Board members, outsiders, survivors to review of reparations organization's management in wake of fraud, but Berman survives as chairman.
A “thorough analysis of the current management of the Claims Conference” — including a review of its administration and governance — was ordered Wednesday by its board of directors, some of whom criticized the leadership for keeping the board in the dark about a letter in 2001 alerting them to a fraud within the organization.
The board said a Special Planning Commission comprised of board members, qualified persons from outside the organization and Holocaust survivors, should conduct the review. It directed the commission to also develop a “strategic plan” that would permit the Claims Conference to fulfill its mission “during the remaining existence of the organization.”
Since its founding in 1951, the Claims Conference, officially known as the Conference on Jewish Material Claims Against Germany, has paid $6.7 billion in German reparations to about 450,000 Jewish victims of the Holocaust, and negotiated with Germany for $70 billion in payments to more than 600,000 Holocaust victims, most of which was paid directly by Germany.
The board also approved as presented the slate of proposed officers, including the re-election of Julius Berman as the unpaid chairman. He has served as chairman since 2002 and although there had been calls by some in the community for his resignation, no one at the meeting suggested it or called for his defeat.
“I don’t have any sense that there was in the course of this discussion anyone voicing dissatisfaction with the internal management of the Claims Conference,” said Rabbi Andrew Baker, a board member representing the American Jewish Committee.
Reached Wednesday afternoon, Natan Sharansky, chairman of the Jewish Agency for Israel, voiced reservations about the prospective composition of the committee. Although it has not yet been selected, Sharansky said he had wanted the commission to be led by outsiders. "My proposal was that the commission mainly be led by independent, respected representatives of world Jewry," he told The Jewish Week. "Unfortunately, that was not accepted.
"There should be leaders from different foundations and some former judges from the state of Israel to make it respectable and professional," he said. "I'm not sure that is the intention of the leadership, and that is very unfortunate."
The board meeting, which was described as heated at times, was the first since the conviction of 31 people — 11 of them employees — for stealing $57.3 million from the Claims Conference by fraudulently approving claims applications. The board, comprised of two representatives from 26 Jewish organizations and another 12 individuals, was held at the offices of UJA-Federation of New York.
Rabbi Baker chaired the discussion regarding the fraud, the 2001 letter and how the leadership handled of it. He said that during the discussion, which totaled 6 ½ hours over two days, everyone was given a chance to speak. The meeting was held behind closed doors, despite requests from The Jewish Week and the Forward that the discussion regarding the fraud be opened to the public.
“I did not limit anyone so that people could at least express their feelings and hear everyone else, and see to what degree we could find consensus or a majority to move us in a forward direction,” Rabbi Baker told The Jewish Week.
“The resolution was adopted unanimously,” he continued. “Considering that some of the strongest critics were in the room, it was not an automatic achievement. This was not a run-of-the-mill issue, and it represented an accomplishment by people who hold different views about how things are managed and operated. But at the end of the day … it reflected the sense that the organization’s goal to aid survivors unites everyone — and that is what prevailed here and was reflected in this decision.”
Rabbi Baker said the discussion included the reports of the organization’s ombudsman and its Select Leadership Committee, both of which looked into the events surrounding the leadership’s handling of the 2001 letter. At the end of Tuesday’s discussion, Michael Schneider of the World Jewish Congress read a statement in behalf of his organization’s president, Ronald Lauder, and Jewish Agency Chairman Natan Sharansky, in which they expressed their “great disappointment and dismay” with the organization’s leadership for keeping the board in the dark about the 2001 letter.
“For far too long there has been a gap between the tireless efforts of the Claims Conference on behalf of the Jewish people and the growing perception that the organization is run like a closed club, with little transparency or accountability in its decision-making process,” they wrote.
“The Select Leadership Committee report presented today to the Board of Directors emphasizes the urgent need to address this problem,” they added. Rabbi Baker said their request for a continued investigation of the events surrounding the letter was put to a vote and that most people “felt we had addressed it as much as it is possible to do. There was only a handful who felt we needed to address it further. The vast majority understood what happened, considered the explanations sufficient, and thought it was time to move on.”
He said there has been much attention in the media to the 2001 letter, but that “focusing on the letter overstates its significance. The letter cited five examples of irregularities and it was dealt with at the time. In hindsight everyone recognizes that it was not dealt with appropriately.”
Rabbi Baker noted that one of those who dealt with the letter has since died and that another has retired. He said Berman, who at the time served as pro bono counsel, “was the first to say he found someone to look into it but that he did not pay attention to it in the years that followed.”
Asked if Berman discussed his actions, Rabbi Baker said: “He explained what he knew and did not know and that he forgot about it. … Everyone recognized that you had in 2001 information that had it been dealt with might have prevented all of this. When the fraud was discovered, I think everyone around the table believed” it was handled properly.
