A basic rule in human relations is that you don’t bite the hand that feeds you, but two years ago it emerged that a major Israeli hospital wasn’t being up-front about its funding from the largest donor to the country’s health system – a contributor of hundreds of millions of dollars.
The donor, the New York-based Helmsley Charitable Trust, has bestowed $450 million on Israeli institutions in recent years, including to Barzilai Medical Center, a public hospital in Ashkelon in the south.
According to a copy of an agreement between the two sides obtained by Haaretz, last month Barzilai completed the return of $6.4 million to the trust, its largest donor – money returned because Barzilai paid a $1 million commission to its fundraising company without the trust’s knowledge.
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Barzilai recently gave back $5.4 million, on top of $1 million it had returned in the past – all this had been earmarked for a surgery department whose walls would be able to withstand rockets fired from the nearby Gaza Strip.
The hospital, which calls the affair “a mistake made in good faith,” did not want the agreement on returning the money made public; it demanded a secrecy clause, which the trust rejected.
“There should be nothing secret about what Barzilai has done, or about how Helmsley responded when we found out about it,” Sandor Frankel, a Helmsley trustee, told Haaretz.
The affair raises questions about Israel’s treatment of its major donors, the management of crucial donations, and the reliability of government agencies – especially considering that the current and previous health and finance ministers didn't reply to the trust’s requests to take action against Barzilai and the individuals responsible.
The Helmsley Charitable Trust, which was established in 2008 and is based on the estate of Leona and Harry Helmsley, is probably unfamiliar to most Israelis. The couple, who were hotel and real estate giants, are much less known than major donors to Israel’s health system like Lev Leviev, Sammy Ofer and Haim Saban, even if Leona Helmsley – born Lena Mindy Rosenthal – is a household name to older generations of Americans.
Of the $450 million that the trust has donated to Israeli institutions, over $278 million has gone to health care. Many of the recipients, like Barzilai, are hospitals on the country’s outskirts that struggle to lure the kind of donations that major medical centers do.
In many cases, this largesse is the only way to buy new equipment, renovate and expand in general. Currently, donations account for 3 to 4 percent of the budgets of Israeli hospitals and a double-digit percentage of their spending for development and the acquisition of advanced equipment. In other words, without donations there is no development.
In May 2020, in an article in TheMarker, Haaretz’s business section, representatives of the Helmsley trust learned of a discovery by the Finance Ministry’s accountant general: the $1 million commission to the fundraising company that works with Barzilai, Politia. (The commission turned out to be $1 million, not $2 million as earlier reported.)
In all its donation agreements, the trust includes a clause forbidding commissions to intermediaries.
TheMarker also found that in a 2019 agreement between the hospital and Politia, a clause appeared that didn’t appear in the two sides’ two previous contracts. According to this paragraph, Politia would receive 15 percent of every donation by the Helmsley trust. Commissions to intermediaries from other donors are based on the size of the donation.
The trust appointed the accounting firm PwC to look into Barzilai; it also asked the Civil Service Commission to reconsider the candidacy of Prof. Chezy Levy, who was due to become director general of the Health Ministry. Levy had until recently been Barzilai’s CEO, a job to which he has since returned, (after serving as the director general of the Health Ministry).
The government was not impressed; then-Health Minister Yuli Edelstein and the outgoing director general, Moshe Bar Siman Tov, supported Levy’s candidacy. In the end, the commission’s appointments committee, headed by Daniel Hershkowitz, approved Levy.
In a letter to the hospital, a lawyer for the trust, Ran Sprinzak, said PwC’s review uncovered “misuse by Barzilai of the trust’s donations, many violations of Barzilai’s donation agreements with the trust, and a waste of over $1 million of the money from the trust’s donations for payment of ‘commissions’ or ‘brokers’ fees’ to Politia.” The hospital intended to sue Politia for the return of the money, Sprinzak added.
As Frankel told Haaretz, “Helmsley is privileged to have been able to contribute, in the last dozen years, approximately $450 million to institutions throughout Israel. We have given that money for only one purpose: for the good of Israel. We will not tolerate, and will aggressively pursue, any shekel falling through the cracks into any person’s private pocket.”
A need for better gatekeeping
In the two years since the affair was revealed, the Helmsley trust has repeatedly contacted the health and finance ministers – both in the previous government and the current one – as well as Accountant General Yali Rothenberg. The trust presented the results of PwC's investigation.
In a letter to Edelstein and then-Finance Minister Yisrael Katz, and later to their successors Nitzan Horowitz and Avigdor Lieberman, Frankel said the trust was shocked by the government’s failure to seriously investigate what he called “essentially looting Barzilai of over $1 million.”
Frankel added: “Turning a blind eye to Barzilai’s diversion of assets only hurts the people of Israel and those who work and donate to support them. I trust you appreciate the seriousness of Barzilai’s dereliction of duty, and I look forward to your response.”
But none of the ministers responded.
When asked why it failed to respond, the Health Ministry told Haaretz that “the minister appreciates the exceptional and significant activity of the Helmsley trust for developing the public health care system in Israel.”
It said the Finance Ministry’s accountant general, the registrar of nonprofit organizations and the Health Ministry were working to improve the process for “the receipt of donations at the Health Ministry. When the work is concluded, the Health Ministry intends to integrate the regulations into the entire system to ensure transparency.”
Regarding the trust’s requests, the ministry added: “It’s true that a few weeks ago a trustee asked to meet with the minister, but the meeting was postponed at the request of the trustee.” The trust says this referred to a meeting on another subject unconnected to the affair.
The Finance Ministry said the accountant general was striving to “strengthen the oversight of gatekeeping” in the health care system, adding that a report by the Civil Service Commission “raised a suspicion of disciplinary offenses by employees at the medical center,” and the commission’s disciplinary division had taken over.
The commission, however, said it had concluded that “there is no real potential for gathering evidence ... that could lead to a disciplinary trial.” It took into consideration both “the factual basis for the suspicions” and the “limitations of the statute of limitations,” it said.
For its part, Barzilai said: “The hospital doesn’t normally report to the media on its relations with donors. It’s important to clarify that the Helmsley trust made a respectable donation to Barzilai and Barzilai will always be grateful to them. Recently it was decided to return some of the donated money to the Helmsley trust upon their request and in accordance with the agreement signed with them.”
The statement added: “The sums noted in the article are not correct at all. We don’t see fit to report on the details of our agreements with donors.
“The hospital used the money from the donation to build everything agreed on with the Helmsley trust, to their total satisfaction, and for the benefit of the public in Ashkelon.”
It said the relevant government ministries had reviewed the matter “after it was clarified that this was a mistake made in good faith.”
Barzilai declined to say whether it had sued Politia to win back the money it awarded, as it had said it would, but the trust says the hospital informed it that it wasn’t suing. This would mean the hospital has lost twice: once when it gave Politia $1 million and once when it returned that sum to the Helmsley trust.
Politia has said that it did not receive the payment as a commission but as payment for its work, and that Politia was the engine behind fundraising for the hospital.