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Story Publication logo October 30, 2017

Inside Transactions at the Jewish Federations

Illustration by Adi Emanuel for the Federation Files. Haaretz, 2017.

Together, more than 148 non-profit Jewish federations hold assets of $16 billion in the United...

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Image courtesy Adi Emanuel.
Image courtesy Adi Emanuel.

Editors Note: For the full-multimedia presentation, please click here.

The Jewish Federations of North America are, collectively, the fifth biggest charity in the United States, existing to benefit the Jewish people, the Land of Israel and humanity at large. But as research by Haaretz has shown, tax returns filed by the 138 Jewish federations registered in the United States for the years 2012 to 2015 point to numerous examples of business relationships between various federations and employees, directors or their family members, and transactions with organizations related to federation board members and executives.
Perusal of the tax forms the federations submitted to the Internal Revenue Service reveals that U.S.-based Jewish Federations (the Canadian Jewish Federations were left out of this calculation) entered into about $20 million worth of inside transactions during the years 2012 to 2015. Examples abound.
Click here to access all the Federations' 990 tax forms (Return of Organization Exempt From Income Tax), broken down by state and city.

Alternative in Phoenix

In Phoenix, board members also sell the local Federation furniture and insurance.
Board member Adam Goodman sold the federation just over $70,000 worth of furniture in 2014. Chairman David Weiner, founder and president of Weiner Insurance, brokered insurance services for the federation, which paid nearly $1.2 million in premiums over three years. On top of that, Weiner Insurance received a commission for services, a fact confirmed by the federation’s marketing director, Laura Touissant-Newkirk. The amount does not appear in public documents.
“Mr. Goodman is a part owner in an office furniture firm. The compensation received is not indicative of the profit received on the transaction for new furniture. Mr Goodman completed a conflict of interest form as do all other BOD members,” the federation responded.
Lisa Runquist, a Los Angeles-based attorney specializing in nonprofit law, says none of this is illegal, but there could be a couple of issues. Did the board determine that this was the best deal for the organization? ... And if it turns out that that wasn’t the best deal for the organization, then there may well have been a violation of the fiduciary duties [of the board]."

Shopping around

From 2012 to 2015, the Jewish Federation of Cleveland listed over $1.8 million in insurance purchases from Oswald Companies, chaired by Marc Byrnes, who served as a federation trustee until April 2014.
Dahlia Fisher, the Cleveland federation’s director of marketing and communications, explained to Haaretz that the federation purchases various lines of insurance. "Of the amount listed ... a portion is for direct brokerage fees. Marc Byrnes is an officer of the Oswald company, so we are required to disclose that relationship,” she said.
“With a board of our size, in a community our size, business relationships among board members should not be considered unusual," Fisher later wrote in an email to Haaretz. "Consistent adherence to our conflict of interest policy protects us from the possible negative consequences of any relationship between and amongst trustees and staff. That policy applies to every committee involved with business decisions, and ensures no volunteer or staff in any decision-making capacity participates in deliberations about business transactions which could in any way involve a private benefit. None of the business relationships noted result in any payments by the Federation to any of the volunteers or staff listed.”
In Birmingham, the Jewish Federation banks with ServisFirst Bank. Jimmy Filler, who was the federation's president from 2009 to 2013, has been on the bank's board of directors since 2005. Layne Held, an executive at ServisFirst, also served on the Federation’s board.
According to the federation, it began banking with ServisFirst before either Filler or Held joined its board, and neither received any related compensation. It bears adding that none of the Birmingham federation’s employees sign conflict of interest statements, according to former Assistant Executive Director Daniel Odrezin.
Again, none of this is necessarily wrong, says Beth Kingsley, a lawyer in Washington, D.C. representing nonprofits: what she finds problematic is the lack of information and transparency.
“It is not necessarily improper to do business with insiders,” says Kingsley, noting that an insider may actually give a better price, for instance. But “the interested person should not be participating in that decision-making,” she tells Haaretz. “I think you ought to be shopping around and making sure" of that. "It’s hard to tell whether that was done. We just can’t know, we don’t have that information.”
Nonprofit legal expert Marcus Owens agrees. “That raises [issues of] duty of care and duty of loyalty,” he says. “That’s where a conflict of interest policy is important for an institution.”

Chilling the air

Indeed, information does seem to be lacking. Federations do usually ask their executives to submit conflict of interest forms, but the forms are not in the public domain. Among the 109 federations Haaretz approached with questions, the ones asked for a conflict of interest agreement provided blank copies. Asked for filled-out ones, only the federations of Baltimore and Peoria sent them.
Jay Sanderson, the president and CEO of the Los Angeles Jewish Federation, told Haaretz that the federation does not require conflict of interest agreements for specific transactions.
Fisher at the Cleveland federation wrote in an email that the federation does “not distribute copies of the signed statements, but as represented in Form 990, [they] regularly and consistently monitor and enforce compliance with the policy.” In Phoenix, Touissant-Newkirk wrote, “It is my pleasure to help. In this case, the documents are confidential.”
According to public records, the Jewish Federation of Milwaukee purchased insurance from 2013 to 2015 from the Bruce Gendelman Company, which employed board member Betty Chrustowski. Hannah Rosenthal, president and CEO, denied Haaretz’s request to see conflict of interest agreements associated with these arrangements, saying they were confidential.
More examples: In 2014, Tampa’s Jewish Federation paid Tampa Bay Trane over $103,000 for air conditioning services. The company is owned by Doug Cohn, husband of federation and JCC board member Maureen Cohn. The federation’s chief operating officer Heidi Shimberg told Haaretz that Trane "offered the best services at a deeply discounted price.”
Palm Beach’s federation disclosed payments to board members for accounting, legal and consultancy services in 2012, 2013 and 2015. Between 2012 and 2015 Gary Walk received $109,094 for “legal services,” Rabbi Howard Shapiro received $30,000 as a “program consultant” and Martin Cass received $4,470 for “accounting services.” The federation's marketing & communications VP, Jeff Trynz, did not comment on these transactions with federation board members.
For Runquist, paying board members for services like legal representation is not necessarily suspect, if it’s the best deal they’re going to get.
But there are still concerns. “Is it a good idea to have a board member who’s a lawyer also providing legal services? I can give you a two-hour discussion of those issues, and what the problems are, and what the potential issues are. But, for the most part, it’s not illegal - it just has lots of potential traps,” she tells Haaretz.
“If you’re providing legal services, and you’re on the board, you have to remember which hat you’re wearing ...if you represent the organization and the organization gets sued, it’s going to be hard for you to represent them in the litigation because you are in a situation where you might find yourself deposed as a director, because you have that hat on. And how can you represent an organization if you’re in that position? It’s very difficult. But it still may be the best for the organization,” Runquist says.
It's always easy to challenge actions after the fact, Runquist points out. But the real question is whether the federations' practices are conducted in ways that make sense, and if they're making good business decisions when they make them. They may well, but only transparency can leave donors reassured.

Akela Lacy contributed to the research on this story.


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