The Palestinian Society for the Protection of Human Rights and the Environment (LAW) has been operating in the territories for 13 years. Norway, Sweden, Denmark and Ireland, as well as the European Union and International Commission of Jurists, have funded the organization's activities.
These donors, and others, however, have recently learned that the founder of the non-governmental organization (NGO) - the largest of its type in the territories - has apparently pocketed or misappropriated a significant share of the funds earmarked for human rights advocacy.
According to an interim report by auditors from Ernst & Young, LAW founder Khader Shkirat orchestrated a system of false financial reports, including loans to family members and fictitious expenses.
From September 1997 through August 2002, the organization received about $10 million from donors. However, about $4 million of this sum was embezzled, used for other purposes, or cannot be accounted for, according to the audit. Shkirat stepped down as director of LAW several months before the audit began, and has since focused on the legal defense of Marwan Barghouti, the Fatah leader arrested by Israel last year. Shkirat is also interested in entering politics.
Since the first suspicions of improprieties emerged, donor states and organizations have frozen their funding. There are currently enough reserves to enable LAW to continue functioning for several weeks, but it is unclear whether the NGO will be able to continue working in the future.
LAW developed out of "Earth and Water" - an organization Shkirat headed during the first intifada in the late 1980s. The organization, which drew its primary strength from the Palestinian Communist Party, earned a solid reputation for its documentation of human rights violations and legal action.
False and misleading
The financial statements presented to LAW's board of directors were formulated to comply with the donors' demands, but portrayed a false and misleading representation of the way these funds were used, according to the Ernst & Young audit. "The overall method to create savings has been fraudulent reporting of financial reports," the Ernst & Young team asserted.
"In our opinion, the executive director, Khader Shkirat, in collusion with [LAW's] auditors, has planned and executed this savings scheme. All project coordinators have knowledge of this scheme - at least within their projects." The outside auditors also fault LAW's board of directors for having "sanctioned the use of erroneous reports."
According to the audit findings, at least $2.3 million of the donated funds were transferred to secret bank accounts in Israel and the territories, and apparently were used for purposes unrelated to the organization's declared mission. Meanwhile, the donors were told that the organization was short on funds. An effort is now being made to track down the missing money.
The Ernst & Young audit, conducted by a team from the firm's offices in Stockholm and Ramallah, claimed that Shkirat used funds contributed by donors to extend loans to a family relative, currency trader Izz Shkirat, including a $130,000 loan that was never repaid.
Shkirat also allegedly channeled $160,000 to a mysterious group, the Center for Democratic Action, and used over $500,000 from LAW (plus an additional $100,000 from a German donor) to purchase a 65-percent stake in the privately owned Amwaj radio station in Ramallah. The investment in the radio station is now being investigated, because the sum paid for the 65-percent share is considerably above its market value. It is suspected that part of this money may actually have been transferred to another destination.
Questions also have arisen regarding a range of other activities, including car and hospitality expenses and funds allocated for publications and office equipment.
European donors said they feel "betrayed" by these revelations about apparent financial improprieties at LAW, but doubt they could sue Shkirat to recover these funds. "Our dealings were with an organization and not with a specific person. Shkirat is out of the picture," they said.
One thing is clear - they will not provide any more funding to LAW. "If a Saudi organization decides to support it, we won't be able to prevent this. But we will not support it again," one donor explained.
Shawki Issa, who succeeded Shkirat as director of LAW but subsequently resigned after being implicated in the funding scandal, claimed he is innocent of any wrongdoing. "I had no part in transferring funds to accounts that the donors didn't know about, because I was studying in the United States at the time."
Haaretz was unable to get a response from Shkirat on the Ernst & Young report.