This week the Conference on Material Claims against Germany (Claims Conference) is convening its annual board meeting in New York.
The agenda has already been circulated. Yet most of the 60 well-intentioned directors, whose principal involvement with the conference involves attending annual meetings, will have difficulty comprehending the complex and confusing data presented to them. As they have for over 40 years, the majority are likely to continue acting as a rubber stamp, automatically endorsing resolutions and allocations recommended by the small innermanagement clique.
It is evident that the burning issues raised last year remain unresolved, and in many cases were not even seriously considered. Directors are thus unlikely to gain further insight into who was responsible for the lack of oversight that facilitated the greatest fraud ever inflicted on a Jewish charitable organization.
The theft, first disclosed in February 2010 as a $350,000 swindle, had risen by July to $7 million. In November, the amount had escalated to $42.5m. A few weeks ago, we were blithely informed that the sum was about $50m. and likely to rise even higher.
How could such a scam proceed unimpeded for over 15 years in the head office of the Claims Conference, literally under the noses of the chief executives, with six key staff members, including a manager, being the alleged perpetrators? In any enterprise – private or public – after such a scandal, one would expect resignations or at least some acceptance of responsibility.
The Claims Conference, a nonprofit charity, employs highly paid, purportedly top “professional” executives. The CEO receives a salary commensurate with the head of the International Monetary Fund. Despite ignoring repeated warnings that a single part-time internal comptroller was absurdly insufficient for an organization handling billions of dollars, no one is now willing to accept responsibility.
After the theft was discovered, the chief executive even had the gall to praise management for its “efficient” response, insisting that there had been no deviation from standard operating procedures. In a statement officially circulated to the board, one director even boasted 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.”
Directors will no doubt be informed of the commendable steps undertaken following the much-heralded K2 Global Consulting company’s recommendations to implement greater safeguards and ensure that such an outrage is not replicated.
However, K2 is not qualified to undertake an audit or review. In the wake of such a scandal, it is surely mandatory for directors to demand a fully independent forensic audit to guarantee that there are no additional areas in which lack of oversight could enable the plundering of public funds – for example, allocations of funds, alleged conflicts of interest, the recovery and sale of German properties, and other issues. However, the management adamantly rejected such a review.
THE REALITY is that a handful of people – basically an old boys’ club – operates the Claims Conference like a personal fiefdom. The excessive centralization of control and lack of checks and balances is highlighted by the fact that Chairman Julius Berman (who has occupied the position for a decade) also appointed himself chairman of key committees such as the all-powerful Allocations Committee, the US Allocations Advisory Committee, and even its Israeli counterpart. That the chairman, an American resident, appoints himself to head the Israeli Advisory Allocations Committee says it all.
YET THERE are glimmers of hope that some organizations represented on the board are becoming more conscious of their fiduciary duties and assertive in exercising their rights.
The Board of Deputies of British Jews commissioned an independent review (the Gruder Report) to consider complaints from Holocaust victims’ heirs that the Claims Conference lacked “transparency and accountability,” and had behaved unethically in the sale of German properties. The report, released in December 2010, was highly critical of the Claims Conference’s moral conduct, demonstrating reprehensible efforts to prevent heirs from recovering property stolen from their families.
As there was no response to the recommendations demanding greater transparency, the British directors are likely to raise the issue at the meeting.
In February, the Executive Council of Australian Jewry – the umbrella body of the Jewish community, which includes the highest proportion of post-war Holocaust survivors other than Israel – requested that the Claims Conference management institute a comprehensive independent review of the way the organization is being administered. The resolution called for “a recognized independent expert or experts to undertake a review” of “strategic risk and governance issues” in order to retain public confidence. The Claims Conference management denied the request that the resolution be immediately distributed to board members, and it was buried as one of the last items on the upcoming conference agenda.
Survivor groups are treated disrespectfully. The majority of the Israeli survivor organizations in fact, temporarily boycotted meetings of a newly constituted group to review the allocations process, when they were not even consulted about the committee’s composition.
Their US counterpart on the board, the American Gathering of Holocaust Survivors, submitted a memorandum on the same subject, demanding that it be circulated to board members.
Their submission was dismissed as “chutzpa” by Berman, who refused to circulate this and other requests. Such behavior exemplifies the shameful contempt directed at those expressing dissent over any aspect of management.
It is astonishing that since the last annual meeting, there has been no public outcry, and the management continues to deny any responsibility for the $50m. fraud.
The onus surely rests with organizations represented on the board to rectify this and ensure that substantive reforms are instituted to achieve genuine transparency and accountability.
A genuinely independent forensic audit reviewing all aspects of the organization should be immediately undertaken to ensure that there are no additional ‘black holes’ requiring attention. Those responsible for the failure of oversight regarding the financial scandal should retire or be retired. Term limits for senior elected officers must be introduced. Berman should do the honorable thing and step down as chairman.
Potential conflicts of interest for directors whose organizations obtain funding should also be reviewed.
Most importantly, intensified efforts must be undertaken to ease the desperate plight of the remaining ailing survivors. Despite the commendable agreement by the Germans to substantially increase support for those requiring home services, it is an indictment on us all that many elderly Jewish survivors still have insufficient resources to pay for food, fuel and basic medical expenses.
Millions of dollars are spent on numerous, for the most part deserving projects, like hospitals and Israeli infrastructure, which do not directly benefit survivors. Surely, under the current appalling circumstances, justice and dignity demand that funding for these activities be suspended and diverted exclusively to survivors.
To quote from the Gruder Report, we must demand that the Claims Conference act “ethically and with the highest possible standards of integrity, transparency and sensitivity.” If there is the slightest doubt as to whether those standards are being upheld, board members and the organizations they represent have a legal fiduciary obligation to act.
This column was originally published in the Jerusalem Post