N.Y. Probe of Charity Cites Mismanagement

By Ami Eden and Nathaniel Popper

Published February 03, 2006, issue of February 03, 2006.

A long-awaited report from the New York State Attorney General’s Office outlines serious financial mismanagement at the World Jewish Congress, including hundreds of thousands dollars of improper payments and loans to its former chairman and secretary-general, Rabbi Israel Singer.

The report constitutes an agreement, signed by representatives of the WJC and the Attorney General’s Office on January 31. It contains a laundry list of management problems at the WJC, including instances of five-star hotel stays and unaccounted for cash disbursements, although the attorney general deemed that none of the problems constituted “criminal conduct.”

Under the agreement, Singer — a lead player in maintaining Jewish ties with the Vatican and fighting for Holocaust restitution and reparations — will no longer be allowed to serve the organization in a capacity with “responsibility for financial management or oversight.”

Singer will have to return $132,000 in the next 90 days and already has returned more than $100,000 in connection with loans and payments that the state deemed improper. The agreement also identified several alleged instances where the WJC’s fund-raising efforts did not “formally comply with relevant state and federal laws.”

The report praised recent reforms at the WJC and said the WJC cooperated in the investigation. Under the terms of the deal, the WJC and its American branch have entered into the pact “without admitting or denying the attorney general’s findings.” The report comes one week before the WJC holds a governing board meeting in Jerusalem.

The WJC, a confederation of national Jewish organizations from around the globe, issued a press release Tuesday hailing the agreement and pointing to its conclusion that the financial mismanagement “did not compromise the core mission” of the organization, nor did it result in “identifiable losses of charitable assets.”

The organization announced that with the close of the New York probe, it has filed a defamation suit in Israel against its most vocal critic, Isi Liebler. Liebler, a former official at the WJC, was dismissed in 2004 after publicly criticizing Singer and the organization’s president, Edgar Bronfman, over alleged lack of accountability and financial oversight.

Liebler, in an e-mail to the Forward, also hailed the attorney general’s conclusions, saying it vindicated his campaign for reform at the WJC. The investigation, he wrote, “has forced the WJC to institute the reforms that I had been calling for and put an end to the system which enabled two individuals to run a publicly funded international Jewish organization like a personal fiefdom.”

The agreement comes after an 18-month controversy over the WJC’s finances and management, which officials at the organization have said could undermine its efforts on several fronts, particularly in the fight for funds to compensate Holocaust victims and their heirs. Despite the attorney general’s harsh assessment of Singer’s management, it appears that he will remain one of the Jewish community’s most visible negotiators on several issues.

Singer appears to retain the full support of the WJC and Bronfman, its chief patron. All operational responsibilities have been delegated to Bronfman’s other top lieutenant, WJC Secretary-General Stephen Herbits, and the position that Singer used to occupy — chairman of the governing board — was eliminated within the last two weeks. But Singer will remain chairman of the WJC’s recently launched high-profile policy council and the organization’s chief policy strategist.

“With the distinguished leadership of my top two lieutenants, Israel Singer and Stephen E. Herbits, the WJC will reach new heights in pursuit of its critical mission, and be a model for the non-profit community,” Bronfman said in a prepared statement issued by the WJC.

The agreement appears to clear Bronfman of responsibility for the problems, stating that while the former beverage magnate “has been instrumental to WJC’s many accomplishments, he did not exercise control over its day-to-day activities.”

In a prepared statement, Singer said: “I sincerely regret that at times my almost exclusive focus on execution of our mission diverted my attention from important administrative activities.”

Singer is also a leader at two major Holocaust restitution organizations, the Claims Conference and the World Jewish Restitution Organization. It appears he will be allowed to retain his position as president of the Claims Conference, where he leads the organization’s efforts to secure payments from European governments for Holocaust survivors.

“Without knowing all of the details and the facts with respect to the World Jewish Congress, it is clear that the role he plays so effectively within the Claims Conference on behalf of the survivor community is not impacted whatsoever by allegations and countercharges involved in the attorney general’s report,” said the chairman of the Claims Conference, Julius Berman.

Berman predicted that the controversy would not undermine Singer’s negotiating efforts.

“The decisions of foreign governments [regarding Holocaust-related payments] are predicated on long-term moral principles and go way beyond the identity of the individual that is sitting across the table at any given time,” Berman added.

