Yet another scandal

Here in Israel, every time we felt that we had reached rock bottom in terms of corruption, we were confronted with yet more layers of sleaze and scandal. But ultimately exposing this cesspool into the sunlight enabled the public rage to bring about the greatest clampdown against improprieties Israel has ever experienced. As a result, democracy triumphed and a new regime, based on governance and financial transparency is emerging.

There are parallels in the Diaspora. Many of you have followed the near meltdown of the WJC when the concentration of power and absence of checks and balances paved the way for corruption. In recent weeks we believed the scandal was over. Alas that was not the case, as evidenced by the devastating attached exposé jointly written by investigative journalists from the New York Jewish Week and the Israeli business daily, Globes. It demonstrates that the WJC scandal has parallels in one of the most sanctified Jewish charities in the world – the March of the Living.

Not only do familiar names involved in the WJC imbroglio reappear, but ultimately it also threatens to tarnish the name of the most important foundation of the Jewish people, the Conference on Jewish Material Claims against German (Claims Conference). There is surely now a desperate need to take swift action to ensure that impeccable transparency and open management are implemented within this hallowed organization.

Each of us is obliged to demand that the organizations involved reform themselves and ensure that such outrages can never recur.

Isi Leibler

Holocaust Cash Went To Shadowy Pal Of Ousted WJC Leader
Larry Cohler-Esses and Ran Dagoni
Embattled Israeli Finance Minister Avraham Hirchson
An internationally known Holocaust education group disbursed — apparently illegally — more than $700,000 to an associate of an Israeli cabinet minister now under investigation for corruption, a joint investigation by The Jewish Week and the Israeli business daily Globes has learned.

In 2003, March of the Living, a New Jersey-based charity, began payments totaling $709,000 to Curtis Hoxter, who is also closely tied to former World Jewish Congress leader Israel Singer. The group began its payments to Hoxter the same year Singer was instructed to stop funneling unauthorized payments to him via the World Jewish Congress — payments that had by then totaled $657,600.

During this time, Singer was also involved in negotiations to join Hoxter’s Manhattan public relations firm as a partner.

David Machlis, president of March of the Living, told The Jewish Week that it was Avraham Hirchson, the group’s founder and now Israel’s minister of finance, who introduced Hoxter to the group and urged his hiring. Hirchson, a key partner of Israeli Prime Minister Ehud Olmert, “suspended” himself last week as finance minister pending the outcome of a police investigation. He is suspected of embezzling millions of dollars in Israeli health care and union funds prior to taking his cabinet position.

Hirchson’s Tel Aviv attorney, Yakov Weinrot, confirmed it was his client who brought Hoxter to March of Living. But, said Weinrot, Hirchson “did not realize his salary would be so big.” Weinrot emphasized that March of the Living was a “independent entity,” though Hirchson founded the group and ran it for many years.

Singer was forced out of the WJC in March after being removed from positions of financial responsibility there in 2006—the year an investigation by then-Attorney General Eliot Spitzer found Singer and Elan Steinberg, executive vice president of WJC’s American Section, responsible for financial mismanagement of the group. Steinberg, who left WJC in early 2002, was gone for much the period during which Hoxter received his payments.

According to WJC sources, Singer and Hirchson have been close since at least the mid-1990s when Hirchson was chairman of the Israeli Knesset committee devoted to regaining Jewish assets lost in the Holocaust, a cause that Singer led.

“They were friendly on a social basis and went out together on social occasions,” recalled one WJC source. “Hoxter has even been a visitor at Singer’s home.”

Hirchson’s March of the Living, a Jewish identity program that takes Jewish teenagers to Holocaust sites in Poland and then on to Israel, receives major funding from the Conference on Jewish Material Claims Against Germany, of which Singer is still president.

Eliezer Singer, Israel Singer’s son, relayed a statement from his father, who he said was traveling abroad and unavailable: “I’m not involved in allocating Claims Conference funds and certainly have no say or interest in any consultants that grant recipients might choose to hire,” Singer’s statement said.
According to tax records, the March of the Living payments to Hoxter took place over three years and were purportedly for fundraising services. But Hoxter has never registered with the New York State attorney general as a fundraiser or fundraising counsel, and is unable to explain what he did for payments he received.

“It was a minor activity,” he said. “I did fundraising, basically an activity to advise them to run a campaign in the U.S.”

