EXCLUSIVE: FEGS Creditors Plan To Sue Failed Charity Execs — And Accounting Firm

By Josh Nathan-Kazis February 14, 2017

Creditors left in the lurch by the collapse of the massive Jewish social service agency FEGS appear to be preparing to sue a former executive who took a $92,000 bonus as the charity imploded.

In papers filed on February 7, attorneys for FEGS agreed to allow the creditors to bring lawsuits lawsuits against FEGS’s former executive vice president, Ira Machowsky, former president, Gail Magaliff, and accounting firm, Loeb & Tropper.

If they are filed, these lawsuits would represent the first efforts to hold FEGS managers responsible for the charity’s implosion.

In their filing, the attorneys said that FEGS’s estate “may have claims” against Machowsky and Magaliff for “negligence and breach of fiduciary duty,” and against Loeb & Troper for “negligence and aiding and abetting breaches of fiduciary duty.”

The Forward reported in 2015 that Machowsky took a $92,000 bonus one month before FEGS admitted to donors that it had lost $20 million. He also championed a for-profit FEGS subsidiary that devoured $72 million of FEGS’s money.

The accounting firm, Loeb & Troper, has seen a string of clients face accounting scandals. Last year, the Forward reported that eight Jewish charities had dropped the firm.

The agreement allowing the creditors’ lawyers to bring the suit is pending approval from the judge in the FEGS bankruptcy case.

Contact Josh Nathan-Kazis at [email protected]

Josh Nathan-Kazis is a staff writer for the Forward. He covers charities and politics, and writes investigations and longform.

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