The WJC has been under a cloud since former officials in the organization’s Geneva office raised questions about $1.2 million that had been transferred by Singer from the organization’s Swiss bank account. For the past year, Herbits, the WJC secretary-general, has maintained that the $1.2 million was for a general pension fund for WJC employees, that the money always was under the control of the WJC, and that top officials at the organization knew about the sum.

The attorney general’s findings appear to contradict Herbits’s account. Spitzer’s office found that the $1.2 million was to be used to set up a pension fund for Singer and one other top official, rather than for a general pension fund. According to the report, Singer did not tell other WJC officials about the funds and moved the money between bank accounts, eventually putting it in the control of an Israeli lawyer, Zvi Barak.

The agreement stated that all the money was returned with interest, and rejected any suggestion that Singer had any intention of using the money for personal gain. The problem, according to the report, is that the WJC did not control the funds when they were under Barak.

Singer’s behavior “violated his fiduciary duties as a trustee of charitable assets and reflected significant weaknesses in the financial administration and internal controls at WJC,” the agreement said.

For critics of the WJC, one of the primary questions since the beginning has been about what Barak, the Israeli lawyer, did with the money while it was in his control. The agreement says that Barak refused to provide the attorney general with a “full accounting” of where the money was when it was under his control in the summer of 2003. As a result, Barak will not be allowed to do any further work for the WJC until he provides documentation about how the funds were handled.

In addition to the issues surrounding the $1.2 million bank account, the agreement offers a scathing critique of how the WJC was run for the last decade. It states that until 2004, the organization was marked by an “absence of any oversight of financial matters by its governing bodies.”

The Attorney General’s Office found that three WJC officers — Singer, Steinberg and former Secretary-General Avi Beker — had received payments for personal expenses, such as life insurance for spouses, car lease payments, medical insurance and school tuition for children. Many of these payments were not reported to the IRS or on the WJC’s tax forms.

Under the agreement, the WJC is required to seek repayment from Steinberg and Beker, neither of whom returned phone calls seeking comment.

Singer has already repaid the WJC $88,875 that he received for these personal expenses. He also recently repaid $84,949 in loans he was given by the WJC in 2001 and 2003, which were not reported on the organization’s tax forms. The Attorney General’s Office also said that Singer received $308,000 for unused vacation and sick time after he retired as the WJC’s secretary-general, despite the lack of time and attendance records. The agreement deemed $132,000 of the sum to be “not reasonable compensation.”

The attorney general’s office also found that top WJC officials operated with no oversight in spending money during travels for the organization. Singer was given $671,600 in cash to disburse during his travels, and Avi Beker, the former secretary-general, was given $166,330. Beker and Singer did not have to account for how they used this cash, though the agreement says there is no evidence the cash was disbursed for “purposes unrelated to the mission of the WJC.”

Singer and other top officials also had personal credit cards to pay for expenses during their frequent travels — and the agreement says the officials “flew first class and stayed in five-star hotels.”

Singer repaid $28,380 in personal expenses that he charged to his credit card.

Despite these issues, Roman Kent, the treasurer of the Claims Conference and a Holocaust survivor, praised Singer’s work on restitution issues.

“I have seen nobody like him, who gave so much of himself, day and night to negotiate on behalf of the Jewish people,” Kent said. “He deserves all the credit for his work.”

Under the agreement, Spitzer’s office considers the matter “resolved,” provided that the WJC follows through on its reforms and upholds its other commitments.

“Today’s agreement recognizes the obligation of all charitable organizations — particularly those funded through the donations of members of the public — to safeguard their assets through effective financial oversight and accountability,” Attorney General Eliot Spitzer said in a statement.

In its statement on the agreement, the Attorney General’s Office highlighted several reforms undertaken by the WJC, all of which were adopted after Herbits became secretary general. Among the steps noted in the statement were the creation of an audit committee and the position of chief financial officer, the computerization of all financial records, the creation of an employee handbook outlining official procedures and policies, the implementation of travel and reimbursement procedures, and the creation of a new fund-raising entity (the WJC Foundation) to improve solicitation practices.

The WJC, in its press release, declared that the agreement with the Attorney General’s Office “summarizes the WJC’s successful ongoing structural enhancements to achieve the highest level of best practices.”

Though the agreement outlines many of the reforms, it also states that the deal should not be “deemed an approval of any of the WJC’s or [its American branch’s] practices or procedures.” According to the agreement, the WJC “shall make no representation to the contrary.”

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