The disclosure by The Jewish Week of the $7 million fraud at the Claims Conference has revived former concerns and exposed new problems relating to the management of this important Jewish organization.
Initially, Claims Conference officials trivialized the fraud by insisting “that nobody was responsible because there was no deviation from standard procedures” and denying that there was any failure in oversight. Incredibly, the treasurer subsequently revealed that $7 million was “only the tip of the iceberg,” prompting KPMG auditors to refuse to sign off on the accounts. That such a gigantic loss from funds destined for restitution is brushed aside in such a cavalier manner highlights a serious lack of accountability.
Three years ago, in the wake of the March of the Living scandal exposing a failure in oversight when a consultant was paid over $700,000 without any plausible explanation [first reported in The Jewish Week], there were calls for an independent forensic audit to review the broad spectrum of control within the organization. Had that call been heeded, this multimillion-dollar fraud may have been averted.
It is also inexplicable that after being defrauded of millions of dollars, the Claims Conference has the chutzpah to appoint “the biggest and best PR organization” in the U.S. to refurbish its image when it already employs a full-time public relations bureau.
However, the biggest scandal is the ongoing plight of the remaining elderly survivors living under wretched conditions. The Claims Conference has an investment portfolio of more than $1 billion, which increased over the past year by more than $30 million. Instead of expanding the portfolio, surely more of this money could have been allotted to ease the lives of the elderly ailing survivors living in poverty.
According to Claims Conference’s chairman, Julius Berman, $70 billion has been distributed by the organization. I would challenge him to facilitate an independent authority to review and disclose the substantial funds directed to projects unrelated to easing the condition of Holocaust survivors or even Holocaust memory. For example, Birthright is a worthy cause, but surely not justifying substantial subsidies from restitution funds simply because a visit to Yad Vashem is incorporated in the program.
The reality is that despite an external façade of governance, the Claims Conference operates like a private club or personal fiefdom.
Aside from conflicts of interest in which directors representing organizations receiving grants determine policies, the principal weakness is the centralization of control by the chairman and his arrogant response to anyone questioning his judgment.
Berman has been in office for more than eight years. This is unhealthy in any democratic organization, but especially so in one dispensing billions of dollars.
It is also noteworthy that both the U.S. and the Israel special Claims Conference Advisory Committees for Social Welfare Allocations are chaired by Berman. This is unconscionable and exemplifies the absence of checks and balances, raising questions about the entire decision-making process of allocating funds.
Only a few months ago, Haim Roet, an Israeli Claims Conference director, resigned, informing Berman, “I am too experienced and old to be a rubber stamp for the autocratic majority of the Claims Conference Board and its management.”
In response to complaints of a lack of “transparency and accountability,” a leading barrister in the United Kingdom, Jeffrey Gruder, was commissioned by the Board of Deputies to examine “both documentary and financial records of the Claims Conference.”
This presumably also related to charges by former owners of properties in East Germany and their heirs that the Claims Conference had defrauded them, selling their properties without approval and refusing to pass on the funds. There were also complaints that lists of Jewish property owners “disappeared” and that properties were auctioned without adequate oversight, allegedly enabling selected German real estate agencies to enrich themselves by indulging in questionable sales practices. In the U.S., there is also pending legal action seeking compensation and damages for unjust enrichment of the Claims Conference at the expense of the rightful heirs to recovered assets.
What must now be done?
An independent forensic audit review should be implemented immediately. In addition an independent committee should be appointed to review the structure of the organization and ensure that conflicts of interest are removed from the decision-making progress.
The board should be restructured to genuinely represent the Jewish people, eliminating representatives from defunct organizations and incorporating those with legitimate claims to be party to policy and allocation deliberations.
There should be term limits for senior elected officers. This would allay the fears of survivors that the money is being withheld in order to maintain the organization even after the survivors have passed away.
Above all, the Claims Conference should submit to full oversight by an objective regulatory body with authority to review not only the flow of funds but also the decision-making process.
Instead of hiring a public relations firm to enhance its image, the Claims Conference should appoint an ombudsman to ensure that survivors and heirs are treated with respect.
But the absolute priority must be to ease the plight of the remaining ailing survivors. In view of the appalling suffering they endure, every cent not committed to heirs should now be diverted towards resolving this humanitarian crisis. And if some projects need to be frozen, so be it. It is obscene that elderly survivors are denied the opportunity of living out their few remaining years in dignity.
Isi Leibler who lives in Israel, is a former official at the World Jewish Congress and is active in numerous Zionist organizations.
This column was originally published in the New York Jewish Week