Israel Matzav

More inside dealing by J Street

More than a year ago, I reported on J Street's use of a polling firm co-owned by its Vice President, Jim Gerstein. While that one smelled, at least it was out in the open.

Now, the Washington Times' Ben Birnbaum reports that J Street has been using the services of a consulting firm founded and still 15%-owned by none other than Jeremy Ben Ami himself, without disclosing it in its IRS filings.

"Even if it's technically legal, it gets very messy when you have these sorts of deals going on because, if you're going to benefit on the other end of it, be it 100 percent or 5 percent, it raises questions about objectivity and the arms' length in the transaction," said Ken Berger, president of Charity Navigator.

"If you want your organization to use a particular company, ideally there would be a clean break one way or the other. So you would either sell off your interest in that company or step down from the board during the period of time when this is going so that there would be no question as to what's going on in the boardroom."

Mr. Ben-Ami declined repeated interview requests, but provided a statement through a spokesman:

"I founded Ben-Or together with Oriella Ben-Zvi in 1998. When I left in 2000, I relinquished all rights to ongoing compensation from Ben-Or in any form. I have received no payments from the company in the past 11 years and have had no role in the management or operation of the firm.

"At the time of my departure, as a token of my role as a co-founder, we left 15 percent of the shares of the firm in my name — an agreement that has no financial implications for me personally, for J Street or for the firm."

...

James Abruzzo, co-director of the Institute for Ethical Leadership at Rutgers Business School, said that aside from a nonprofit's obligation to vet multiple firms in a "competitive-bidding process," someone in Mr. Ben-Ami's position would at a minimum have to disclose his stake in the firm and recuse himself from any decision to hire it.

Even if those conditions were met, Mr. Abruzzo said, "it still doesn't feel right."

"There's a certain amount of trust that is one of the assets of a nonprofit," he said. "And if you undermine that trust by doing something that even seems like it's self-dealing, that's injurious to the organization."

501(c)4 and 501(c)3 organizations are required to report "business transactions involving interested persons" on their annual Form 990 tax returns. On J Street's most recent form — covering the fiscal year from July 1, 2008 to June 30, 2009 — one J Street official was designated an interested party, though it was not Mr. Ben-Ami.

...

Charity Navigator's Mr. Berger said that without a competitive-bidding process, "you're getting into some very gray area, and you don't want to have a look back from the IRS later that's going to bite you."

"In other words," he said, "if you have a financial interest in the company and then the IRS checks and sees that the decision was based without looking at any other options — because you said it was the best, then there's exposure there."

The documents also hint at an added level of collaboration between J Street and Ben-Or.

Read the whole thing.

But don't worry about the IRS coming after J Street so long as this administration is in power. They're too busy running after Z Street and other pro-Israel organizations to be bothered.

Labels: J Street, Jeremy Ben Ami, self-dealing

posted by Carl in Jerusalem @ 11:06 PM