July 17, 2013
http://wordfromjerusalem.com/?p=4731
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For more than a decade, there
have been passionate pleas for the Conference on Jewish Material Claims
Against Germany, the organization responsible since its inception for
the distribution of over $70 billion of restitution payments, to review
its management, governance and oversight procedures and prioritize the
distribution of discretionary funds so that aged Holocaust survivors
desperately in need of assistance could live out their remaining years
with a modicum of dignity.
The Claims Conference response
has been consistently hostile. It has demonized critics, threatened the
media with libel suits and accused me of conducting a vendetta and
jeopardizing its negotiations with the German government. At all times
it has brazenly insisted that its management and oversight procedures
were impeccable.
Even following a $57 million
fraud - the largest financial transgression ever experienced by a Jewish
organization - Chairman Julius Berman and CEO Greg Schneider adamantly
rejected pleas to strengthen organizational oversight and authorize an
external independent review. They insisted that the fraud, which was
orchestrated by a senior manager at the head office and perpetrated over
16 years, was merely a regrettable breakdown that could never have been
detected. They refused to accept accountability; they did not even
apologize.
Over the past month, in
response to media accusations of failed governance and a possible
cover-up, Claims Conference Ombudsman Shmuel Hollander, was commissioned
to prepare a report for a committee of directors handpicked by Berman.
The findings, which were
belatedly released to the Board of Directors just one day before its
annual meeting last week, were unambiguous, confirming the charges of
the organization’s harshest critics. It was a clear-cut condemnation and
an expression of lack of confidence in the Claims Conference
management, leadership, and Board of Directors.
The report notes that during the period 2001-2009 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”.
- operated with an “absence of professional control systems… [that] constituted a key factor in enabling and certainly in facilitating the [$57 million] fraud.”
Hollander’s findings show that
the management failed to address the fraud even when made aware of it.
It states that an “enormous hole in the control mechanisms sent out an
invitation to the thief” and that “even with the writing on the wall,
and the organization exposed to warning signs, the matter was not
attended to.”
The report goes further,
concluding that management failures were not restricted to the $57
million fraud. According to the report, the scandal 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”.
A key piece of evidence in the
accusations against the Claims Conference is an unsigned letter sent to
the organization in 2001 detailing and potentially exposing the nature
of the fraud.
Despite the debate over whether
or not there was a deliberate attempt to cover up this letter, it is
indisputable that Berman - acting in 2001 as the Claims Conference’s
counsel - failed to adequately investigate its contents. The Board was
not informed of the letter’s existence, neither at the time of its
receipt in 2001 nor on the discovery of the fraud in 2009. Indeed, had
it not been for the sharp eye of a journalist for The Forward,
who picked up an oblique reference to the letter whilst attending court
during the fraud trial, it would have remained concealed to this day.
As the Ombudsman’s report
attests, the Claims Conference’s dysfunctional organizational culture of
secrecy and opacity enabled this concealment to take place. It
concludes that “no one who was aware of the 2001 letter [including
Berman, and CEO Greg Schneider] treated it with the gravity that it
demanded at the time or examined or supervised the work of the
department where the fraud took place…In this respect the management of
the letter and the report [undertaken by Berman’s law firm] was a
symptom of a more serious problem”.
In any functional organization
or public institution, such a damning report necessarily leads to the
resignation of the parties involved and raises major questions
concerning the fiduciary responsibilities of the Board of Directors. Not
so in the case of the Claims Conference.
Indeed, ignoring the
incriminating report, the organization presented a list of nominated
officers, including Chairman Berman and CEO Schneider, as a bloc to the
Board at its annual meeting last week. The Board was obliged to accept
or reject the list in its entirety. To maintain a façade of total
unanimity, abstentions were not recorded. Board members were quietly
warned that if they failed to endorse the list they would bear
responsibility for the dissolution of the Claims Conference.
The majority of directors, true
to form, “unanimously” endorsed the list of nominees, including those
directly responsible for the mismanagement and fraud. Despite the
findings of the Ombudsman’s report, the apathetic refrain repeated again
and again by Berman apologists was “Yes, they made mistakes but it is
over. Let us move forward”.
