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NEW YORK - The New York State attorney general has cleared the World Jewish Congress of financial irregularities of a criminal nature and misuse of donated funds. In a report published in New York on Tuesday, Eliot Spitzer said the investigation was concluded without discovering any criminal activity or basis for a civil suit.

The report did, however, criticize the WJC's financial controls and record-keeping. "The organizations lacked appropriate financial controls to safeguard charitable assets and failed to keep adequate records regarding their fund-raising activities," it said.

And, as part of the settlement reached between the WJC and Spitzer's office, longtime WJC executive head Rabbi Israel Singer will no longer be involved in fund-raising or financial management at the organization. Singer was recently appointed chairman of the organization's Policy Council, a new body comprising Jewish and non-Jewish statesmen from around the world.

Under the settlement announced Tuesday by the state attorney general's office, the New York-based WJC agreed to establish a permanent audit committee and chief financial officer position and to computerize all its financial records. Singer is giving up his post as chairman of the WJC governing board.

The investigation began more than a year ago, when outgoing WJC Vice President Isi Leibler claimed the organization had secretly transferred $1.2 million from New York to London via Israel.

On Tuesday the WJC filed an NIS 26 million defamation suit against Leibler in a Tel Aviv court.

According to Spitzer's report, the problems uncovered in the investigation did not affect the abilities of the WJC to carry out its mission and caused no losses or damage.

Senior WJC officials in New York expressed satisfaction with the results of the investigation.

"The World Jewish Congress is stronger now than ever," said WJC President Edgar M. Bronfman. In an interview with Haaretz, he said, "For 14 months we worked tirelessly with the attorney general's office" and gave it "unfettered access to our entire worldwide organization. Our utter transparency and cooperation revealed that we had nothing to hide," Bronfman said.

Stephen Herbits, WJC secretary general, said in response to the decision, "The first and most important remedy is to continue doing what we have put in place."

Rabbi Marc Schneier, a senior WJC figure, also expressed satisfaction with the report, saying that it helped the organization demonstrate its transparency and that the WJC's influence would increase as a result.

"I look forward to continuing our vital diplomatic mission of safeguarding Jewish communities around the world," Singer said yesterday. "Commitment to that mission contributed to our historic victories in winning $21 billion in restitution for victims of the Holocaust."

Herbits and Singer explained that the transfer of funds was part of a plan to set up an employee pension fund. The report found that steps were not taken to ensure the money would eventually return to the organization.

The organization also inappropriately paid for some employees' personal expenses, including car payments and personal credit card charges, the state audit found.

"I sincerely regret that at times my almost exclusive focus on execution of our mission diverted my attention from important administrative activities," Singer said in a written statement.

Leibler told the New York Times that Spitzer's office "has forced the WJC to institute the reforms I had been calling for."

The timing of the release of the report is particularly significant for the WJC. Next week the group's Governing Board will convene in Jerusalem for its semiannual meeting. About 80 representatives from some 40 countries will attend, in addition to about 100 guests, including Bronfman.

The board will discuss critical issues facing the Jewish world and Israel, and will set priorities for 2006 and beyond. It will also evaluate policy activities and review governance, operations and administrative developments in 2005.

For the first time, the WJC will discuss creating a framework for dialogue between Western nations and the Muslim world. Singer referred to Jewish dialogue with the Catholic Church as an example of how a millennium-old hatred could be overcome within only a few decades.