EXCLUSIVE: Iconic Jewish Charity Illegally Loaned $500K To CEO, Regulators Say
One of the American Jewish community’s most iconic charities appears to have broken New York state law by loaning its CEO over $500,000 to help him buy property.
Known for its ubiquitous blue-and-white charity boxes, present in virtually every American synagogue and Hebrew school for generations, Jewish National Fund is a major American Zionist organization with a storied history.
Now, New York regulators are demanding that JNF quickly recover the half-million dollar loan it made to its CEO, Russell Robinson, and another, smaller loan it made to its chief financial officer, Mitchel Rosenzweig. The loans, made in the 2015 fiscal year, appear to have violated a state law barring charities from lending money to their officers.
“If JNF has this reputation of being a legacy Jewish organization with a very positive reputation, this directly flies in the face of that existing perception,” said Mark I. Rosen, an associate professor in the Hornstein Jewish Professional Leadership Program at Brandeis University.
After being alerted to JNF’s loans by an inquiry from the Forward, the office of New York State Attorney General Eric Schneiderman sent a letter to the organization on July 25, demanding that the loans be fully repaid by the end of the year.
JNF denies that the loans were illegal, and says that the executives have been repaying them with interest.
In its letter, the Office of the Attorney General asked for a statement from JNF confirming that the charity and its CEO and CFO had agreed that “full repayment [of the loans] shall be made on or before December 31, 2017.”
New York takes an especially hard line on loans to charity officers. Legislators, concerned about conflicts of interest and bonuses masquerading as loans, have written particularly strict guidelines into the state’s not-for-profit law. While federal law simply requires charities to disclose such loans, New York bans them outright.
“Because there is so much opportunity for mischief in cash payments to officers and directors that are not denominated as compensation, New York has taken a prophylactic approach,” said Bob Pigott, a former head of the Charities Bureau of the New York State Attorney General’s Office.
The ban is virtually complete, said Daniel Kurtz, another former head of the Charities Bureau. Only educational corporations, such as schools or universities, are exempt.
“No loans,” Kurtz said.
JNF claims its loans didn’t violate the law. Adam Brill, the group’s spokesman, said that despite their titles, the CEO and CFO are not officers of JNF, and therefore are not subject to the ban on loans.
Experts said that this argument likely wouldn’t go far.
“It’s hard to see how they can say this with a straight face,” Kurtz said. “I’ve never seen anybody successfully raise that defense.”
With a staff of over 200 and a $60 million budget, JNF is among the oldest, most well-established Zionist organizations in the United States. Robinson and Rosenzweig have led the organization from its New York headquarters since the late 1990s. JNF has grown significantly during their tenure, with assets at the end of the 2015 fiscal year that were 25 times larger than when the two joined the organization.
The two men have also earned healthy salaries. In 2015, Robinson earned $436,000 from JNF, while Rosenzweig took home $306,000. Robinson has ranked in the midrange of Jewish communal CEO compensation as measured in the Forward’s annual salary surveys, though his base compensation jumped significantly in the time since the Forward last undertook the project.
In 2015, JNF extended loans “to facilitate the purchase of real estate” to both men, according to tax filings. JNF loaned Robinson $525,000 and loaned Rosenzweig $185,000.
JNF would not say exactly what the men did with the money. Rosenzweig, who lives in the New York area, purchased a $395,000 home in Delray Beach, Florida, in June of 2016, according to records on file with the Palm Beach County Clerk.
JNF says that the men have been paying back the loans in regular installments and are being charged interest at the prime market rate, the interest rate banks offer well-qualified borrowers.
Now, the attorney general says the men need to pay back all the money, with interest, before the end of December.
Beginning last year, the Attorney General’s Office has been taking a close look at violations of the ban on loans to officers. In 2016, the Charities Bureau sent 35 letters to charities, inquiring about such loans. A review of more recently available filings is ongoing.
Under the state law governing not-for-profit corporations, a charity’s directors are personally liable for improper loans made to officers.
When first contacted by the Forward, Brill said that the loans were legal and had been properly reported and approved.
“Others do it,” Brill said. “It’s reported. It’s on our official filings…. It’s part of the contractual packages that have been approved by our board of directors.”
Brill then argued that Robinson and Rosenzweig, JNF’s chief executive officer and the chief financial officer, are not officers of the charity.
“JNF represents Mitchel Rosenzweig and Russell F. Robinson as employees and not as officers or directors of the corporation,” he said, citing the group’s bylaws but declining repeated requests to provide a copy of those bylaws.
JNF has identified Rosenzweig and Robinson as officers in its tax filings for years. Brill said that they were identified as such “because they have the word ‘officer’ in their title. They are not voting officers that sit on the corporate boards.”
Experts said that the distinction makes little sense.
“The notion that someone is not an officer because he or she does not have a vote on the board of directors is a silly one,” Pigott said.
Indeed, the state law that governs not-for-profits does not require that a charity’s officer be a member of its board.
In its letter to JNF, the Attorney General’s Office asked for a statement confirming that JNF has entered into an agreement with Robinson and Rosenzweig by which they will fully repay the outstanding principal and interest on the loan before the end of this year. It also asked for a statement confirming that JNF will not help the men repay the loans.
The letter also said that if JNF believes the loan was permitted under state law, JNF should submit a statement “of the basis for that belief.” The JNF has just over two weeks to respond.
“As always, JNF is in full compliance with the laws and regulations of the State of New York, and follows all legal procedures as specified by the NY Attorney General, and will respond to any requests made by the Attorney General as in the past,” Brill said in a statement.