Israel Criticizes Jewish Claims Conference Huge Profits Casts Shadow over Holocaust Survivors Organization

Through the sale of property Nazis stole from Jews in eastern Germany that was later signed over to the organization, the Jewish Claims Conference has made a profit of about 1.5 billion euros. But not all of that money has been given to Holocaust survivors. Criticism of the powerful organization is growing in Israel and many are calling for greater transparency.

The building at Sophienstrasse 26 is plain and functional. The guard in the lobby and the access control system are the only clues that this building in Frankfurt's Westend neighborhood houses more than just ordinary offices. In fact, it is the German headquarters of one of the world's most influential Jewish organizations, the Jewish Claims Conference (JCC).

Georg Heuberger, a small, white-haired man, greets visitors in his office on the sixth floor. The 62-year-old, the JCC's representative in Germany, reports to the organization's main office in New York. When Heuberger, a historian, took the position two years ago, he knew that the JCC is not uncontroversial among Jews, especially given its sensitive monopoly: the exclusive right to distribute compensation funds from the German government to the Jewish victims of Nazi persecution. He had not been in office long before he began hearing complaints.

Meanwhile, Heuberger is no longer the only target of grievances. Around the globe, the descendants of Holocaust victims feel unfairly treated by the JCC, an umbrella association for Jewish organizations. They accuse it of hoarding compensation and restitution funds instead of distributing them to victims. The JCC's critics include the Israeli government and parliament.

The money at the center of the controversy consists of funds the JCC collected in Germany. The organization, established in 1951 to enforce Jewish restitution claims against Germany, found a new field of activity in eastern Germany in 1990. There, it searched for real estate once owned by Jews, seized by the Nazis and eventually nationalized by the East German government -- all without compensating the owners or their heirs. After the fall of the Berlin Wall, the heirs were given until 1992 to file claims. By law, those who did not file such claims forfeited their property to the JCC. According to its own records, the JCC has earned about €1.5 billion ($2.3 billion) from the sale of properties following restitution.

According to the JCC, the proceeds from these sales are used "for the benefit of Holocaust survivors." But representatives of victim groups question whether this is true and accuse the JCC of a lack of transparency and of having accumulated enormous reserves. Documents SPIEGEL has obtained also suggest questionable business practices. Internal documents paint a picture, not of a selfless organization devoted to championing the rights of others, but of a business enterprise sitting on assets worth hundreds of millions of dollars.

In Israel, the venerable organization has come under public pressure as a result of a film by Israeli journalists Guy Meroz and Orly Vilnai-Federbush. In the film, which was aired in early May, the Israeli Pensioners' Affairs Minister Rafi Eitan calls the JCC "a gang." The government has already taken action in response to the film. A €400 million ($620 million) fund for Holocaust survivors requiring special care was withheld from the JCC. The Movement for Quality Government, a citizens' group leading the fight against corruption in Israel, even wants to see the JCC placed under the supervision of a German-Israeli government commission.

The activity in Jerusalem has reverberated in Berlin, where negotiations between the JCC and the Finance Ministry are scheduled to take place on Wednesday. Heuberger's goal is to increase various compensation funds and to gain recognition of additional victim groups. But now JCC representatives fear that the course of events in Israel could obstruct the talks with the German government.

The main reason that the JCC petitioned for large restitution sums after 1990 was the Nazi confiscation of real estate. When property records in eastern Germany became accessible, they were often in deplorable condition. The JCC's German office sent out researchers to comb through address records and telephone books from the 1930s, as well as the membership lists of Jewish congregations. In each case, the JCC petitioned for the restitution of the applicable piece of property, even when it did not know whether heirs or property owners were still alive.

The JCC had plenty of competition in its struggle to lay claim to these properties in the former East Germany. Many attorneys eagerly listed themselves as claimants, even without powers of attorney, and then placed newspaper ads to locate the corresponding heirs, so that they could buy the property from them. The consequences were bizarre. When the deadline for filing restitution claims expired on Dec. 31, 1992, approximately 240,000 claims had been filed for properties formerly owned by Jews -- in East Berlin alone. Up to 10 different claims were filed for some pieces of property. In most cases, the JCC was one of the claimants.

