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August 15, 2012

Rabbi’s use of discretionary funds spurs new policies

http://www.jewishjournal.com/los_angeles/article/rabbis_use_of_discretionary_funds_spurs_new_policies_20120815

Rabbi Isaac Jeret

Rabbi Isaac Jeret

In response to the Haiti earthquake in January 2010 and the Carmel forest fires in Israel in December 2010, members of Congregation Ner Tamid of South Bay, like so many others, wanted to donate money to help the victims. So, many of them directed donations through Rabbi Isaac Jeret’s discretionary fund.

But their money never made it to organizations working on the ground in Haiti and Haifa.

Jeret, who led the 500-member Conservative congregation in Rancho Palos Verdes for seven years, allegedly not only did not send the money where he was supposed to, but instead he is believed to have taken money from his discretionary fund to make political donations to congressional campaigns across the country, according to Timothy Weiner, the synagogue’s treasurer from September 2009 through June 2012, who participated in an internal investigation of the matter.

Discretionary funds, common in most synagogues and churches, typically empower clergy to discreetly assist the needy and to support other charitable endeavors. Jeret’s case, while an aberration, could prompt other synagogues to asses their own balance between, on the one hand, trusting their rabbi and keeping the confidentiality of recipients, and, on the other, providing greater oversight and accountability for how the funds are dispersed.

The board of Ner Tamid accepted Jeret’s resignation on May 24, following an investigation initiated by the board last February that uncovered evidence indicating that Jeret had used somewhere around $10,000 from his discretionary fund to support political candidates going back several years, according to attorneys leading the investigation. The investigation is not yet complete, so a final number is not available.

Use of synagogue funds for political purposes could have potentially threatened the synagogue’s tax-exempt status, an outcome Congregation Ner Tamid has worked to head off. The IRS has not contacted the synagogue, and attorneys do not expect the federal agency to get involved.

“Given the congregation’s swift and decisive action in investigating Rabbi Jeret’s conduct, accepting his resignation once that investigation was completed, and implementing more robust corporate governance and oversight procedures to prevent any similar issues from arising in the future, the congregation has best positioned itself to address any future IRS concerns,” said attorney Nathan Hochman, a partner with Bingham McCutchen in Santa Monica, who is assisting the synagogue pro bono. Hochman headed the tax division of the U.S. Department of Justice in 2008-2009.

Jeret declined to comment.

Jeret’s attorney, Nancy Kardon, said the rabbi left the synagogue on a medical leave of absence in February 2012.

“After that time, on behalf of Rabbi Jeret, we worked diligently to assist CNT in its effort to reconcile any purported misuse of the Rabbi’s Discretionary Fund. Rabbi Jeret has since paid back to CNT all monies for which it sought reimbursement, and, as of May 2012, formally resigned from CNT, due to his medical condition. The Rabbi offers his thanks and prayers to those who have stood by him in this trying time,” his attorney, Kardon, wrote in an e-mail to The Journal. Kardon declined to elaborate on Jeret’s medical condition, and attorneys for the synagogue also declined to elaborate.

Rabbi Joel Rembaum, rabbi emeritus of Temple Beth Am on the Westside, has agreed to lead the congregation on an interim basis; a search for a new rabbi will commence in the fall. Cantor Sam Radwine delayed his retirement and canceled a two-month sabbatical in Israel this summer to stay with the congregation.

Debra Schneiderman, president of the 51-year-old congregation, says Ner Tamid is well positioned to move forward.

“At Congregation Ner Tamid, we share in each other’s joys and comfort one another in our sorrows. Our community, always strong and vibrant, has rallied together in the last few months and is looking forward to building upon that strength in the coming year, when we will have the honor and privilege to be led by Rabbi Joel Rembaum and Cantor Sam Radwine.”

While Jeret was on medical leave in February 2012, board members received statements from his discretionary account, and that is what tipped them off that something was awry, Weiner said. Ner Tamid then placed Jeret on administrative leave and hired an accounting firm to begin an investigation. Board member and attorney Laura Abrahamson and Hochman headed the investigation, both offering their time pro-bono.

The investigation took a comprehensive look at all spending Jeret was involved in.  The political contributions from the discretionary fund were the most significant instances of wrongdoing, according to Abrahamson.

Weiner, who was involved in the investigation, said Jeret made the political donations privately and then used the discretionary fund to reimburse himself.

Public records indicate that Jeret made campaign contributions totaling $6,500 in 2008 and 2010. Another $6,000 came from a Rabbi Leslie Jeret; Jeret’s full name is Leslie Isaac Jeret. It is not clear which, if any, of these donations were reimbursed from the discretionary fund.

Jeret has supported both Republican and Democratic congressional candidates from a broad geographic range.

Hochman said the synagogue has already taken all the actions the IRS would require if it were to investigate. In addition to accepting Jeret’s resignation, the synagogue has revamped how it oversees the discretionary fund. Lay leaders have contacted donors who made directed gifts that were not fulfilled and offered to reimburse them or donate the funds to the intended recipients, Weiner said.