To their credit, the Chairman
of the Jewish Agency, Natan Sharansky, and the President of the World
Jewish Congress, Ronald Lauder, who head the two most significant
organizations affiliated with the Claims Conference and represent the
bulk of world Jewry, fully endorsed the Ombudsman’s report. Both
expressed “great disappointment and dismay” at the failure of the
leadership to disclose the 2001 letter warning of the fraud to the
board. Sharansky referred to the “growing perception that the
organization is run like a closed club, with little transparency or
accountability in its decision-making process”. He called for the
creation of a committee, totally independent of the management or
leadership, to review the organization.
The dysfunctional Board
summarily rejected this call, highlighting that it is disproportionately
represented by minor and even marginal organizations and ad hominem
members lacking accountability to anyone. Furthermore, that that many of
its member organizations themselves receive funding from the Claims
Conference and therefore have a conflict of interest.
Neither Natan Sharansky nor
Ronald Lauder partook directly in the vote, and, to his credit, Jewish
Labor Committee’s Sam Norich, a former fervent supporter of Berman, made
an impassioned speech and resigned in protest.
Yet even allowing for the abstentions, support for the status quo was overwhelming. CEO Greg Schneider, subsequently boasted to The Jerusalem Post
that “Our board spoke loudly, clearly and unanimously. It was inspiring
to see unanimous agreement that all extraneous issues, from
personalities to internal Jewish politics were put aside so that the
Claims Conference can continue in successfully providing for Holocaust
survivors.”
In line with this fatuous
remark, the Board rejected the call of Sharansky and Lauder for an
independent review, and again approved the creation of an internal
committee to assess whether the current management has the capacity to
implement future strategic plans. Such internal committees dominated by
Berman supporters have become a standard procedure by which the Board
buries embarrassing matters.
There remain serious fiduciary
issues at stake. The report stated that auditing procedures were
“neglected in terms of both resources and personnel… as required in the
body handling monies on such a large scale.” Yet the Board failed to
appoint external auditors to conduct a forensic audit to ensure that
there were no additional skeletons in the closet – a standard procedure
for organizations in which embezzlement has taken place.
Berman and Schneider’s failure
to disclose the 2001 letter to the Board also represents a breach of
fiduciary responsibility. And the Board itself clearly has a fiduciary
obligation to ascertain whether the negligence of Berman’s law firm in
failing to adequately investigate the $57 million fraud in 2001 exposes
it to liability.
The Forward
has gone further to question whether the violations of fiduciary
obligations on the part of the Board and Berman for failing to
adequately investigate the fraud and take adequate measures to ensure
appropriate checks and balances were in place constitute a criminal
offence.
And there is the matter of
Chairman Berman himself. Despite his awareness that retaining the
chairmanship would irretrievably compromise the reputation of the
organization, Berman canvassed unabashedly to retain his position. He
succeeded in being re-elected, enabling him to carry on with business as
usual despite the devastating finding that for 11 years he has presided
over an organization handling billions of dollars of restitution funds
without effective controls, oversight or management. It is simply
inconceivable that under such circumstances and facing a conflict of
interest, the Chairman of such an immensely powerful charitable
organization could retain his role.
By enabling the Chairman and
his management team to retain their positions and continue to run the
organization like a private fiefdom, the Board of Directors has
de-legitimized the Claims Conference itself. It has forfeited its
legitimacy and moral authority to speak in the name of the Jewish people
and survivors. In the eyes of world Jewry, despite the massive sums of
money from Germany which it disperses, the organization is perceived as
an example of the abuse of power on a grand scale.
But more disgraceful than the
lack of organizational integrity, is the Claims Conference’s failure of
moral integrity. At its last Board meeting, the directors again
displayed an utter failure to recognize the moral responsibility, if not
the sacredness, of the task with which they have been entrusted by
declining to implement proposals urging a diversion of funds from other
projects to ease the plight of aging Holocaust survivors in the twilight
of their lives.
What will happen next? The Board’s failure to act may well encourage intervention from outside regulatory bodies. According to The Forward,
the office of the New York Attorney General is monitoring the
situation. If this were to lead to a full-blown investigation, it will
cause further disgrace and humiliation in the Jewish world.
The writer’s website can be viewed at www.wordfromjerusalem.comHe may be contacted at ileibler@leibler.com
This column was originally published in the Jerusalem Post and Israel Hayom
Some of my recent articles:
En Route to Becoming a Banana Republic (July 11, 2013)
Will the Claims Conference Board Act Before it is Too Late? (July 2, 2013)
Teheran and Islamic Fundamentalism: Facing Realities (June 24, 2013)
Chief Rabbinate Electoral Machinations (June 17, 2013)
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