How Anonymous 2001 Letter Shook Claims Conference to Foundations

Julius Berman Wins Reelection Despite Botched Fraud Probe

Happier Times: Embattled Claims Conference board chair Julius Berman (left) signs a financial agreement with the German government in May. Reuven Merhav (center) has signed a report that harshly condemns the organization’s management while Roman Kent (right) was one of two members of the four man committee who refused to sign the report.
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Happier Times: Embattled Claims Conference board chair Julius Berman (left) signs a financial agreement with the German government in May. Reuven Merhav (center) has signed a report that harshly condemns the organization’s management while Roman Kent (right) was one of two members of the four man committee who refused to sign the report.

By Paul Berger

Published July 10, 2013, issue of July 19, 2013.
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A single, anonymous letter was the focus of attention as dozens of board members met in New York from around the world at the annual meeting of the organization responsible for allocating billions of dollars in Holocaust restitution funds.

The 2001 letter, which warned of a fraud that went unheeded and that turned out almost a decade later to total $57 million, created sharp divisions among board members of the Conference on Jewish Material Claims Against Germany as they met on July 9 and 10.

The debate about how the letter was handled threatened to unseat the group’s long-standing chairman, Julius Berman. But Berman survived the vote to continue as chairman of the group for the 12th consecutive year.

Although Berman remains in his post, the letter may pose a threat to directors and senior officers — past and present. That’s because an investigation into the Claims Conference’s handling of the letter, carried out by its ombudsman, Shmuel Hollander, found serious managerial and administrative failings.

According to Hollander’s report, which was released to board members two days before the meeting, Claims Conference officers and Berman, who served at the time as pro bono counsel, failed to investigate the letter’s warnings adequately. They also failed to inform the Claims Conference board of the letter, both when it was received in 2001 and during the past few years, after the letter was given to Preet Bharara, the U.S. Attorney for the Southern District of New York, to be used as evidence in a trial against a trio of the fraudsters.

Laura Solomon, founder of a Pennsylvania law firm that specializes in representing not-for-profits, said Hollander’s report suggests that Claims Conference directors and officers broke the law.

“The failure to share the 2001 letter with the board, and to take all necessary steps to investigate, report to the proper regulatory authorities and stop fraud of this magnitude suggests a serious breach of those fiduciary duties,” Solomon said.

Solomon added that officers or board members who had a fiduciary responsibility in 2001, even if they have subsequently resigned from the Claims Conference, could be liable.

Such crimes would be investigated in New York by Attorney General Eric Schneiderman. Even before Hollander’s report was released, a spokeswoman for Schneiderman said his office had been alerted to issues at the Claims Conference and was reviewing the situation.


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