February 2010 was a time of high tension for top officials at the Jewish organization that processes restitution claims for Holocaust survivors.
Just three months earlier, they had discovered the existence of what would turn out to be a massive, multimillion-dollar fraud taking place at the agency, the Conference on Jewish Material Claims Against Germany. It was, they discovered, being facilitated by Claims Conference employees right under their noses. And, as would eventually be revealed, it had been going on for 15 years and had netted thousands of participants about $57 million meant for needy Holocaust survivors.
Initially, no one but the small circle of people at the very top of the Claims Conference knew about the fraud’s existence, along with the outside law firm they had retained and the FBI, which had been informed and was investigating.
Haim Roet, a former World Bank economist and recent appointee to the Claims Conference board, was not part of this tight circle. But based on his experience with the boards of other major organizations, he knew something was deeply wrong with how the Claims Conference handled the large volume of claims submitted to it, and with how it accounted for the billions of dollars that passed through its channels, all with so few auditors. For months, he protested to Claims Conference officials that their methods for tracking all this had to change.
But Claims Conference C.E.O. Greg Schneider and board chairman Julius Berman refused to relay his demands to other board members. As revealed in an email exchange obtained by the Forward, they insisted that his concerns could merely be presented as background material at the group’s annual board meeting in the summer of 2010.
Finally, in a Feb. 14, 2010 email to Schneider — just days after board members were told of the fraud’s existence — Roet demanded “an objective evaluation of the operations and management of the Claims Conference and a reasonable staff for Internal Audit… to prevent, as much as possible, the risk of fraud.”
In June 2010, when Berman refused to give Roet email addresses for his fellow board members so he could inform them of his misgivings, Roet resigned, determined, as he put it, not to be “a rubber stamp for decisions taken by the chairman.”
The Claims Conference did not respond to several requests from the Forward to interview Berman. But Roet remains upset to this day about Berman’s rebuff of his suggestions for preventing fraud even as they were scrambling to deal with one.
“I was astonished,” Roet said of the first and last annual board meeting he attended in 2009 that gave rise to his concerns. The majority of board members there failed to challenge Berman on anything, he said, adding, “People came from all over the world… and they didn’t open their mouths.”
Today, Berman faces mounting questions about how he and some of those same top executives handled a prior tipoff that they received about the massive scam back in 2001, some eight years earlier, but which they failed to follow through on. Berman, who has rejected calls for his resignation as board chairman, has announced the establishment of a special committee to investigate the issue.
It’s not the first time that Berman has responded to a crisis in this way. But previously, the principal focus of such investigations has been Claims Conference spending. This may be the first time Berman has called for an investigation into the actions of his organization’s top leaders, including himself. And this time, the tactic of deploying an internal inquiry is under fire from important voices both within and outside the Claims Conference.
Jewish Agency Chairman Natan Sharansky and World Jewish Congress President Ronald Lauder, both Claims Conference board members, are among those calling for an independent probe of the whole issue by outside investigators.
Still, the tactic of establishing an in-house inquiry to stanch criticism of the Claims Conference is one that has worked well for Berman in the past.
In 2007, the Claims Conference announced that its on-staff auditor would examine the circumstances surrounding $700,000 in payments that a grantee gave to a consultant close to Israel Singer, the Claims Conference’s president at the time. Questions had been raised about what, if anything, the consultant, Curtis Hoxter, had done to earn this money. During the period in question, Singer was also involved in negotiations to join Hoxter’s Manhattan public relations firm as a partner.
Singer adamantly denied having had any involvement in the Claims Conference grants, which went to March of the Living, a group that takes young Jews from around the world to Auschwitz for Holocaust education tours. But he withdrew from running for re-election as board president later that year.
At the time the controversy arose, Claims Conference spokeswoman Hillary Kessler-Godin said its auditor’s “major conclusions” would be made public. In 2012 — five years later — the conference’s chief auditor, Yigal Molad Hayo, issued a one-paragraph report in his annual summary, saying that he had found no evidence that Claims Conference funds had been misused.
