Just over four years ago, the government retained forensic accountant Izik Slovedianski to conduct an audit of the Jewish National Fund. Slovedianski worked for 18 months and in June 2018 presented a 70-page draft report that documented a long list of irregularities at the JNF.
The draft report, which was commissioned by a unit of the Justice Ministry’s Corporations Authority called the Registrar of Associations and Public Benefit Companies, concluded that the problems were so serious that consideration should be given to liquidating the corporation so that a court could address what Slovedianski called “grave findings.”
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But his conclusions were never published. Slovedianski withdrew them and they do not appear in a second draft of the report that was issued in August. The new draft contains additional findings.
In the two years between the two drafts, the JNF and its chairman, Danny Atar, spent millions of shekels in a legal battle against the report’s findings. Heading the fight for the JNF was Herzog Fox & Neeman, one of Israel’s top law firms, which succeeded in softening the tone of the report.
The JNF, which operates as a public-benefit corporation and has annual revenues of as much as 2.5 billion shekels ($740 million), spent heavily to counter the report. In addition to Herzog Fox & Neeman, the JNF also retained Meitar Liquornik Geva Leshem Tal & Co., Israel’s biggest law firm, and the services of Amiram Bogat, a former registrar of nonprofit organization, and Yaron Keidar, a former head of the Corporations Authority.
Along the way, JNF twice turned twice to district courts and once to the Supreme Court in an effort to obtain the documents and call logs used in the draft report. JNF sources said they appealed to the court because Slovedianski was foot-dragging over handing over the information. Slovedianski declined to comment.
In its lawsuit with the district court, JNF demanded that the draft report be kept under lock and key. The reason was not only Slovedianski’s conclusions: Sources at JNF, who asked not to be named, said last week that it was also because the company wanted to prevent the report from being released before the World Zionist Congress in Jerusalem starting Tuesday.
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Although many of the problems cited in the report occurred before Atar became chairman in November 2015, the company is concerned that it might harm his chances of being reelected to the post during the conference.
Atar was a Labor Party Knesset member, but since the party has virtually disappeared from the political map, he has worked to form a coalition to support his candidacy, including in the Reform movement. Atar’s chances improved considerably after Tuesday, when Defense Minister Gabi Ashkenazi said Atar would be Kahol Lavan’s candidate for chairman.
However, a day later World Likud Chairman Yaakov Hagoel and coalition whip Miki Zohar overcame long-standing tension that may lead to a Likud candidate replacing Atar as per a rotation agreement.
In the second draft of the Slovedianski report, nearly 20 of the first draft’s 80 sections were eliminated. The JNF is still appealing the findings, but TheMarker has obtained a copy of the first draft, which was attached to court papers filed by JNF. It shows an operation that manages billions of shekels of public money without organized procedures and appointments made on the basis of personal connections.
The report found that the JNF had spent heavily in 2014-16 on legal costs, paying no fewer than 90 firms a combined 46 million shekels. The company responded that given its size, the amount was small especially when considering that its main area of activity involves land and that typically involves considerable legal costs.
However, the report found that some of the contracts with the various law firms were approved without going through proper procedures regarding fees, including the firms’ hourly rates and number of hours expected to complete the work they were hired for. The company only became fully apprised of the cost after it was given a bill. In some cases, contracts were approved by the JNF’s tenders committee only after they had been awarded.
A substantial part of the report deals with how the JNF’s special contracts committee, the body that approves a wide range of agreements, conducts its business. Minutes of a May 2017 meeting – which was dropped from the second draft of the report – gives some insight into the committee’s decision-making process.
Weighing a request by the organizers of the Bein Ha’Cramim festival in the Galilee, the committee’s members Yuval Yenni, the JNF’s CEO and the committee’s chairman and Leah Fadida, a former Labor MK who now handles the company’s public relations, held the following conversation:
“They are requesting 1.4 million shekels. The expert adviser, Glitz, recommended 150,000 shekels. Etty and Aviram recommend 150,000 shekels. So, we have to decide how much to give them,” says Fadida, according to the minutes.
Yenni: “I see. What’s your position?”
Fadida: “I think 100,000 is a respectable amount. Or something like that.”
Yenni: “Is this from the committee’s budget?”
Fadida: “Yes, and I’ll add 20,000 shekels for training and everything.”
Yenni: “That from public relations?”
Fadida: “Yes. That’s why I say there’s no need for more than 100,000 shekels.”
The minutes make it hard to see by what criteria the allocation was being made, but as the report makes clear in fact millions of shekels were allocated without any clear criteria in 2014-17.
In May 2016, for the first time criteria were defined for JNF’s sponsoring and/or participating. However they dealt with procedural issues, not the decision-making process, and they were only put into effect two years later. Instead, the draft report, says money was allocated for purposes unconnected with the JNF’s goals and often based on the personal or political preference of JNF officials.
The draft report also found that JNF division chiefs screened proposals for sponsorship and participation before they went to the tenders committee. That gave them the power to block proposals even though there were no written standards for how they made decisions.
Until the end of 2015, the tenders committee was composed of top JNF officials. Today, in response to a State Comptroller’s report, the committee is composed of experts. Nevertheless, the draft report quoted company employees who said officials continued to interfere in decision-making, raising suspicions that some decisions were still based on personal and political considerations.
JNF sources said these allegations don’t appear in the second draft of the report. The first draft cited instances where the tenders committee approved agreements with outside parties after contracts had already been signed and begun to be implemented, turning the committee into a rubber stamp.
One example of this was a 1.2 million shekel sponsorship agreement granted to the Yedioth Aharonoth publishing group for a 2017 conference. The committee approved it after they were informed that the contract had already been signed. JNF sources said that incident was removed from the second draft.
Another section of the draft report deals with appointments. The report cites the appointment of Yoram Shviro, who as an official in the State Comptroller’s Office, was an appropriate candidate for the job. But, according to the draft report the terms of the appointment were altered twice to make them more flexible, at which point Shviro applied for the post.
In another case, the report details how Atar exerted pressure to appoint Yaron Ohayon, whom he knew from his stint as CEO of the Gilboa Region Council Economic Corp., as an aide. Ohayon was offered without a competitive tender a job at a monthly salary of 20,000 shekels and a company car. The report says Atar demanded the pay be increased to 35,000 but eventually settled for 28,000. A month later Ohayon was named acting director of land development, a position he filled for 18 months before a tender for the post was issued.
In response to the allegations in the draft report, the JNF said in a statement that the company had undertaken reforms and has appointed as an outside auditor, former Judge Oded Mudrick, and another retired judge, Sefi Alon, as legal adviser to its board.
“Since Atar assumed his post as JNF chairman, he has led an organizational revolution of transparency and proper management that has created hundreds of detailed procedures and has put into effect very stringent standards of conduct,” it said.
“The [TheMarker] story is based on an old draft report, whose main claims have already been shown to be incorrect and so haven’t appeared in revised drafts of the report. Even things that continue to appear [in the current draft] will be dropped after the company has given all its responses,” the JNF added.
The Companies Authority said it was giving the JNF time to respond and that due to the size and sophistication of its operations the process was taking some time to complete.