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Controversies over Organizational Accountability

by Daniel Kadden
The reopening of decades-old Holocaust restitution claims has led to unprecedented monetary settlements and a measure of justice for thousands of aged survivors. The renewed push for restitution has also been tainted, however, by conflicts among Jewish organizations and stakeholders over the control of settlement monies — conflicts that have diminished the moral authority on which the campaigns were based and raised troubling accountability and governance questions about organizations involved in the restitution efforts.
A coalition of American, European and Israeli organizations launched a series of campaigns in the mid-1990s to secure personal compensation and material restitution for crimes committed against Jewish victims of the Holocaust. This wave of public advocacy was triggered by a combination of factors, including the collapse of the Soviet bloc and the unification of Germany, which opened up vast archives of long-hidden material documenting Nazi-era crimes and led to class-action lawsuits filed in the United States against European corporations with historic ties to the Nazi regime.
The most notable of these suits charged the Swiss banking industry with secretly pocketing dormant accounts of Nazi victims and helping to finance Hitler’s war machine. Attorneys representing survivors and their heirs were able to obtain damning evidence. The Clinton administration and Congress provided critical political support. A flurry of public hearings and news reports proved highly embarrassing to the Switzerland’s government and venerated banks.
The early success of this campaign spurred advocates to pursue additional claims against German and Austrian banks, European insurance firms and other corporations that collaborated with the Nazi regime or benefited from the Holocaust through the use of slave labor. Under relentless pressure, the Europeans agreed to unprecedented monetary settlements: $1.25 billion from Swiss banks, 10 billion Deutschmarks from German industry for former slave and forced laborers, $40 million to cover unclaimed Austrian bank accounts, $100 million from the Italian insurance giant Assicurazioni Generali to settle unpaid prewar insurance policies.
Photo of survivors
The campaigns resonated strongly with the public. The renewed pursuit of restitution seemed a natural corollary to the growth of Holocaust education and remembrance programs in the Jewish community and beyond. As new disclosures came to light, calls for moral and material restitution took on an emotional urgency. Advocates argued that aging survivors, many in failing health, deserved recognition and justice in their lifetimes. Survivors themselves, along with the children and other heirs of victims, voiced support for efforts to uncover the truth.
The settlements themselves offered mixed results, however. While an unprecedented number of Nazi victims received direct compensation or the actual return of looted family assets, the various claims processes proved cumbersome, confusing and insulting for many. The recollection of painful details from the past reopened old psychic wounds for some survivors. Others chose not to file any claims on principle: They would not take “blood money.”
Because each claim fund was independently administered, elderly survivors were obliged to fill out a confusing and repetitive array of forms about their personal and family histories. In some cases, application deadlines were pushed back repeatedly, as local survivor organizations, legal aid agencies and Jewish Family Service offices were swamped with requests for assistance.
After the initial headlines, little attention focused on who would qualify for payments and who would not, how the funds would be administered and tracked, and how long the processes would take to complete. Claimants received legalistic form letters requesting missing information or rejecting their claims outright — or heard nothing about the status of their claim for years on end. Israel Arbeiter, a survivor testifying before a Congressional committee in 2003, asked plaintively, “What good does it do to create an elaborate claims system and proclaim . . . relaxed standards of proof when everyone knows from the beginning that most of us survivors have no documentation? Hitler didn’t allow us to keep any documentation. . . . What good does it do to have a claim process when claimants receive no word about the status for almost three years? Are they waiting me out?”
 
The high-profile Swiss claims process, brokered by a U.S. District Court judge and under court supervision since 1998, has been plagued by continuing disputes and oversight problems. In 2002, a team of high-profile independent jurists assigned to make decisions about individual claims reportedly resigned in protest over new, streamlined payout rules, which they felt threatened the integrity of the process.
Yet even after the adoption of looser rules, payouts today remain far below expectations. More than seven years after the settlement agreement was signed in 1998, most of the $800 million designated for compensation of looted bank accounts sits in court-controlled accounts, undistributed to victims and heirs. An unknown number of survivors have died waiting for their cases to be decided.
The settlement of Holocaust-era insurance claims has proved even more contentious. Members of the private administrative commission established in 1998 have engaged in pitched public battles over claim standards and access to company records, leaving tens of thousands of claimants in limbo. Several Congressional hearings have disclosed serious accountability problems and the maze of hurdles claimants face to prove their case and obtain justice. In 2005, over 25,000 claimants — those with the least amount of hard evidence of unpaid insurance policies — were awarded $1,000 “humanitarian” payments, but were left in the dark about the validity of their claims and about what evidence actually existed of unpaid insurance owed to their families.
 
