Once again, as we commemorated the victims of the Holocaust, what was highlighted was the grinding poverty of elderly survivors unable to live out their few remaining years with a semblance of dignity.
It is now almost five years since the exposure of the multimillion dollar fraud at the Claims Conference in which managers at the New York head office, over a period of 16 years, stole at least $57 million.
Incredibly, the management denied responsibility for the fraud and initially concealed the extent of the scandal. Chairman Julius Berman and CEO Greg Schneider adamantly rejected pleas to authorize an external independent review, insisting that the fraud was merely a regrettable breakdown that could never have been detected. They refused to accept accountability; they did not even apologize.
Worse, these leaders tried to prevent their own board from learning that they had been forewarned about the fraud more than 10 years earlier and that Berman, in his capacity as general counsel, had been charged to investigate the matter but had failed to adequately follow up.
Under pressure, Claims Conference Ombudsman Shmuel Hollander, a former Israeli cabinet secretary, was commissioned to launch an internal review. The plan was for Hollander to report to a committee of loyal directors — handpicked by Berman — who would then report to the board. This backfired when Hollander’s devastating findings were publicly released despite being rejected by members of the committee appointed by Berman.
The findings confirmed the charges of the organization’s harshest critics. They amounted to a clear-cut condemnation and lack of confidence in the Claims Conference management, leadership, and board of directors.
The report noted 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.”
The ombudsman concluded that the management 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.”
Most worrying, however, was that Hollander found that management failures were not restricted to the $57 million fraud, but 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”!
There could be no more damning indictment of the management and leadership.
In any functional organization or public institution, the resignation of the leadership would be mandatory. Not so in the case of the Claims Conference. Berman remains chairman, a position he has now held for 13 years without challenge, and Schneider remains CEO and together they continue to run the Claims Conference as their private fiefdom.
One of Berman’s principal “justifications” for retaining his office was his claim that the fraud would not affect survivors’ restitution and impacted only on German taxpayers’ money funding the Article 2 and Hardship Funds. Under normal circumstances, such an unconscionable remark denying any responsibility or accountability for the safekeeping of restitution funds entrusted by the German Government to the Claims Conference, should itself be considered sufficient grounds for deeming Berman unfit to retain his leadership role in the organization.
In response to Berman’s spurious remarks, I stated in The Jerusalem Post (October 22, 2013) that “the German government does not have unlimited funds available for restitution. And German taxpayers’ funds earmarked for restitution, which were stolen, would surely impact on other funds which may have been made available.” In fact, Berman’s irresponsible defense was a red flag encouraging the German government to demand compensation.
Berman dismissed my warnings. But Paul Berger of The Forward (click here for link) disclosed that in December 2014, Matthias Hass, of Germany’s Finance Ministry, confirmed Germany’s “requirement” that the Claims Conference “makes repayments to compensate for the financial damage arising from the cases of fraud” but noted that it had been “fulfilled” by the contribution of 54 million euros by the Claims Conference to the commendable Child Survivor Fund established by the German government in September 2014.
The implication of Hass’ letter is that 54 million euros of Claims Conference funds were diverted to compensate German taxpayers by being allocated to a Fund that would otherwise have been wholly funded by the German government.
Once again, Berman is being somewhat disingenuous with the truth. Just as he failed to reveal that a letter had been received, warning of the fraud 10 years prior to its discovery, so too now, the Claims Conference management is duplicitously covering up the fact that due to its lack of oversight and competence, funds otherwise available to assist survivors have been requested to compensate the German government.
In response to the Forward exposé, the Claims Conference denied that its contribution to the Child Survivor Fund should be deemed as compensation for the fraud, stating that it had notified the German government accordingly. This only makes their behavior more reprehensible. After the German government had informed them in writing that it demanded compensation for the fraud, the Claims Conference leaders are still more concerned about protecting their own positions of authority than safeguarding sacred restitution funds.
They refuse to acknowledge that the payment of 54 million euros ($57 million) to the Child Survivor Fund, which “coincidentally” precisely matches the amount of the fraud, “fulfilled” the German demand for compensation, out of fear that it would expose Berman’s repeated duplicitous statement that no restitution funds were diverted or endangered because of the fraud.
However, in so doing, the German government retains the right to demand additional restitution funds as compensation.
Now that their last line of defense, dubious as it was, has been exposed as a lie, will the leadership have the decency to finally resign? Clearly not. They are more likely to orchestrate another resolution along the lines endorsed by their board immediately after the discovery of the fraud, 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.”
The failure of board members to intervene and exercise their fiduciary responsibilities is mind-boggling. But this is a result of the organizational composition of the dysfunctional board, largely unchanged since its establishment over 60 years ago, which is today completely out of sync with the changes that have since occurred in Jewish communal life. Its members meet annually to simply rubber-stamp complex decisions and recommendations proposed by the inner cabal that has been controlling the organization for too long without term limits.
The lack of transparency would be utterly scandalous in any organization but particularly so when this involves the handling of sacred restitution funds.
And while this goes on, every day we hear heartbreaking stories depicting the appalling suffering of Holocaust survivors in the twilight of their lives, denied elementary needs such as food, medicine and other basic services to enable them to live out their remaining years with dignity.
It is incomprehensible why the Claims Conference has failed to respond to pleas to temporarily freeze dispersion of funds directed to infrastructure and prioritize the ailing survivors.
The survivors deserve better. We all deserve better. The mishandling of sacred Holocaust restitution funds represents the greatest moral failure of organized Jewish life in our generation.
This column was originally published in the Jerusalem Post and Israel Hayom