Discussion of ombudsman’s probe into handling of fraud moved up on the schedule.
Stung by a sharply worded e-mail from a board member demanding an immediate copy of an ombudsman’s investigation into the Claims Conference’s handling of $57.3 million in fraudulent claims, a top official of the organization said it would be sent shortly.
The official, Reuven Merhav, chairman of the executive committee of the Claims Conference, said also that the agenda sent in advance of next week’s annual board meeting — which had the ombudsman’s report being discussed at the end of the two-day meeting — should not be read literally.
The board member, Stephan Kramer, a leader of Germany’s Jewish community, had demanded that the ombudsman’s report be sent to the board prior to the meeting so as not to “create the impression we are sweeping things under the carpet.”
“This would be a critical error with severe repercussions,” he wrote.
The report is keenly anticipated because it will deal with next steps after the conviction of 10 former employees, and 21 others, who were part of a 16-year scheme to steal from funds intended for Holocaust survivors. Some critics had urged that an independent investigation be held into who, if anyone, still involved with the Conference, was responsible for the lack of oversight.
Kramer noted that in the draft agenda of the meeting he received, the ombudsman’s report was slated to be discussed “almost [at] the end of the agenda. With all due respect, I think this would not be appropriate.
“The severity of the issue and the massive demands from leading persons and organizations in the Jewish world make it, to my mind, necessary to put the report much higher on the agenda,” he wrote. “The Claims Conference must make it clear to all that it assigns this topic top priority. …
He urged that the report be given the first day of the meeting since it will deal with “the most severe issue the organization is facing. We should not get into any other business before we have discussed and concluded on this matter. This is also a question of trust in the leadership of the Claims Conference — trust by the Jewish world and beyond it.”
In addition, a longtime critic of the Claims Conference, Isi Leibler, wrote in the Jerusalem Post Monday that placing the ombudsman’s report at the end of the agenda “can only be described as an unconscionable action.”
“Aside from making a mockery of governance and due process, relegating such a crucial issue relating to accountability and allegations of a cover-up to the end of the meeting, demonstrates that the leaders continue operating the organization like their personal fiefdom and treat the directors with utter contempt,” he wrote.
But in his e-mail, Merhav said he had spoken with Claims Conference Chairman Julius Berman and been “informed that that the issue will be discussed during the first day of our two-day meeting next week.”
In response to requests from The Jewish Week and the Forward that the board meeting be opened to the public and the press during the board discussion of the fraud, Berman said in a statement:
“It is the longstanding policy of the Claims Conference that its meetings of the board of directors are not open to the public.” He said the discussions “are often very frank” and members want to “feel free to speak openly.”
It is not clear when the ombudsman’s report — nor a report by a Select Committee Merhav chairs that also investigated the fraud — would be released to the public.
The board meeting is scheduled to begin Tuesday. It will be the first time the board has met since the conviction of all those arrested in connection with the fraud, including the ringleader, who had been in charge of the two reparations funds defrauded.
About $5 million has so far been recovered from the people who wrongly received it and another $3 million is being received in installments. In addition, judges have ordered that those who have already pleaded guilty pay another $1 million in restitution.
By the time all 31defandants have been sentenced, it is expected that the Manhattan U.S. attorney’s office will have asked that the rest of the $57.3 million be paid by the defendants as restitution.
Following the convictions, two Conference board members, Ronald Lauder, president of the World Jewish Congress, and Natan Sharansky, chairman of the Jewish Agency for Israel, publicly called for independent investigations into how the Claims Conference handled the fraud. But Berman decided instead to ask Merhav and three other board members to do their own investigation.
Merhav in his e-mail said his committee had been asked by Berman “to formulate an appropriate course of action for the Conference with respect to the issues surrounding the anonymous letter sent to the Claims Conference in 2001” that spelled out details of the fraud.
Claims Conference officials at the time all but ignored the letter, and the fraud was not discovered until November 2009; it is believed to have started in 1994.
That committee, in turn, asked the ombudsman of the Claims Conference, Shmuel Hollander, to conduct his own fact-finding investigation and report his findings to the committee. Merhav said Hollander was provided with all the resources necessary.
“We are now finalizing our report, which includes the findings of the ombudsman,” Merhav told the board in his e-mail. “Once completed, we will distribute it to the board of directors. It is an important matter that we take very seriously; therefore we think we should not be rushed before all information is taken into account.
The decision to close the board meeting comes as questions continue to be asked about how the organization could have permitted the fraud to continue for 16 years. In court papers filed June 10 in connection with a related matter, Sam Dubbin, a Miami a lawyer representing Holocaust survivors, cited the scandal in questioning the Claims Conference’s competency.
He noted “substantiated news reports concerning the Claims Conference’s negligence and oversight — or worse … and denials by current Claims Conference leaders about their personal involvement, knowledge, or responsibility concerning the 2001 evidence.”
Dubbin said the survivors he represents “believe these detailed and disturbing reports constitute such information `that might reasonably be expected to alter’” the court’s decision to allow the Claims Conference to handle the allocation of $54 million remaining from a $1.25 billion settlement of all Holocaust-era claims against Swiss banks.
In his papers, Dubbin said the survivors were asking the judge, Brooklyn Federal Court Judge Edward Korman, to appoint his own independent committee to investigate how the Claims Conference handled the fraud.
Dubbin referred in his papers to a May 13 letter from 18 survivors who form the executive committee of the Holocaust Survivors Foundation-USA. In it, the survivors cited what they said were a series of scandals over the years surrounding the Claims Conference — everything from the diversion of funds to a secret Swiss bank account, an Israeli court decision finding the Claims Conference “guilty of defrauding survivors,” and the Board of British Deputies findings “that the Claims Conference acted unethically towards the heirs of East German properties ….”
The survivors complained about a “lack of transparency, accountability, and survivor representation” in the Claims Conference. They have long objected to Korman’s reasoning that survivors in the former Soviet Union should receive a greater share than survivors living in the U.S., who can receive other benefits from the government. In this case Korman’s proposal is to allocate 75 percent of the $54 million, or $40 million, to survivors in the former Soviet Union and $1.6 million to survivors in the United States.
Although there are some who feared that Dubbin’s court papers might influence the German government to think twice about entrusting millions of dollars to the Claims Conference for distribution to qualifying survivors, Stuart Eizenstat, the Claims Conference’s special negotiator, said those fears are unfounded.
“The Germans were concerned when this first came out and they insisted on higher levels of auditing and transparency,” he told The Jewish Week. “They were told of the fraud before it became public. They were kept closely abreast of the investigation [into the fraud] and of developments in the trial.”
Eizenstat said the fact that Germany on May 23 signed an “historic agreement” to provide $1 billion for home care to needy survivors through 2017 is evidence of their faith in the Claims Conference.
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