Shortly before the 1992 deadline, the JCC, after tough negotiations with the German government, managed to achieve a decisive advantage: It was the only claimant that was granted the right to file broad claims. Even important details, such as the exact location of a piece of property or the names of the original owners, could be filed later in the restitution proceeding.

The preferential treatment of the descendants of Holocaust victims remains a source of considerable dissatisfaction today. Ironically, the purpose of the agreement between the JCC and the German government was to prevent former Jewish assets from being awarded to the German treasury if heirs could not be found. The JCC interpreted the agreement to its benefit, arguing that heirs had, after all, been given the opportunity to file their claims before the 1992 deadline.

But these heirs were in a far less favorable position than the JCC. If they filed claims after the deadline, they could only hope that the JCC's New York office would be accommodating and willing to make exceptions for their individual situations. Two brothers living in Australia, for example, neglected to file their claims to an apartment building in Berlin's Pankow district by the filing deadline. They simply did not know that the building had once belonged to their grandfather. When they learned the truth in 1999, the building had already been signed over to the Claims Conference. The brothers wanted to keep the building, but the JCC had it auctioned off.

The brothers' only remaining option was to file a petition with the JCC under the auspices of the organization's so-called “Goodwill Fund”. As a precondition, they had to accept that they had "no legal claim" to "payment of portions of the proceeds" and had no legal means of contesting the decision in favor of the JCC. In the end, the JCC's Special Committee in New York agreed to pay the brothers 80 percent of the price realized at auction, with the JCC keeping the balance. Although the brothers still see themselves as the only rightful heirs, they gave in. "My clients reproach the Claims Conference, in the clearest of terms," their attorney wrote to the JCC, "for not having looked after the interests of the original owners, but instead exclusively pursued its own interests."

Calls for Greater Transparency

The case of the Jewish department store dynasty Wertheim is also one that has not been resolved to the satisfaction of the victims' heirs. It was presumably the most valuable individual restitution to which the JCC secured the rights after German reunification. The sale of Wertheim properties flushed more than €180 million ($279 million) into the organization's coffers. A Wertheim property on Leipziger Platz in Berlin's Mitte district sold for €75 million ($116 million) in December 2006, and less than half a year later the Karstadt Group, which operates a major department store chain, paid the JCC €88 million ($136 million), primarily as compensation for the Lenné Triangle on Berlin's Potsdamer Platz. Karstadt had sold the property to billionaire Otto Beisheim in 2000. But in 2005, a Berlin court awarded the Wertheim holdings, which the Nazis had Arianized, to the JCC. Roman Haller, who negotiated the deal on behalf of the JCC, was pleased with the outcome. "We are grateful," Haller said, "to be able to contribute in this way to bringing a small measure of justice to the Wertheim heirs."

For Constance Leninger Fischer, who lives in New York and is the granddaughter of company founder Georg Wertheim, the words of the JCC official must have sounded like sheer mockery. In October 2006, the JCC issued a terse and direct decision, in which it stated that Fischer had "absolutely no basis" for any claims against the JCC. The organization refuses to comment on the status of negotiations, merely confirming that "informal talks" with an attorney are underway.

Discretion is one of the JCC's trademarks, and discretion also characterizes its dealings with the German Finance Ministry. Almost unnoticed by the public, the German federal government has paid the JCC well over €100 million ($155 million) in the last six years. The funds represent payments for so-called global settlements, which the German government intends as settlement of individual compensation cases. The first of these deals with the JCC related to synagogues in eastern Germany that were destroyed during the Kristallnacht pogrom in 1938. Berlin paid the JCC €69 million ($110 million).

The JCC paid the Central Council of Jews in Germany €17 million ($26 million) to develop Jewish communities in the eastern part of the country. But the Central Council has no idea what happened to the remaining €52 million. The money, explains Frankfurt JCC representative Heuberger, "was used for various JCC social projects for Holocaust survivors."

