At the annual meeting of the Claims Conference in New York last week, there was discussion of my recent column concerning the fraudulent misappropriation of more than $7 million of Holocaust funds (“Scandal at the Claims Conference,” July 13). While I was strongly criticized and accused of “ill intentions,” not a single factual remark incorporated in my column could be refuted.
Indeed, additional information emerged, adding greater weight to my calls for reforming an organization which is controlled by a small group of people who in practice remain largely unaccountable.
There was a disingenuous attempt to infer that information concerning the misappropriated funds was suppressed in deference to a request from the FBI.
Yet, it was the New York-based Jewish Week which exposed the fraud and only subsequently did the Claims Conference furnish the details.
More importantly, it was disclosed that the fraud has been going on for more than 10 years and that the $7 million already identified related only to information obtained from computerization of records initiated in 2007. Claims Conference executive vice president Greg Schneider confirmed that additional funds had been stolen and treasurer Roman Kent added that $7 million was “only the tip of the iceberg.” It was also suggested that the German government could hold the Claims Conference accountable for the missing funds.
To make matters worse, the auditors, KPMG, declined to sign off on the annual accounts pending further clarification of the actual amount of funds misappropriated.
Any organization is susceptible to fraud. But to trivialize the issue by maintaining that nobody was responsible because there was no deviation from standard procedures is unconscionable. It is surely obligatory for the administrators of the largest global Jewish foundation to ensure that foolproof procedures are in place. Allowing for the absence of malfeasance, there is still a question of accountability, not to mention transparency. It is thus highly inappropriate in the aftermath of such a scandalous fraud for a director to publicly boast that “the Claims Conference is well led, well governed, well staffed and manages its restitution funds in a manner consistent with best practice and probity.”
NO RESPONSIBLE public institution encountering a disaster of this magnitude would respond in such a dismissive manner. It is this kind of arrogance that enrages survivors and others concerned with the administration of this crucial organization. After all, when a charitable organization is defrauded out of millions of dollars, is it acceptable to blithely deny any culpability in oversight? But more was to come. Avraham Biderman, a veteran Aguda Claims Conference director, announced that to deal with this problem, the executive had appointed Howard Rubinstein and Associates, “the biggest and the best PR organization in the United States,” to refurbish its image. A $500,000 budget was set aside for this purpose as well as for additional lawyers and accountants.
As the Claims Conference already has a fully staffed public relations department, it is surely astounding that not a single board member rose to challenge such a decision.
That should be viewed in tandem with the comment by the chairman of the Claims Conference, Julius Berman, conceding that “tens of thousands of Jewish victims of Nazism around the world are living in need, unable to meet bare expenses or to properly care for themselves in old age.”
The Claims Conference investment portfolio this year rose to $1,086,810,179 and yet not one of the 64 directors felt obliged to ask the obvious question: Could not a larger portion of this $1 billion plus fund be set aside for the few remaining Holocaust survivors, whose life span is now extremely limited? Need so much be retained by an organization, one of whose primary functions is to distribute Holocaust funds to needy survivors? There was also no satisfactory explanation regarding the $700,000 paid out three years ago by the March of the Living to a “consultant” at the behest of Avraham Herschson, the disgraced former finance minister currently serving a jail sentence for fraud.
Following the damning exposure of this scandal, I wrote in a Jerusalem Post column:
“The Claims Conference has much to answer for in this latest scandal. It stands exposed for having neglected to exercise oversight after allocating substantial funding for a worthy venture and thus indirectly enabling a questionable consultant, closely associated with its own president, unconscionably to receive massive payments from March of the Living funds. If the Claims Conference could so badly fail to oversee the utilization of funds in such an important Holocaust-related institution, its oversight in relation to allocations for other enterprises must be reviewed. It would therefore be appropriate to launch an independent forensic audit to cover the broad operations of the organization in order to allay concerns and instill confidence that the Claims Conference is being managed in an appropriate manner.
“This latest scandal also highlights the urgent need to introduce new leadership into the Claims Conference, restructure its board and ensure that the public is satisfied that restitution funds are being managed in an exemplary manner. There is surely no other organization more in need of impeccable transparency than the Conference on Material Claims against Germany.“
THE CLAIMS Conference now alleges that it was unable to progress with this matter because the general controller received “limited cooperation” from the March of the Living in the course of a three-year investigation on a number of issues, including lack of information about a Brussels account whose funds went to the US and Israel as well as the $700,000 payment to the consultant. Further payments to the March of the Living were suspended, but there was no effort to recoup the funds that the Claims Conference should never have provided had adequate oversight prevailed.
At a time when many elderly survivors are destitute, the Claims Conference agenda also failed to allow for a meaningful debate on the morality of providing endowments from restitution funds to well deserving charities which are not directly related to the Holocaust.
To suggest that Birthright – an organization I fully endorse – was entitled to receive huge grants from restitution funds because the participants visit Yad Vashem is surely unacceptable.
Not surprisingly, the office holders from the previous year were unanimously reelected to principal leadership positions. It is noteworthy that the chairman of the nominations committee continues – after many years – to be the representative of the Anglo Jewish Association, an almost defunct body which has equal representative status at the Claims Conference to organizations like the Jewish Agency, the French Jewish Community and the American Jewish Committee.
A strong case therefore exists to suggest that the Claims Conference leadership is somewhat of a selfperpetuating private club. In addition, representatives of organizations which receive grants are inhibited and face a conflict of interest on many issues that arise, which is reflected in the fact that the board of directors effectively acts as a rubber stamp to approve allocations and policy decisions. Sixtyfour representatives are flown annually at Claims Conference expense to New York and Jerusalem for meetings to hear reports and validate them. There are never challenges to allocations and rarely substantive debates because the issues are complex and most board participants, even if equipped with sufficient data, are unlikely to rock the boat.
As I noted in my column last week, none of this implies malfeasance or corruption. But it does highlight one single overriding issue. How can these directors sit around a table and not raise an outcry that with an investment portfolio of more than $1 billion in liquid funds, more of this money is not employed to ease the lives of the elderly, ailing survivors living in abject poverty? To me this issue transcends everything.
This column was originally published in the Jerusalem Post