Asked what fundraising activity he had conducted on the group’s behalf, Hoxter said, “I have no idea. I have no recollection. It was just something I assisted on. I prefer not to go into any details. It was not a major activity. I’d have to check my records.”

Hoxter, 85, said he had helped the group make “contacts.” Asked to name some of the contacts he facilitated, he replied, “I have no ideas about details.”

For March of the Living, the payments to Hoxter were anything but minor. In 2003, tax records show, his fee of $279,200 constituted more than one-third of the group’s budget for that year.

Who Is Hoxter?

Born in Germany to Jewish parents in 1922, Hoxter has, during his long public relations career, represented — apparently simultaneously — both the WJC and Swiss banks charged by the WJC with withholding funds from Holocaust survivors after World War II.

A December 1998 New York Times article— published during the WJC’s struggle for restitution from Swiss and German banks that had held onto Jewish assets after World War II — described Hoxter as one of a number of Jewish lawyers and consultants “defending the companies from which compensation is being sought.”

Hoxter, who fled Germany in 1938, before the Holocaust, “has spent much of his career representing German and Swiss companies, a role he says his first wife, now deceased, viewed with displeasure,” the Times reported then.

Yet just six months earlier, a roster of participants at a State Department conference on Holocaust restitution listed Hoxter as adviser to the WJC’s delegation.

In his book on the restitution controversy, “Imperfect Justice,” Stuart Eizenstat, the Clinton administration’s point man on the issue, recalled, “The Swiss would later jokingly refer to Hoxter as a ‘double agent,’ but in reality he was Singer’s man, a shadowy but effective figure who mysteriously turned up at key moments.”

Despite some calls for his removal, Singer remains president of the Claims Conference, which has granted more than $7.4 million to March of the Living since 1998. Claims Conference officials insist that Singer has never had any role in its allocations process.

“We are not aware of anyone from the Claims Conference making such a recommendation,” said Hillary Kessler Godin, the conference’s communications director, when asked if any conference officials had urged March of the Living to hire Hoxter.

The Claims Conference, which supplied grants to March of the Living even predating Singer’s tenure as president, designated its funds to the group exclusively for scholarships, Godin noted. The funds enable high school students to join March of the Living’s annual Holocaust education trips to Poland and Israel, she said.

But former WJC governing board chairman Isi Leibler, who first discovered Singer’s payments to Hoxter at the WJC and raised alarms about Singer’s financial practices there, said, “That March of the Living paid Hoxter massive, yet unexplained rewards while being funded by yet another group led by Singer can only be described as unconscionable and obscene.”

He dismissed the defense that Claims Conference money funded only scholarships, noting money is fungible.

“Claims Conference officials have the obligation of overseeing and ensuring that grants to organizations like the March of the Living are properly employed,” Leibler wrote via e-mail. “In the absence of any rational explanation, their failure to do so is an indictment, and every effort must now be employed to recoup these funds.”

Spitzer’s probe found that the earlier WJC transfers to Hoxter occurred from 2001 through 2003. But Hoxter’s accountant wrote the then-attorney general that Hoxter had “no documentation or description of services performed, or time records” to account for any WJC work during this period. The payments were never reported on WJC’s tax records, as required by law, a failure Spitzer blamed on the group’s auditor.

“Hoxter was secretly receiving these funds,” said Leibler. “The payments were never approved, and not a single WJC official but for Singer even knew he was on the payroll.”

In late 2003, when Leibler and Elan Steinberg, then WJC’s senior adviser, discovered the payments, Steinberg asked Singer to justify further outlays to Hoxter, Leibler related. “Singer declined to do so. Consequently, the payments to Hoxter were immediately terminated.”

“The claim that no one at the WJC knew about Hoxter is simply false,” Israel Singer retorted via an e-mail his son relayed. “The record shows he worked closely with senior WJC leaders since the late 1980s on many issues ranging from [Austrian President and former SS officer Kurt] Waldheim to restitution.”

But Leibler’s complaint is that no WJC officer besides Singer knew Hoxter was working for — not with — WJC; and at a salary ranging from $203,400 to $232,400 per year, making Hoxter the WJC’s American Section’s second highest paid employee.

A follow-up question to Singer on this point via e-mail elicited no response by press time.

Crossing The Charity Law Line

Under state law, charities and their fundraisers are obligated to register and file tax reports with the state attorney general if they raise more than $25,000 in New York. Fundraisers must also file copies of contracts with charities using their services. Despite the fact that March of the Living far exceeded the state threshold, neither it nor Hoxter are registered. Willful failure to register is a criminal misdemeanor.