Projects supported by the JCC are listed in detail on the organization's Web site. But individual transactions are systematically shielded against outside inspection. When outside auditors request access, they are quickly reminded of the hazardous terrain they are about to enter. When auditors from the Federal Audit Court wanted to investigate the use of money from the JCC's hardship fund for Holocaust survivors, they encountered substantial reservations. The correspondence to address the Audit Court's questions went on for years. In the end, representative Heuberger insists, the JCC "corrected the deficiencies that were found."

In 2006, auditors were mainly interested in an office the Claims Conference maintains in Paris, paid for with German taxpayers' money. The office, which operates on an annual budget of €58,000 ($90,000), derives its funding from the German government's hardship fund for Holocaust victims. According to the JCC, the Paris office will be closed at the end of June.

An internal review of the business practices of Michael Siegmund, who sold real estate on behalf of the JCC for many years, was treated like a state secret. Beginning in 1998, Siegmund worked part-time as a member of the supervisory board of a real estate auction company, Deutsche Grundstücksauktionen AG. The company earned a profit on almost every sale of real estate that had been signed over to the Claims Conference. The organization terminated its relationship with Siegmund, though not until the middle of last year, "to avoid even the potential appearance of a conflict of interest,” JCC controller Jigal Molad writes in a report SPIEGEL has obtained. "The position on the supervisory board was approved by JCC management," says former JCC manager Siegmund.

It was not the first time that real estate deals left a bitter aftertaste. The JCC also had to bear the consequences of a different case, this time involving a businessman in Bad Homburg near Frankfurt. In the 1990s, the businessman, who represented the eastern states of Saxony-Anhalt and Brandenburg, sold the JCC's restitution claims to properties, the return of which the JCC had already applied for, but for which the agencies that handle unresolved property issues had not yet issued a decision. The businessman's idiosyncratic business practices brought in millions for the JCC. But, as internal documents suggest, the JCC employee was also profiting personally.

In November 2003, a real estate buyer from the northwestern city of Münster contacted the JCC office in Frankfurt to complain about the employee. The buyer claimed that he had paid the employee and one of his independent contractors more than €500,000 ($775,000) in commissions to gain access to JCC properties. A short time later the JCC salesperson, who has declined to comment on the charges, was let go.

To this day, it remains unclear exactly how much money the organization earned through the sale of real estate in eastern Germany. Only after coming under heavy criticism did the JCC mention a sum of roughly €1.5 billion ($2.3 billion). In mid-July the organization plans to publish a list of all properties it sold, including the selling prices.

"This is sacred money," says Seev Bielski, the chairman of the Jewish Agency, a Jewish immigration organization, "which is why the Claims Conference, more so than any other public institution, must seek to provide transparency." Bielski hired an outside auditor to determine how large the JCC's reserves are. The report was never made public, and the incident serves as an example of the JCC's enormous influence. The Jewish Agency was one of the recipients of JCC payments. "They threatened to hold back money," Jewish Agency chairman Bielski complains.

SPIEGEL has obtained a copy of the draft version of the audit report. According to the document, the JCC controlled reserves of $780 million (€503 million) in 2005 alone. "There is no reason to hold on to so much money," says Yehuda Bar-Lev, an accountant from Tel Aviv. According to the JCC, these numbers are outdated, but Heuberger admits "that we must take steps to achieve more transparency."

The control committee of the Israeli parliament, the Knesset, will address the issues surrounding the JCC on June 16. "The Claims Conference is no army, and it has no reason to keep anything secret," says committee chairman Sevulun Orlev. The German government has also pricked up its ears. In an informal meeting during an event at Frankfurt's Paulskirche Church to commemorate the 60th anniversary of the Jewish state, the German ambassador in Tel Aviv described to JCC representative Heuberger the devastating criticism his organization faces in Israel.

This does not present a good starting point for Heuberger in his negotiations with the German Finance Ministry on Wednesday. When Israeli journalists asked him about the Claims Conference, Finance Minister Peer Steinbrück said: "I know about the problems."

Translated from the German by Christopher Sultan.