This report comes in the aftermath of the discovery of the $ 42.5 million fraud and represents another scandal which, in the interests of justice, must be fully addressed.
Even though drafted in an understated legalistic manner, this report dispels any lingering doubt as to whether the Claims Conference leadership has lost its moral compass. It demonstrates the unconscionable efforts of the Claims Conference leadership to prevent heirs from being able to recover property stolen from their families. In so doing, it would appear that the Claims Conference has repudiated its mandate as custodian to act on behalf of the interests of survivors, victims and their heirs.
The Claims Conference has long denied these allegations. Having them now explicitly confirmed by a respected QC in a formal report is devastating.
Below is a summary of the key points, quoting directly from the 30 page Gruder Report:
1. “The Jewish community is entitled to expect that the Claims Conference acts, and appears to act, ethically and with the highest possible standards of integrity, transparency and sensitivity … The Claims Conference must be open to scrutiny and cannot be immune from justified and constructive criticism.”
2. The Claims Conference refused to publish or disclose details of heirless properties it recovered or claimed, both before and after the deadline set by Germany to claim property in 1993. “The fact remains that before the expiry of the time limits, the Claims Conference was in possession of information that may have been of assistance to owners and heirs in making a valid claim on their own behalf.”
3. When pressured to provide information, it did so in a manner that made it virtually impossible for heirs to identify or claim their assets. To this day, they refuse to provide a list which could help owners or heirs identify their assets.
4. The Claims Conference defends its actions by arguing that it has no legal duty to act on behalf of owners or heirs, and has no obligation to render assistance in making such claims. This is in accordance with German legislation enacted following negotiations between the Claims Conference and the German government which recognized the Claims Conference as the successor for unclaimed Jewish assets. According to the Claims Conference, “once it became the owner of the properties or assets, it owed no duties to the previous owners or their heirs under German law“.
5. “Although the legal position under German law is important, there is also a moral and ethical dimension… The Claims Conference had a moral duty to publicize the information that it had and seek to assist and identify heirs who were rightful claimants”.
6. In fact, Gruder quotes the German Government which agreed to transfer the unclaimed properties to the Claims Conference in the understanding that it was acting on behalf of the heirs: “We (the German Government) do not have anything against the Claims Conference transferring property to heirs who missed the filing deadline. This is one of the reasons why the Jewish Claims Conference was named as the entity entitled to obtain the property …” It would appear that it simply did not occur to the German Government that in the absence of any legal obligation, the Claims Conference, one of whose principal objectives is restitution, would not view itself under any duty to the rightful heirs.
7. The Goodwill Fund was supposedly set up by the Claims Conference to enable heirs who missed the German deadline to make claims for ex-gratia payments. “One might have imagined that a corollary of the setting up of this scheme would have been publication (and regular updating) by the Claims Conference of the information available to the Claims Conference relating to the situs of Jewish owned property in Eastern Germany or the identity of the previous owners in order to assist potential claimants. This did not happen.” To the contrary, “It is clear the Claims Conference rejects any obligation to assist owners or heirs in making a claim within the relevant time limit and disclaims any duty to provide any information in its possession which might have assisted owners or heirs making a claim under Goodwill Fund when that remedy was available.”
8. The Claims Conference also limited the definition of heirs for the Goodwill Fund to “the owner, his spouse and close blood relative. Accordingly, the Claims Conference does not appear to recognize the claims of beneficiaries under the will of the former owner of the property, including charities to which bequests were made.”
9. The Goodwill Fund was not operating for 10 years, as repeatedly stressed by the Claims Conference, but only 5 years and expired in 1998. The Goodwill Fund was opened for an additional 6 month period in October 2003 due to the allegations that the Claims Conference deliberately withheld information to prevent heirs making claims. Under pressure, a list (which was useless as it did not identify properties or include addresses, names of businesses or full names) was published but only appeared on the web site for six months before being removed. “The Claims Conference has not explained why, having set up the Goodwill Fund in 1994, it did not publish any information available to it to assist Claimants until the end of 2003, nor why, in 2004, it removed the lists of names and cities after only six months.”
10. The Claims Conference refused to provide the investigator with a copy of the 2003 list.
11. In response to further pressure, a new list was published in 2008, comprising assets recovered and identified by town, but with “no names of the former owners of properties or businesses in whose shoes the claim was made and settled by the Claims Conference“, again rendering it useless. “The absence of any names makes it difficult for any heirs or family members to identify family properties or assets. Accordingly, each list provides some information which would be of relevance to heirs but it is not possible to combine the two lists in order to see the full picture. Therefore it is not possible to consult any list which is presently available and identify a name, address and amount of compensation… It is only natural for heirs to want to know the full details of their families’ properties and businesses and the compensation received by the Claims Conference. This information is clearly available to the Claims Conference, and I do find it surprising that it has not been published by it in a comprehensive and comprehensible form, and indeed updated regularly.“
12. In conclusion, “to date, the Claims Conference has not published a comprehensive list of claims made and settled with the name of the relevant owner or the business, the address and the amount claimed or settled, although the Claims Conference has been in possession of this information for a substantial period of time. Had this information been made available at an earlier stage, it may well be that a greater number of heirs might have made claims either before the 1992 deadline, or perhaps, more realistically, before the 2004 deadline for claims on the Goodwill Fund… I do feel a sense of unease if it has been the case (and I cannot totally dismiss this on the evidence I have seen) that funds available for the Claims Conference’s programs were increased by the failure of owners and heirs to make timely claims for restitution or for payment under the Goodwill Fund due to lack of assistance by, or information from, the Claims Conference.”