Defenders of the campaigns have argued that the various agreements mark an important moral and legal victory. Former U.S. Undersecretary of State Stuart Eizenstat, who led the diplomatic effort on behalf of the U.S. government, has noted that “for the first time in the annals of warfare . . .  systematic compensation was . . . achieved for individual civilian victims for injuries [caused] by private companies as well as governments.” In the 2005 edition of his book, Imperfect Justice: Looted Assets, Slave Labor, and the Unfinished Business of World War II, Eizenstat argues that “critics of our work have gone too far.” While he is “chagrined by the increasingly divisive arguments among the victims’ own representatives over how to allocate funds that remain unclaimed” and “deeply distressed by the increasing frustration of Holocaust survivors and other victims of the Third Reich at the delays, some even deliberate, in paying the full $8 billion in settlements we negotiated,” there has been, he writes, “impressive progress in paying victims,” and “the pace . . . is likely to quicken.”
Some critics, on the other hand, felt that the very targeting of European companies was an unseemly form of extortion that raised the threat of anti-Semitic backlash. Charles Krauthammer decried what he saw as a “shakedown . . . that recalls the worst of racial hustling and class-action opportunism in the United States,” and argued that “it should be beneath the dignity of the Jewish people to accept [money], let alone seek it.” Abraham Foxman of the Anti-Defamation League, himself a child survivor, worried that the focus on Holocaust assets would make “the century’s last word on the Holocaust that the Jews died not because they were Jews, but because they had bank accounts, gold, art and property.” This, he warned, was “too high a price to pay for a justice we can never achieve.”
In the end, the settlements provided an opportunity for European societies to confront history anew and acknowledge how their national institutions abetted genocide. Twenty-one European nations established special commissions focusing on the Holocaust and looting of Jewish assets. A panel of eminent Swiss historians revealed, in unprecedented detail, the close wartime commercial and political ties between Switzerland and Nazi Germany. These findings shocked many Swiss, who had never before doubted their nation’s claim of neutrality.
In France, a governmental investigative commission detailed the vast plundering of Jewish property under the wartime Vichy regime, showing how confiscation and “Aryanization” affected every area of public and private life, including the civil service, trade, industry and culture. A comprehensive list of German firms that collaborated with the Nazi regime was published for the first time outside Germany.
The restitution campaigns also revealed the survivor population in a new light. Survivors came forward publicly, some for the first time in their lives, as legal plaintiffs and witnesses at public hearings. They eloquently articulated moral arguments in support of restitution. As the primary stakeholders in efforts to secure justice, survivors asserted more strongly than ever before their own interests.
 
The restitution campaigns, while innovative in their use of media, public hearings and the threat of litigation, were, in fact, a continuation of more discreet efforts undertaken over many decades.
Even before the end of World War II, an alliance of American Jewish leaders, anticipating the Allied victory and recognizing that only a small remnant of the original Jewish communities in Germany would be reestablished, had successfully lobbied occupation authorities to gain a novel legal status as “successor” to the heirless and unclaimed property of German Jewry.
Following the creation of the Federal Republic of Germany, they formed a coordinating group called the Conference on Jewish Material Claims Against Germany (dubbed the “Claims Conference”) to negotiate and administer German compensation payments to individuals, assist survivors, and rebuild cultural institutions destroyed during the Holocaust.
Photo of survivors in lineIn partnership with the nascent State of Israel, they signed a series of agreements with the West German government to provide benefits to thousands of primarily German-Jewish victims around the world, along with significant foreign aid to Israel.
The Conference’s “Successor Organization” catalogued and secured legal ownership of looted real estate in Germany, and collected compensation from the government or sold assets to support agencies that helped survivors reconstruct their lives.
For years the Claims Conference was the de facto manager of restitution affairs for the Jewish community. It operated quietly and methodically, behind the scenes. Its founders represented a snapshot of post-war Jewish institutional and philanthropic leadership: the American Jewish Joint Distribution Committee, B’nai B’rith, the World Jewish Congress, the American Jewish Committee, the Jewish Agency for Israel, and representatives of British, French, Canadian, Australian, and South African Jewry and several other important Jewish constituencies.
Action on restitution was a natural extension of their communal leadership roles, and several of the organizations, notably the “Joint” and the Jewish Agency, were directly involved in the provision of services to survivors and remnant communities. Survivor groups were conspicuously absent from the leadership; the many social and self-help associations formed by camp survivors and refugees in their new communities were the recipients, not the dispensers, of aid.
 