Hayo said that one area of “unresolved questions” remained, but because the Claims Conference had “no jurisdiction over, or ability to pursue this matter any further,” the Claims Conference audit had been closed.
Hayo added that March of the Living had agreed to establish an “independent investigative body” to continue with its own probe.
“Of course, we trust that the result of this investigation will be reported,” Hayo said. The March of the Living did not respond to a query from the Forward on what follow-up, if any, it has conducted.
In the fall of 2010, another crisis of sorts arose when Berman came under pressure to appoint a special committee to look in detail at Claims Conference spending. After months of delay a committee for allocations policy review was formed, and, in 2011, it reported in depth on the organization’s funding policies. It looked at a host of contentious issues, such as grants for Israeli hospitals, social welfare spending, and funding for Holocaust research and education.
The committee’s report largely endorsed previous Claims Conference policy, though it did air some criticisms.
Berman will no doubt be anxious for a similar result from this latest ad hoc group, whose four members he has appointed. The group, known officially as the “select leadership committee,” will be responsible for investigating Berman’s own activities and those of other top Claims Conference officials when the early warning of fraud arrived in June 2001. The warning came in the form of a detailed anonymous letter, first reported on by the Forward in May, that implicated a handful of Claims Conference employees in submitting or approving fraudulent claims. It described five such claims in detail and named some of the key officials involved — officials who were prosecuted only eight years later, when the emergence of additional evidence moved Claims Conference executives to revisit the issue. Eventually, 31 individuals, including almost a dozen former Claims Conference employees, were convicted of or pleaded guilty to taking part in the fraud.
But Claims Conference officials failed to put a halt to the fraud in 2001, despite a preliminary investigation that supported many of the letter’s allegations.
A couple of months later, in September 2001, Berman himself oversaw a second probe. He assigned the actual inquiry to a paralegal at Kaye Scholer, the law firm at which he was a partner.
According to an eight-page report, obtained by the Jewish Telegraphic Agency, the paralegal recommended further questioning Semen Domnitser, the Claims Conference employee eventually convicted as the scam’s ringleader, and investigating the apparent cases of fraud more deeply. The report went from Berman to Gideon Taylor, then the Claims Conference’s executive vice president, with a request for his input. Yet nothing further appears to have happened.
In a statement the Claims Conference released on May 14, before the existence of Berman’s investigation was disclosed, Kessler-Godin, the agency’s spokeswoman, blamed the group’s failure to stop the fraud in 2001 exclusively on Karl Brozik, the director of Claims Conference operations in Germany.
Brozik, who oversaw the initial inquiry, died in 2004.
Berman, who is a member of JTA’s board, refused to discuss the details of his own inquiry with JTA. And his decision not to speak to the Forward made it impossible to get his perspective for this report.
But since the Claims Conference’s February 2010 public disclosure of the fraud, Berman has issued a series of forceful denials that he or any other Claims Conference leaders could have foreseen it.
“I’m more than happy for anyone to show how I should have known” about the fraud, Berman told the New York Jewish Week in November 2010. “I’m prepared to accept the theory that if a member of the board knew or should have known, he should rethink whether to stay on. But what happened is so far removed from what we do.” Berman added: “When all the facts are known, I doubt very much if anybody rationally would have been able to suggest that someone along the line would have known there was a problem.”
In an interview with JTA published May 23, Berman described his role as simply that of a pro bono counsel. Other than “fielding the occasional phone call” — as JTA put it — “and showing up to one-day-a-year meetings,” Berman was depicted as having very little involvement with the Claims Conference.
But according to the Claims Conference’s annual report for 2001, in addition to serving as counsel at the time, Berman was a board member who served that year on the control, or audit, committee and on the executive committee.
Less than two years later, as chairman, Berman rose to become the most powerful member of the Claims Conference board with huge influence over the hundreds of millions of dollars that the group pays out each year. According to the 2003 annual report, Berman was a member of seven committees and chairman of another five committees, including the allocations committee, the U.S. allocations advisory committee and the Israeli allocations advisory committee. By then he was also the board’s president, a position he steadfastly clings to today.
Contact Paul Berger at firstname.lastname@example.org Follow him on Twitter @pdberger