13. However, the Claims Conference did not merely refuse to release information. It actively took steps to prevent heirs from seeking the relevant information of their property recovered by the Claims Conference. The report gives examples of the Claims Conference going to court to prevent heirs getting information of their assets under the German Freedom of Information Act “on the grounds of protection of intellectual property rights and trade secrets“.
14. As stated in the report, “ignoring requests for information by heirs, or indeed, even worse, the obstruction of their attempts to obtain information, is, in my view regrettable to say the least…”
15. The Gruder Report also relates to allegations of wrongdoing in relation to:
(i) the process of selling the properties by the auction house used by the Claims Conference (it has been reported in German media that the person appointed by the Claims Conference to oversee the sales was also a director of the auction house with the implications being obvious); and
(ii) allocations of contracts by the Claims Conference and excessive payments; and
(iii) conflicts of interest in relation to the allocation of funds by the Claims Conference to bodies represented on it.
The report did not deny these allegations but stated that it did not have sufficient evidence, remarking that “it is unfortunate that one Jewish organization” refused to cooperate “because it did not want to jeopardize its position as a distributor in the UK of funds disbursed by the Claims Conference” and also noting that “at least some of these organizations [represented on the Board] may not be entirely disinterested and objective in their support of the Claims Conference.”
I realize that this may appear complex and confusing to many who are not acquainted with the operation of the Claims Conference. But this can be no excuse for your organization which sends representatives to the Board of the Claims Conference.
More than anything else, the Gruder Report reinforces the urgent need for demanding transparency, accountability and term limits for the leaders of the Claims Conference.
The position of the Claims Conference that it has no duty and is under no obligation to cooperate with heirs has led to legal action in the United States by those seeking compensation and damages for Unjust Enrichment of the Claims Conference at the expense of the rightful heirs to recovered assets.
But, this is not merely a financial matter. There are overriding ethical implications. The statement attributed to the senior Claims Conference leader in 2007 that “there would be an abundance of Holocaust restitution money left over to be used for the community’s needs … after survivors were gone” demonstrates how power — the control of the disbursement of billions of dollars within the Jewish world — in the absence of checks and balances, can be intoxicating. The report illustrates how a small group of leaders – presumably well intentioned – over the course of time have simply lost focus of the goals of the organization on whose behalf they were entrusted to act. Unless term limits are imposed and leaders are replaced on a regular basis, the arrogance currently being manifested will be perpetuated and the leaders will be encouraged to continue to view the assets under their control as their personal fiefdom.
The response from the Chairman Julius Berman to the Gruder Report reflects the contempt which the leaders display towards criticism. Berman complained to the London Jewish Chronicle that the Board of Deputies of British Jews had breached its undertaking to give the Claims Conference an opportunity to review and discusses the issues. He either had not even bothered to read the report or more likely, is confident that no-one else will. Otherwise, how could he ignore the evidence of Gruder enabling the Claims Conference ample opportunity of responding to the concerns and criticisms.
I therefore urge each organization represented on the Board of the Claims Conference to honor your fiduciary obligations and ensure that the Claims Conference shall indeed act in the interests of those on whose behalf it was mandated to represent:
(i) The most basic task is to immediately commission a forensic audit, independent review and investigation of the Claims Conference and all its activities.
Consider how you would respond if a massive fraud involving the theft of at least $ 42.5 million was carried out for 16 years from within your own organization? Would you not demand accountability?
Would you conceivably contemplate authorizing the very people who failed to provide oversight the right to determine the terms and conditions for an internal investigation and have the investigators report to them?
Contrary to what has been publicized by the Claims Conference, the review by K2 Global Consulting is neither independent nor an audit. To quote their own definition, they have been engaged “to assist the Claims Conference with its review, evaluation and ongoing efforts to strengthen its claims process and internal controls”. (See the report http://www.k2global.net/claims-conference-info/)
The review must be fully transparent, genuinely independent and the terms of reference should be established by objective outsiders not in any way connected to the current leadership of the Claims Conference. The review should not be limited merely to the claims process which we already know was subject to a massive fraud, but must:
(a) include a forensic audit of each of the divisions to ensure that breakdowns or frauds are not occurring in other divisions; and
(b) review potential conflicts of interest; and
(c) investigate whether the decision making process has been tainted.
If all is in order, then the Claims Conference shall be able to move forward without being plagued by constant innuendo and allegations of impropriety.
The failure to insist on a genuine independent broad review and investigation will reflect not only on the current leadership of the Claims Conference, but each and every organization on the Board which has sat on the sidelines and refused to “rock the boat”.
(ii) Furthermore, in the light of the Gruder Report, I submit that it is imperative that term limits for all leadership positions be immediately implemented. This should be applied irrespective of the results of the audit and investigation. We are dealing with the control, administration and allocation of billions of dollars of the most sacred funds. The lack of regard for moral obligations to survivors and the callous disregard towards claims of rightful heirs to recovered property is inexcusable. We are not merely talking about a cavalier dismissal of moral and ethical obligations, but a betrayal of trust.
The Gruder Report does not deal with the lack of oversight and control which allowed the $ 42.5 million fraud to be carried out for 16 years by employees from the offices of the Claims Conference nor does it relate to the prior appeals for greater oversight which were ignored by management. But the Report demonstrates the attitude and mind-set of the current leadership, their refusal to accept any responsibility and the efforts to which they will go to avoid transparency and accountability.
To quote from the Gruder Report, each of you as a board member is entitled to expect that the Claims Conference has been acting “ethically and with the highest possible standards of integrity, transparency and sensitivity“. If there is the slightest doubt as to whether those standards have been maintained, you have a legal fiduciary obligation to act.
Jerusalem: December 22, 2010