be appointed to review the entire structure of the Claims Conference suffered a similar fate. In a classic example of bureaucratic double talk which would have made Sir Humphrey from the BBC series, “Yes Minister”, blush with pride, the Board resolved to “establish a Sub-Committee of 5 directors for the purpose of considering the ECAJ resolution” and make recommendations to the Executive Committee (the same inner management, who are surely the subject of the review), who would then decide how to proceed – if at all.
It goes without saying that no request was tabled for a comprehensive independent audit of the organization. In an environment when board members meet once a year and the agenda is exclusively determined by Berman (who refuses to distribute resolutions not to his liking in advance and buries them in masses of documentation), there can never be an opportunity for genuine and informed consideration of such issues at a board level.
The Gruder Report, rejected by Board, states that we are entitled to expect that the Claims Conference “acts and appears to act ethically and with the highest possible standards of integrity, transparency, and sensitivity”. If there was any doubt as to whether these standards are being upheld, board members and the organizations they represent have a fiduciary duty to act.
However, in classic Stalinist tradition, at this board meeting the matter was simply laid to rest by passing a self-serving resolution expressing “complete confidence in the leadership and management of the Claims Conference” and their commitment to “transparency …, integrity … and to abide by the highest ethical standards“. Such a cynical response raises serious concerns about the role of the directors and the exercise of their fiduciary and moral obligations as custodians for the welfare of the survivors.
As we bear witness to the reprehensible manner in which the Claims Conference has been administered and the ongoing suffering and poverty of survivors, each and every one of those organizations must bear responsibility for being complicit and failing to actively ensure that the Claims Conference act first and foremost on behalf of the remaining survivors.
This column was originally published in the Jerusalem Post
In a message to his Board, Julius Berman Chairman of the Claims Conference states that aside from one issue he does not consider it worthwhile to respond to what he describes as unspecified “myths and falsehoods” raised in my article.
He accuses me of having made a “false accusation” in alleging that new frauds are being investigated in the home-care allocations. However he then then proceeds to concede that 18 cases of suspected fraud (“whose compensation packet was rescinded”) in that area are currently being investigated.
Despite the extraordinary scandal of the existing fraud, Berman apparently did not feel obliged to inform the Board of these new cases of fraud in the home-care allocations division and only released this sensitive information after reference had been made to the issue in my Jerusalem Post article.
Readers may also recollect that during the previous debate over the framing of the resolution relating to the Claims Conference, enormous emphasis was laid on the extensive work of the K2 Global Consulting group to review the claim processes for the Hardship Fund and Article 2 Fund which allegedly superseded the need for an independent audit. Yet it was only at the Annual Conference that the board was belatedly informed that the Germans had rejected the K2 Global Consulting group and appointed Deloitte & Touche to undertake a proper “systems audit” and report directly to the German government. That the Board was not informed about this until they met speaks for itself. What has also yet to be revealed is the quantum of Claims Conference funds that were invested in this futile engagement rejected by the German Government.
The memorandum by Mr. Berman not only ignores the failure to assign accountability for the absence of oversight of the $50 million stolen over a 15 period by employees at the Claims Conference head office. He also fails to relate to other significant issues raised in my column which he simply dismisses as “myths and falsehoods”. And you should be aware that there are other matters of concern currently being investigated.
In such a climate one can only describe as bizarre that the Board could endorse a self-serving resolution expressing “complete confidence in the leadership and management of the Claims Conference and their commitment to: the principles of transparency (including the presentation of fair, accurate and comprehensive information regarding its activities); the fair processing of claims under the various programs it administers; the principles of integrity, fairness, accountability, dialogue, and service, in operating its programs and overall operations; and to abide by the highest ethical standards”.
In a sense it exemplifies the lack of transparency and responsible oversight in the inner management of an organization whose role is to disburse sacred restitution funds and ensure that the needs of the dwindling destitute Holocaust survivors are prioritized.
Jerusalem – 7 August 2011