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.

(page 2 of 3)

Hollander’s findings were relayed to the full Claims Conference board in a report compiled by a special four-person committee. In an introduction to the report, the committee called for “a comprehensive restructure of [the Claims Conference’s] culture structures, administration, management and governance.”

But the report was almost instantly undermined by the resignation of two of the committee members, Abraham Biderman and Roman Kent, in protest at what they said was a flawed document. “I believe that the report is inappropriately pejorative, contains material factual errors, and does not take into account the substantial management improvements made subsequent to 2001,” Biderman wrote in a July 7 letter that was distributed to board members, announcing his resignation from the committee.

Hollander’s investigation was commissioned following a story in the Forward that Claims Conference officials failed to heed the anonymous letter, which alleged fraud against key personnel in the group’s New York claims processing office.

When the fraud was eventually discovered, in late 2009, two Holocaust funds, endowed by the German government and administered by the Claims Conference, had been defrauded of $57 million. But the committee found that the fraud might have been discovered had the 2001 letter been “properly addressed and investigated thoroughly.”

The allegations in the letter were investigated twice in 2001, first by a Claims Conference employee in Germany, then by a paralegal at the New York law firm of Kaye Scholer, where Berman was a partner.

Karl Brozik, who was the director of Claims Conference operations in Germany and died in 2004, oversaw the first investigation. Saul Kagan, the Claims Conference’s previous executive vice president, and Greg Schneider, the assistant to the executive vice president, were copied on some correspondence.

Gideon Taylor served as executive vice president of the Claims Conference and resigned in 2009, months before the fraud was discovered. He was apprised of both investigations.

Crucially, Hollander’s report found a key weakness in the management structure of the Claims Conference: The alleged ringleader of the fraud, Semen Domnitser, had no superior. Although both investigations were cursory, they “should have served as an alert to Mr. Domnitser’s superiors, had anyone been functioning in this capacity,” Hollander found. Since Domnitser had no superior, the “fraud continued — and was perhaps even expanded — for eight years.”

Hollander reported that “the absence of professional control systems, as well as the absence of computerization… constituted a key factor in enabling, and certainly in facilitating, the fraud.”

“The organization was governed in a manner unacceptable in both public and corporate bodies,” the report said. “The apportionment of authority and the organizational structure in no way matched the needs of the organization, which was characterized by unreasonable levels of centralization.”



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