The fall of the Berlin Wall, German reunification and the wave of political change in Central and Eastern Europe in the early 1990s dramatically changed the restitution landscape. As the core leadership of the Claims Conference sought to broaden their targets beyond West Germany, they established a new coordinating body, the World Jewish Restitution Organization, to pursue property claims in Eastern and Central Europe, and soon expanded their involvement to the banking, insurance and slave labor campaigns.
These campaigns transformed the Claims Conference into one of the largest Jewish philanthropic bodies in the world, with total annual revenues in 2004 exceeding $1 billion. The group administers global compensation programs, holds billions in property assets and reserves, and boasts an influential direct grant program that has dispensed over $800 million since 1996 and now exceeds $100 million in annual outlays. Scores of community-based agencies serving survivors in the U.S., Israel and Europe are heavily dependent on annual Claims Conference grants.
But as the restitution settlements grew, so did controversy and conflict over the use of the monies. The small bloc of organizations dominated by the Claims Conference and its allies, which had exclusively controlled the allocation and use of Holocaust-related funds for years with little public oversight, now came under heightened scrutiny and criticism.
Institutional clashes over restitution money have had real and immediate consequences. By 2002, social service providers in various countries were reporting alarming gaps in the social safety net for the aging survivor population and making urgent pleas for increased funding to meet essential medical, housing and other special needs that government and communal resources were not able to cover.
Recent surveys have indicated that up to 25 percent of the estimated 122,000 survivors in the U.S. are living at or below the official poverty line. In Eastern Europe and the FSU, the situation is even more dire. A growing chorus of survivor groups, intimately familiar with the plight of their peers, have argued that the only appropriate use of available restitution funds is to serve the needs of living survivors, with a special emphasis on home care.
Controversy has particularly surrounded the Claims Conference’s policy, adopted in 1994, that 20 percent of its discretionary grant money — a total of over $150 million since 1996, derived from recent restitution settlements and the proceeds of sales of German property — be directed to Holocaust remembrance and education projects rather than to emergency or essential social services for survivors. Despite bitter complaints by survivors and pleas from leading Jewish Federations (including a formal resolution by the Jewish Council for Public Affairs, representing hundreds of Federation community relations councils), the 20 percent policy has remained in effect.
Supporters of this policy — including a number of leading survivors and representatives of agencies receiving grants for education and related projects — defend it as a vitally important way to ensure that future generations learn about the Holocaust. They point out such funding is consistent with the decades-long practice of supporting community reconstruction with proceeds from heirless Jewish assets and fulfills a sacred responsibility to provide “a voice for those who did not survive.” As the ranks of survivors diminish, that responsibility becomes more crucial.
The Claims Conference has also been buffeted by complaints about a perceived lack of accountability and responsiveness in its management of resources. Jewish Federations in North America, Israeli officials, European Jewish leaders, social service professionals and, most pointedly, survivors, have charged that while the Conference exercises exclusive control over hundreds of millions of dollars secured in the name of Holocaust survivors, they maintain a remarkably closed decision-making process with no formal mechanisms for input from the wider Jewish community opinion, particularly from rank-and-file survivors.
Planning and allocation decisions, these critics charge, take place behind opaque curtains. There are no published guidelines setting out the criteria used in approving grant applications. Published financial and statistical data are heavily abridged in comparison with data from other large Jewish agencies. Full inventories of German properties and other assets held by the “Successor Organization” are not publicly available, and neither are reliable estimates of the value of the property portfolio. Policy regarding the purposes and use of an enormous reserve fund for “future needs” — now approaching $300 million — is unspecified.
 
