by the Forward

A Moral Responsibility

In November 2010, when the Manhattan U.S. attorney announced the arrest of 17 Brooklyn residents on charges that they bilked the Conference on Jewish Material Claims Against Germany out of many millions of dollars, he minced no words. This was “perverse and pervasive fraud,” said prosecutor Preet Bharara.

The leadership of what is known as the Claims Conference, which since 1951 has processed billions of dollars in restitution claims for Holocaust survivors, was equally aghast. Greg Schneider, the executive vice president who first reported the fraud to the FBI in 2009, called the scheme run by his own employees “disgusting” and said that he was utterly stunned that it had gone on for 15 years. “We never expected something like that to happen,” Schneider said at the time.

Julius Berman, chairman of the Claims Conference board, said that the organization was “outraged that individuals would steal money intended for survivors of history’s worst crime to enrich themselves. It is an affront to human decency.” And here’s an excerpt from a JTA story last year about the fraud: “Calling the controls that the Claims Conference had in place to prevent fraud ‘reasonably adequate,’ Berman said the deception was as impossible to anticipate as the attacks of 9/11. ‘Until it happens once,’ he added. ‘Then you’re on notice that something you never foresaw can happen.’”

Never expected something like this?

Impossible to anticipate?

How can that be when Berman, Gideon Taylor (Schneider’s predecessor) and Schneider himself were apprised of the fraud eight years earlier, in 2001?

As the Forward has reported, the fraud scheme — which grew to include 31 people who have since pleaded guilty or were convicted of diverting $57 million to unqualified recipients — was first described in an unsigned but detailed letter sent to the Claims Conference office in Germany in June 2001. A preliminary investigation of the letter’s charges supported its allegations that “rules were broken for many office employees.” It identified fives cases that should never have been approved, accusing Claims Conference employees of approving Holocaust funds for themselves and their relatives, who were “non-eligible.”

When recently asked about the letter, a Claims Conference spokesperson contended that the head of the German office was the one responsible for failing to take action on the allegations in 2001. That person has, conveniently, died.

But this attempt to absolve the New York leadership of responsibility does not hold up to scrutiny. Schneider and Taylor were copied on some of the correspondence between the New York and German offices. And, as the Forward has reported, Berman arranged for his own internal review, conducted by a paralegal in his law firm and sent to Taylor in September 2001. So he was, to use his own words, “on notice” that something wrong could, indeed, happen.

Since Taylor left the Claims Conference in early 2009, he has refused to comment on the fraud but for an email sent to JTA on May 21 that repeated the blame-it-on-the-dead-German argument. That’s unacceptable. He needs to be held accountable for his apparent failure to act, and that begins with a public statement of what he knew, when.

Schneider’s role is less clear, because he’s not clear about it himself. The Claims Conference spokesperson said that in 2001 Schneider was in a lowly post, as assistant executive vice president, and therefore not aware of the alleged scheme. But Schneider testified under oath in the recent federal trial that he was the chief operating officer, the second in command, when the letter was received.

Whatever title was on the door, Schneider’s current position is significant enough for him to clearly outline whether he knew of the fraud in the past eight years and whether he was in any position to stop it.

Berman has the most explaining to do. Why did he ask a paralegal in his law firm to conduct an internal probe this important and sensitive? Why did he apparently not share this information with the board? Even if he concluded that the evidence of fraud wasn’t strong enough in 2001 to turn over to authorities, why didn’t he follow up in the intervening years? Why would he think that controls to prevent fraud were “reasonably adequate” when they were clearly nothing of the sort? And why is that mediocre standard sufficient to safeguard public monies meant for destitute Holocaust survivors, surely the most sympathetic victims on the planet?

Berman’s public stance since these revelations is classic: Say nothing, and appoint an internal probe. That is so clearly inadequate that two respected Jewish leaders who sit on the Claims Conference board — Ronald S. Lauder, president of the World Jewish Congress, and Natan Sharansky, chairman of the Jewish Agency for Israel — have called for an independent investigation.

That is the least the Claims Conference should do.

More substantively, there is a serious governance challenge here. The board is made up of two representatives from 24 organizations that, 60 years ago, were representative of the post-war Jewish world. (Forward publisher Samuel Norich sits on the board as a delegate from the Jewish Labor Committee.) Some, like the Jewish Agency, still command the spotlight on the communal stage. Others are, let’s be honest, fading bit players. Should they still have an equal voice and vote? Do they reflect current needs, or past politics?

Many of these organizations are also beneficiaries of money distributed by the Claims Conference, calling into question their ability to independently scrutinize operations and hold the professional leadership accountable — the fundamental job of any board. Moreover, the board meets only once a year and its executive committee only twice a year, a light schedule for an organization of this size and mission, leading the conference’s vice president to acknowledge that board members are not connected to the daily reality at the international agency.

Then who is?

The Claims Conference has done incalculable good in the last six decades, distributing billions of dollars to needy recipients, providing health care, education programs, sustenance and all manner of support to survivors around the globe. It is noble work. And, because so much money is at stake, it has also been controversial work, sometimes targeted by critics who have their own political agenda.

The Forward’s agenda, rather, is to promote transparency and accountability. The federal probe and the resulting convictions have, as far as we know, put an end to the fraud, but not to the underlying governance issues that allowed the fraud to continue for eight years after it was flagged. As Berman himself said to JTA last year, “We would never be able to recover from someone charging that we tried to cover it up.” Indeed, he and the others in leadership have a moral responsibility to prove that has not happened and would not happen.

A Moral Responsibility

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