The existence of the 2001 letter was not shared with the board after the fraud was discovered, Rabbi Baker said, because “I don’t think anyone inside paid attention to the letter because it was not significant. Critics of the Claims Conference were critics before this letter was elevated in significance, but most on the board concluded it was not so significant.”
The board directed that the Special Planning Commission be convened as quickly as possible and report its progress to the board every three months. It may invite experts in various fields, such as demographers, and is supposed to complete its work and present a report at the board’s annual meeting next summer.
“The Claims Conference is faced with the need to focus on the future needs of the living survivors as they get older, more feeble, and suffer increasing health problems while the assured sources of funds needed to care for them is depleting,” the board resolution said.
The strategic plan to be developed, it said, should also include recommendations for the “promotion of appropriate Shoah research, education and remembrance even subsequent to the demise of the living survivors.”
Rabbi Baker said the composition of the committee and its size has yet to be determined but that the inclusion of survivors on the committee was made as an amendment to the proposed resolution.
“Everyone recognized that this needs to be a committee that has credibility inside and outside of the organization,” he said. “I believe that is what we’ll see.”
The ombudsman, in his report, a copy of which was obtained by The Jewish Week, attributed the fraud to mismanagement that led to the lack of oversight of Claims Conference employee Semen Domnister, who headed the two reparations programs that were defrauded.
“He was able to treat the department as his own domain and to maintain over many years a sophisticated and complex network of fraud on an enormous scale, without any of his formal superiors noticing what was occurring under their noses,” said the ombudsman, Shmuel Hollander.
“The possibility of fraud should have been minimized at all times,” Hollander continued. “Even with the writing on the wall, and the organization exposed to warning signs, the matter was not attended to…”
The warning letter, he added, “should, at the very least, have served as an alert to Mr. Domnitser’s superiors” — but there was no one “functioning in this capacity.”
Although he did not point any fingers, Hollander said that in 2001 the group’s executive director, Gideon Taylor, devoted much of his time “pursuing negotiations around the world” relating to programs on behalf of Holocaust survivors. Greg Schneider, who Hollander described as “Taylor’s right-hand man” and in 2002 became the group’s chief operating officer, was “left to bear the brunt of responsibility regarding internal matters.”
As such, Schneider managed allocations to organizations, most notably the Slave Labor Program that distributed $1.4 billion to 174,000 victims of Nazi persecution and their heirs in 87 countries.
Hollander said “the organization’s personal programs did not effectively benefit from his hands-on management (or that of anyone else), and was de facto left in the hands of Mr. Domnitser alone.”
He added that although Taylor “initiated attempts to introduce modern management and work methods into the Claims Conference … it is clear that during the relevant period, and indeed during the subsequent years, Mr. Domnitser and his department were not directly accountable to Mr. Taylor, nor was the management of the individual personal programs under Mr. Taylor’s direct supervision at any stage.”
Hollander concluded that the “absence of professional control systems, as well as the absence of computerization,” were key factors in enabling and facilitating the fraud.
But in a 21-page rebuttal, Schneider insisted that Hollander was simply wrong when he said that no one had supervised Domnitser nor examined the work of his department.
Schneider said he was the “main conceptual architect and driving force” behind the effort to computerize Claims Conference records, and that this could not have been done “without being involved in the details of the funds, their administration and working extremely closely with fund managers such as Domnitser…
“Ultimately, I cannot escape the fact that Domnitser and his accomplices stole tens of millions of dollars. And, while he was doing it, I was working closely with him — in the same office. There is not a day that goes by in the grueling four years since I discovered the fraud that I don’t replay events in my head, wondering what else I could have done. I considered Domnitser a trusted colleague. … I was lied to, fooled, hoodwinked, duped. I missed it. I am sorry.”
Although the ombudsman restricted his report to the 2001 letter, the Select Leadership Committee criticized current Claims Conference leaders for not informing the board or any of its committees about the 2001 letter or a cursory investigation conducted at the request of Berman, who in 2001 was pro bono counsel to the Claims Conference.
The committee added that the information remained concealed even after Claims Conference officials turned the letter over to the Justice Department in 2010 “for the purpose of the criminal proceedings.”
“The committee regards the failure to disclose these matters at any time to a committee of the board or to the board itself as totally unacceptable,” it said. “However, we have found nothing in the [ombudsman’s] report or otherwise to suggest any active concealing, or any attempt to deceive, by way of a cover-up of any of these events, as has been alleged in some quarters. The failures were in fact much more prosaic — part of a litany of lack of diligence, competence and judgment that, as the ombudsman has shown, characterized this event throughout.”
In his letter, Schneider, now the executive vice president of the Claims Conference, took exception to those comments. He wrote that since he uncovered the fraud in November 2009 and contacted the FBI, “Nothing — not one thing — about those efforts can be characterized as lacking diligence, competence, or judgment. Indeed, quite the contrary has been true.”
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