Despite occasional media reference to the Claims Conference as a “survivor group,” it has never been one either constitutionally or functionally. Only four of its forty-eight voting board seats are apportioned to survivor organizations, and these were added only in 1989. The governance structure hews closely to the original form created in 1951, with twenty-four constituent organizations, including some small and marginal ones from among the founders, each having two voting seats on the board, which generally meets only once or twice a year.
The member agencies themselves overlap to a significant degree. For example, the leading political body representing French Jewry, the Conseil Representatif des Institutions Juives de France (CRIF), is not only a voting member of the Claims Conference, but is also a key constituent of another voting member, the European Jewish Congress, which in turn is a constituent of another voting member, the World Jewish Congress.
This kind of closed leadership circle was the norm six decades ago, and helped assure consensus. More recently, it has opened the Claims Conference up to charges of cronyism. The Board routinely awards grants to its own member organizations, or to agencies with interlocking connections and leadership.
A series of exposés by journalist Netty Gross in the Jerusalem Report, beginning in 1997, has detailed the inner workings of the Claims Conference and its associates, which she terms “the Old Boys Club.” Gross found that the organization failed to transfer property in East Germany or provide full compensation payments to the legitimate Jewish owners or heirs of such properties, essentially cheating them of their legal rights. It then took title to thousands of buildings and sold the most valuable for cash using the services of a small circle of favored real-estate brokers.
Jerusalem Report editor David Horovitz wrote in March, 2000 in favor of sweeping reform of the Claims Conference’s allocations process and handling of German property. Its “constituent organizations,” he wrote, “many of them dependent on the Conference’s Allocations Committee for finance . . . have long since proved themselves incapable or disinclined to exercise the necessary controls.”
Critics have also pointed out the conflict of interest inherent in the simultaneous roles the Claims Conference and its leading members occupy as negotiator, administrator and beneficiary of restitution funds.
The Washington State Insurance Commissioner, who has closely monitored the Holocaust insurance settlement process, raised concerns in a 2004 report about the “potential conflict of interest” arising from the Conference’s involvement in both reviewing and approving “humanitarian payments” to claimants while playing a key role in determining the use of any unspent funds in the humanitarian fund. “Simply put,” the report stated, “the less money distributed through humanitarian payments to claimants the more will be left for ‘other purposes.'”
 
Inside the Claims Conference, rapid expansion has brought internal tensions bubbling to the surface, with various geographical and institutional factions pitted against each other. Public reports have described conflicts between Israeli and North American interests over allocation formulas, dissent by British representatives over the administration of the “Successor Organization,” bitter competition for monies between the Jewish Agency and the Joint Distribution Committee, and disagreement over how to respond to public demands for greater accountability.
The survivor groups on the board, one based in Israel and the other in New York, have become increasingly candid in their dissents, particularly over the controversial “20 percent policy,” the need for modernizing the organization’s structure, and the consequences of retaining a large cash reserve in the face of a failing safety net for survivors.
Today, the Claims Conference can be likened to a 21st-century philanthropic battleship with mid-20th-century accountability standards. Given the Conference’s outmoded governance model, closed-door decision-making style, and internal squabbles over who gets the biggest slice of the restitution pie, communal leaders and survivors alike are wondering if the Jewish public interest is being properly served.
The complex, shifting needs of the aging and vulnerable survivor population have especially challenged the status quo. Restitution funds are an enormous resource and can no longer be controlled or administered in quiet corners of the community. As consensus over priorities has fractured, the established leadership may have to cede some control over funds and long-term planning for survivor needs to a broader set of constituents, especially survivor groups. New public priorities are clashing with entrenched institutional interests.
Calls for openness and fiscal accountability will surely continue, echoing broader concerns about democratic governance and transparency heard throughout the non-profit sector, including the Jewish organizational world, in the wake of scandals affecting well-known charities and large corporations like Enron. A recently-concluded investigation by the New York Attorney General’s office of a key Claims Conference constituent, the World Jewish Congress, found a pattern of serious financial mismanagement and governance failures. While no criminal charges were brought, the organization removed its board chair, Israel Singer (who continues to serve as president of the Claims Conference), was required to adopt strict new fiscal controls, and will be monitored by state regulators for several years. The episode heightened accountability concerns across the Jewish community and may spur more rapid organizational reform.
A powerful sense of obligation is felt within Jewish communities for the welfare and care of the surviving generation of the Holocaust. The urgency and intensity of that communal responsibility may, in the end, be the key factor pushing organizations like the Claims Conference to embrace democratic innovations that will benefit survivors and the broader Jewish community.
 
Daniel Kadden holds a Ph.D. in Judaic Studies and Sociology from Brown University. He has co-directed the Holocaust Survivors Assistance Office for the State of Washington and has twice testified before the U.S. Congress on Holocaust-era insurance restitution. The child of Holocaust survivors, he has worked closely with survivors and members of the “Second Generation” in support of Holocaust education and for justice and dignity for aging survivors.