Tuesday, July 9, 2013

This Fraud Is Explosive...$57 Million

by Gary Snyder

They blame it on “management failings” which were responsible for “facilitating” $57 million in fraud perpetrated against the Conference of Material Claims Against Germany over 16 years. This has all of the markings of a deficient board that is covering up, management that could run amok, and few internal controls that could stop such massive mischief. 

A report, written by Ombudsman Shmuel Hollander, pointed to “systematic failings and problematic organization behavior” as the background to the failure to discover and stop years of approvals of fraudulent restitution claims. In a blistering critique of the corporate culture of the Claims Conference, Hollander stated that “the absence of professional control systems... constituted a key factor in enabling, and certainly in facilitating, the fraud.” The fraud was organized by conference employee Semen Domnitser, who served as the director of the conference’s Hardship Fund.

The controversy surrounding the Holocaust restitution organization centers around a 2001 tip-off letter sent to the conference that resulted in two internal probes...one of which found no wrong doing. Had the allegations been “properly addressed and investigated thoroughly by an independent and professional functionary in New York, it is highly probable that the information supplied could have led to the discovery of the missing links in the chain of command and the breaches of procedure which Mr. Domnitser and his partners used to their own advantage to perpetrate their crimes,” the ombudsman wrote.

After public pressure, organizations such as the Jewish Agency and World Jewish Congress and several members of the board,  there were calls for an independent investigation.

The report asserted that “none of the Senior Directors examined or supervised the work of the department in any meaningful way” and that Domnitser was able to go about his work, and fraud, for years with effectively no oversight. It noted the failure to disclose all matters to the board was “unacceptable."
Conference Chief Operating Officer Greg Schneider wrote in a letter appended to the report, stating that while he only believed that Domnitser was to blame, he could not “escape the fact that Domnitser and his accomplices stole tens of millions of dollars. And, while he was doing it, I was working closely with him – in the same office... I was lied to, fooled, hoodwinked, duped. 
The report “demonstrates that most regrettably and contrary to what many on the board had earlier assumed, best practice and competence, were missing” in respect to the issue of the 2001 letter and “related events."
A former member of the board who resigned in 2010, said that the results of the investigation bear out concerns that he expressed prior to leaving the conference. “It is [inconceivable] that the chairman and the chief executive officer decline to take responsibility for the large fraud taken place over a period of years and years by so many employees.”
As is typical is such uncoverings, not all members of the committee signed off on the report. Two board members resigned from the committee rather than endorse the ombudsman’s recommendations. In a letter to the board included with the report, one member stated that he believed the report to be “inappropriately pejorative” and to “contain material factual errors and “does not take into account the substantial management improvements” since 2001.
One member of the Executive Committee of the Holocaust Survivors Foundation USA considered the theft of $57 million as “typical of the general disregard the Claims Conference has had for Holocaust survivors’ actual rights and interests all these years, and the massive suffering its policies have inflicted especially on those survivors living in poverty. He “hope[s] they also examine the behavior of the accounting firms like Ernst and Young and KPMG who certified the organization’s financial reports over the last decade, and the blindness of the organization’s board of directors as well.”

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011), Answers, 
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