Explosive new Claims Conference scandals revealed

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Almost a decade has passed since I began urging for drastic reform and change of leadership at the Claims Conference in the wake of successive scandals relating to the mismanagement of the organization entrusted to pursue justice on behalf of the Jewish people for Holocaust victims and survivors.

The lack of oversight which enabled senior Claims Conference employees to steal $57 million of restitution funds, the subsequent cover-ups, and refusal to accept accountability or facilitate an independent investigation to review the management were all bad enough. There is now informed chatter that the theft of restitution funds significantly exceeds $57 million and is now believed to have reached the $100 million mark, but the management refuses to disclose the figures to the public or to directors.

On top of this, a new fraud relating to misappropriated funds in the Ukraine, also resulting from lack of adequate oversight, is being investigated. As of now, this also has not been reported to the public or directors.

If that were not sufficient, this week, on the eve of the annual board meeting, a dramatic communication – effectively a smoking gun – has been circulated to Claims Conference directors by its ombudsman, Shmuel Hollander. It is an extraordinary document, which not only confirms what critics like myself have been saying, but even expounds the extent of the breaches in governance, lack of transparency, cover-ups, and denial of accountability by the leadership. It confirms that the majority of directors are either unaware of or ignoring their fiduciary responsibilities and have enabled Conference President Julius Berman and his Executive Vice President, Greg Schneider, to continue operating the organization as their personal fiefdom, failing to prioritize the needs of ailing Holocaust survivors.

Hollander, a highly respected and consummate civil servant, having served as the Israeli government’s Civil Service Commissioner and Secretary to the Government under six prime ministers, not only reaffirms these charges but reveals other shocking behaviors.

He notified the Board of Directors that Berman told him explicitly that his contract as ombudsman would not be renewed because of his critique of the Claims Conference in a July 2013 report, prepared for a select committee, which detailed the mismanagement and lack of adequate financial oversight resulting in the $57 million fraud.

Hollander’s report was commissioned after it was revealed that Berman and Schneider had been forewarned about the fraud, in an anonymous letter, more than 10 years prior to its discovery and that Berman, in his capacity as general counsel, had been charged to investigate the matter, but failed to adequately follow up.

That report stated that the Claims Conference:

  • Failed in “tailoring its organizational structure to meet the growing range of activities and needs”
  • “Was governed in a manner unacceptable in both public and corporate bodies”
  • Demonstrated “systematic failings and problematic organizational behavior,” and
  • Operated with an “absence of professional control systems … [that] constituted a key factor in enabling and certainly in facilitating the [$57 million] fraud” which could otherwise “have limited the enormous scope of the fraud.”

His report concluded that the Claims Conference management had failed to address the fraud even when made aware of it. An “enormous hole in the control mechanisms sent out an invitation to the thief” and “even with the writing on the wall, and the organization exposed to warning signs, the matter was not attended to.”

Of greater concern, however, was that Hollander found that management failures were not restricted to the multi-million dollar fraud, but they should be “reviewed and addressed against a backdrop of systematic failings and problematic organizational behavior,” adding ominously, “only the tip of the iceberg was revealed to us”.

But now, in a shocking new revelation, Hollander states that in August 2013, Berman and Schneider, together with two senior board members, sent an official statement on behalf of the Claims Conference to the German Finance Ministry rejecting the findings of Hollander’s report “without relating to the actual facts themselves.”

Hollander notes that as his report addressed the involvement of Schneider and Berman in the matter of the anonymous letter, “by signing the statement as official representatives of the organization, rather than in a personal capacity, it appears that they placed themselves in a position of personal conflict of interest.”

Hollander reveals that “heavy pressure was applied” to at least one of the other signatories of that letter, who was told that it was a demand by the German Finance Ministry. It later became apparent that the senior German official in charge of such matters was unaware of any such demand, which according to Hollander “raises suspicion of the violation of proper administrative behavior.”

In Hollander’s letter to the board, he details that after preparing his report, Schneider regarded him “as a hostile element whose actions must be blocked.” The letter continues to describe the sequence of events of “punitive actions”, “relevant information was withheld,” “formal obligations were violated, and staff members in the organization even received an instruction at one point not to reply to inquiries from us [the ombudsman] without the approval from New York.” Hollander informed the board that Schneider’s actions “constituted a gross violation of the mandate which empowers the ombudsman.”

Hollander’s appeals to Berman to intercede were ignored. He reports that “Berman refused to speak to me or to meet with me, despite repeated requests. It is difficult to accept or understand such an abandonment of responsibility by the president of the organization.”

He concludes that “with regret, I must determine that the Claims Conference is an organization that is incapable of hearing criticism regarding senior management. … The organization wanted only a ‘yes man’ – a fig leaf or a charade of an ombudsman.” He stresses that “the real problem is not the dismissal of the ombudsman, but the manner in which the organization is managed – an area that requires a thorough and dramatic change.”

These damning observations do not come from a disgruntled employee. Hollander is one of the mostly highly respected Israeli civil servants and assumed the position of Claims Conference ombudsman because of his desire to conclude his public career by working on behalf of Holocaust survivors. As he emotionally wrote to the directors, “I myself am the son of Holocaust survivors and the subject is close to my heart.”

In my earlier articles, upon discovery of the extent of mismanagement, fraud and lack of oversight, I wrote that in any functional organization or public institution, the resignation of the leadership would be mandatory. Not so, however, in the case of the Claims Conference. Despite all the scandals and damning revelations, Berman has now led the organization for 13 years without challenge and Schneider remains Executive Vice President.

Berman and Schneider have persistently rejected all calls for a genuine independent forensic audit and one shudders to think what such a review may reveal. As Hollander wrote in his initial review:  To date, “only the tip of the iceberg has been revealed to us!”

These new revelations can no longer leave any room for doubt. They document Berman and Schneider’s efforts to actively undermine and prevent even internal reviews of the organization and took vindictive punitive steps against Hollander for his adverse findings against them personally.

The time for action to bring an end to this obscene scandal is now or during the forthcoming July annual meeting of the Board of Directors. So long as Berman and Schneider – both of whom have engaged in cover-ups and breached governance on an ongoing basis – remain in office, the organization lacks any credibility or legitimacy. The ultimate responsibility rests with the board which has disregarded its fiduciary responsibilities and allowed this scandalous state of affairs to persist.

If the directors fail to act, they will be exposing not only themselves but the organizations they represent to external scrutiny. Shameful as it may be, under such circumstances, perhaps only intervention by an external law enforcement body, such as the New York State Attorney General, may save the Claims Conference.

This column was originally published in the Jerusalem Post and Israel Hayom



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