Machlis, March of the Living’s president, denied his group had to file these documents. “Not including funds generated through the Claims Conference, which is not a public solicitation, virtually no funds were raised in New York,” he said.

But charities law expert William Josephson, who headed Spitzer’s Charities Bureau, said the Claims Conference’s money could not be excluded. “The statutory definition of ‘solicit’ is not dependent on whether the solicitation is public or private. It covers any solicitation,” he said.

Machlis did not respond to repeated requests to see a copy of any contract his group had with Hoxter, outlining work he had agreed to do.

Any misuse of Claims Conference funds, even indirectly, would be regarded as something akin to desecration in many quarters. The money comes from governments and institutions that were complicit in victimizing Jews during and after the Holocaust, and is meant to compensate its survivors and their heirs. A smaller amount is reserved for grants to groups involved in Holocaust education, research and remembrance, such as March of the Living.

March of the Living denied Singer had anything to do with its payments to Hoxter. But the disclosure by Machlis, its president, that Hirchson brought Hoxter to the group may open up more questions than it answers about the tangled ties linking Singer, Hirchson, Hoxter, and a fourth individual named Zvi Barak.

Barak, Singer’s longtime attorney, is also one of Hirchson’s longtime associates and the business partner of his son, Ofer Hirchson, in the Hirchson-Barak Corporation.

Barak was intimately involved in Singer’s WJC financial controversies. Spitzer’s probe found that Singer had improperly transferred $1.2 million in WJC funds from a Swiss bank to a custodial account in London controlled by Barak.

Spitzer also discovered that between 2001 and 2003, Barak and Singer were in active negotiations to join Hoxter’s p.r. firm. Barak circulated several versions of a memorandum of understanding outlining proposed terms for a partnership. One version obligated Singer to bring to Hoxter $2 million in clients annually for two years before he could become an equal partner. According to Spitzer’s probe, the draft memoranda were never signed or implemented.

In 2004, Barak’s relationship with Hirchson’s son sparked a Holocaust restitution controversy of its own. Barak worked then as advisor to a special Knesset committee investigating Israeli banks that, like some Swiss banks, had never returned millions of dollars in deposits from Holocaust victims after World War II.

Barak provoked a furor when, at a Knesset committee meeting, he rejected the conclusion of five accounting firms that the Israeli banks should return more than $172 million to Holocaust survivors or their rightful heirs. He instructed the accountants to rework their findings using new guidelines suggested by the banks, according to Israeli press reports of the meeting. This reduced by about 90 percent the compensation the Israeli banks owed survivors and their heirs.

It later emerged that the Hirchson-Barak Corporation was heavily in debt — for more than $26 million — to the banks in question; a fact Barak had not disclosed when asked about conflicts of interest before he became the Knesset committee’s adviser. Challenged on this, Barak replied that the debt was corporate, not personal, so there was no need to disclose this — a response the Knesset’s legal adviser accepted.

‘Suspicious Connections’

The tangle of relationships between Hirchson, the March of the Living founder and Israeli cabinet minister; Barak, his longtime associate and also Singer’s attorney; Hoxter, the p.r. consultant, Hirchson associate and longtime Singer friend; and Singer himself adds fuel to the central question:

What work did Hoxter — an octogenarian who has never registered as a fundraiser — do for the $1.36 million he got from two organizations tied to members of this quartet?

Last week, the Claims Conference announced its in-house financial controller, Yigal Molad, was launching an “in-depth audit” of grants it had made to March of the Living in response to the Israeli police investigation of Hirchson and “recent allegations in the media.”

“Even more than other public funds, restitution and reparation monies are sacred,” said Menachem Rosensaft, founding chairman of the International Network of Children of Jewish Survivors. “It is unconscionable that any funds, let alone, hundreds of thousands of dollars, intended to benefit Holocaust survivors, should be funneled instead to feather the nest of a shadowy figure with highly suspicious connections to both Avraham Hirchson and Israel Singer.”

Larry Cohler-Esses is Jewish Week editor at large; Ran Dagoni is Washington correspondent for Globes, Israel’s leading business daily newspaper.

Editor’s Note: In 2002, Israel Singer sought to recruit one of the authors of this article, Larry Cohler-Esses, for a job with the World Jewish Congress. Investigators for then-New York Attorney General Eliot Spitzer later interviewed Cohler-Esses about that meeting.