|German officials lay a wreath at Yad Vashem in Jerusalem as Claims Conference officials look on in May. JTA Wire Service|
After two months of Jewish communal squabbling following the disclosure of a flubbed opportunity to detect a massive fraud scheme at the Claims Conference years before it was stopped, the Claims Conference appears to be moving on.
Since its formation in 1951 and its mandate to negotiate with Germany on all matters of reparations and restitution, the Conference on Material Jewish Claims Against Germany has faced attack after attack on how it distributes the funds it receives. Its leadership always has preferred to give more money to the poorest survivors of the Shoah, or for their benefit, than to survivors who are better off. When the Berlin Wall collapsed, and communism in Eastern Europe with it, the conference showed a decided preference for the poor Jewish survivors who until then had been denied any assistance because Western governments prohibited sending money behind the Iron Curtain.
At its annual meeting this week, for more than six hours the organization’s board of directors debated the circumstances surrounding an anonymous letter sent to the conference in 2001 alleging that multiple false claims had been approved for restitution payments.
That letter came with a false return address and had all the earmarks of having been written from outside the organization. It could easily have been dismissed as yet another attempt by some discontented critic to cause trouble within the organization. The letter was not dismissed, however. Instead, the Claims Conference set in motion two separate investigations that year into the letter’s allegations. Neither investigation found evidence of fraud. Any anomalies were attributed to human error.
For that reason, a senior Claims Conference employee, Semen Domnitser, who was implicated in the letter, was able to continue running his scheme until 2009, when Claims Conference executives discovered the fraud and turned the matter over to federal prosecutors. In total, Domnitser and his co-conspirators racked up more than $57 million in fraudulent payouts over 16 years. He and 30 others was convicted at trial earlier this year. It was Germany that suffered the loss, however, and not the Claims Conference.
Faced with a public outcry following the revelation of this missed opportunity, a specially appointed Claims Conference committee commissioned an investigation into the 2001 episode. The committee turned to the conference’s ombudsman to handle the investigation. The committee’s final report, based chiefly on the ombudsman’s findings, was sent to the board just before last week’s meeting in New York. It proved highly controversial. Two of the four committee members disavowed its finding and refused to allow their names to be associated with it. What troubled them the most, they said in letters to Claims Conference Chairman Julius Berman, is that the ombudsman’s report and then the committee’s failed to take into account any of the procedural safeguards that were put in place once the fraud was discovered. The chief executive of the conference, Greg Schneider, also presented a 21-page rebuttal.
After its lengthy debate, the board had a choice on Wednesday: Investigate further and possibly purge the organization of the remaining Claims Conference leaders associated with the failure, or move on. It chose to move on, albeit with added measures of caution.
It voted unanimously to endorse the Claims Conference slate of officers – including Berman, who as pro bono counsel oversaw one of the botched 2001 probes into the anonymous letter, and Schneider, who discovered the fraud four months after becoming chief executive in 2009.
Following that vote, however, one member who had sat on the board for a decade, Sam Norich, representing the Jewish Labor Committee, resigned. He objected to the way the election was handled, he said in a statement printed in the Forward newspaper, of which he is publisher. The board, he said, was asked to vote up or down the entire slate presented, but was not given an opportunity to vote on each nominee individually. That, he argued, virtually assured the re-election of Berman and the reappointment of Schneider, both of whom were implicated in missing the fraud boat in 2001.
The board also voted unanimously to endorse the special committee’s recommendations to form a new committee to review the administration, management, and governance structure of the Claims Conference. The board stopped short, however, of endorsing the special committee’s controversial report or the ombudsman’s disputed findings, and it did not agree to any additional outside oversight, as some critics have demanded.
Although outsiders will be included on the new committee that is to review organizational governance, the committee will not have any power other than to issue a report and make recommendations to the board.
Essentially, the board reaffirmed a central tenet of how the Claims Conference operates: Outside critics may complain and demand more of a say in how the billions of dollars in restitution money from Germany are handled and distributed, but ultimately it is the board that makes the decisions.
To some outside critics, this is “business as usual” and is unconscionable. In their view, heads should roll for the conference’s failure to detect a $57 million fraud. They point to the disputed ombudsman’s report, which found a “litany of lack of diligence, competence and judgment” among senior Claims Conference leaders for their handling of the 2001 episode. They complain that the organizations that comprise the board, formed in 1951 and little changed since, is unrepresentative of the current Jewish world, insufficiently transparent, and uninterested in outside input.
Claims Conference leaders, however, say that the critics miss the point. Yes, they say, there were significant failures in 2001 – yet even the ombudsman’s report does not lay the blame on any one person and said there is no evidence that anyone tried to cover up the 2001 episode. Besides, it was the Claims Conference that discovered the fraud in 2009 and brought it to the authorities. Those authorities, and notably the U.S. attorney’s office, have praised the cooperation they received from the Claims Conference, and credited that cooperation with convicting all 31 people charged in the case.
And since 2009, new systems and controls were put into place to prevent recurrence of fraud, including two outside auditing firms – one of which reports to the Germans.
“The plain truth is that there is one person to blame: the convicted criminal,” Schneider wrote in his lengthy letter to the board. “All the main players in charge at the time … missed it. And, I am sure that each regrets it. But, people are fallible.”
Perhaps most notably, in the years since the fraud was discovered, Claims Conference officials say, they have been able to maintain the confidence of the German government, which bore the full cost of the fraud. That confidence is evident in the successes Claims Conference negotiators have had with Germany since 2009, including getting more classes of survivors eligible for pensions and restitution payments, and dramatic increases in funding for home care for infirm survivors. Even though the number of survivors drawing restitution payments has dwindled as they have died, the total amount of restitution Germany provides actually has increased since 2009, Claims Conference officials note.
It’s unlikely that this will be enough to placate critics, especially those who prefer an allocations process more favorable to their constituencies. If anything, the board’s decisions last week may amplify their calls for reform. In the end, however, all the critics can do is complain.
The committee created by the board last week may recommend additional changes to how the Claims Conference operates, and it is possible that some changes eventually will be adopted.
Ultimately, however, that will be up the board of the Claims Conference.