While many rabbis can tell stories of discretionary fund misuse — colleagues paying for their own child’s bar mitzvah, leasing a car or simply writing checks to oneself — it is believed that cases like Jeret’s are few and far between, said Rabbi Alan Henkin, director of rabbinic placement of the Reform movement’s Central Conference of American Rabbis (CCAR).

“When you consider how much money goes through discretionary funds on an aggregate basis for several thousand synagogues, remarkably little of it is misused. The money is used for positive and productive purposes,” Henkin said.

The size of funds varies widely from synagogue to synagogue, ranging anywhere from a few hundred dollars to hundreds of thousands of dollars.

Donations to honor the rabbi, pushkes (collection boxes) and honorariums for lifecycle events typically fill the funds.

More often than outright abuse, the funds are the subject of misunderstanding, rabbis say.

“There is a lot of confusion on the part of rabbis and congregations about discretionary funds — what is appropriate use for them and what is not appropriate. We have tried over the years to provide some clarification for congregations and rabbis,” Henkin said.

A few years ago, the CCAR updated its discretionary fund guidelines. Ellen Aprill, a professor of tax law at Loyola Law School and a past president of Temple Israel of Hollywood, helped craft the guidelines.

Aprill cautions that if rabbis use the fund for personal benefit — even mixed personal-professional benefit, such as attending a conference — the IRS could consider the entire fund personal taxable income for the rabbi. (The Conservative movement’s Rabbinical Assembly guidelines allow for conference fees).

In addition, for congregants to take a tax deduction on their donation, the money must go to charitable purposes.

Congregants also can’t earmark a donation for a specific family, because that would essentially be laundering a person-to-person gift through a tax-exempt body. A congregant can, however, suggest a recipient to the rabbi, as long as the gift is not conditional, Aprill said.

And, of course, the disbursement must comply with the synagogue’s nonprofit status.

Aprill said while the IRS could theoretically go after Ner Tamid for influencing a political campaign, it typically doesn’t pursue cases if the nonprofit is addressing the situation.

Before this incident at Ner Tamid, the rabbi’s and cantor’s contracts stipulated that they must administer their respective discretionary funds according to Rabbinic Assembly (RA) guidelines, but no one checked regularly to make sure that was happening, said Weiner, a deputy attorney general for the state of California.

The new policy requires the board’s financial secretary to review the ledgers quarterly, and the financial secretary will also be a signatory on the account with full access to records. In alternating years, an outside accountant will review the rabbi’s and cantor’s funds, and the clergy will present to the membership an annual general breakdown of the fund. Direct reimbursement from the fund to personal accounts will not be permitted, according to Weiner.

The CCAR and the RA emphasize that in addition to understanding the legalities, each congregation needs to draw up an agreement with its rabbi that sets out the moral and ethical guidelines for the fund, which should reflect the synagogue’s priorities and mission.

The Reconstructionist Rabbinical Association also has guidelines, and the Rabbincal Council of America, an Orthodox umbrella group, recently appointed a subcommittee to create its own guidelines. Rabbi Alan Kalinsky, executive director of the Orthodox Union West Coast Region, said he distributed the CCAR’s guidelines to his member synagogues.

According to the various guidelines, in addition to supporting the needy and other charitable organizations, the rabbi and shul should agree on whether funds can go toward honorariums to guest speakers, support internal programming, or cover the rabbi’s expenses for trips to visit college students or for hosting events at his or her home. Whether it covers membership dues in rabbinic associations is debated.

If the rabbi needs to be reimbursed for out-of-pocket expenses, he should write a check for that amount from the discretionary fund to the synagogue, rather than to himself, and have the synagogue pay him back, so that the paper trail is transparent.

If the fund is used to purchase books or CDs, those items remain the property of the synagogue. And if the rabbi leaves the congregation, the fund stays.

Rabbi Stewart Vogel of Temple Aliyah in Woodland Hills says transparency is key.

“There is a sense of secrecy that sometimes prevails around these funds, and I think we live in an age where we have to take away that mystery, and to replace it with an aura of trust,” said Vogel. “It’s not about questioning the rabbis’ integrity — it’s just that we live in an era of suspicion, and we need to respond by taking away that suspicion.”

Vogel submits a yearly accounting to the president, and the president can look at the fund at any time. Vogel tries to write the checks to third parties — rental agencies, insurance companies, car mechanics — rather than directly to recipients, to assure the funds are being used properly and that there is a paper trail.

Rabbi Ed Feinstein at Valley Beth Shalom says his fund, which distributes around $10,000 a year, is reviewed monthly by the executive director, but Feinstein blocks out the names of individual and families who have received funds. He said much of his fund goes to support day school and camp scholarships.

Rabbi Elazar Muskin at Young Israel of Century City has a fund that disburses hundreds of thousands of dollars a year, much of it collected through appeals for specific causes locally and in Israel. Muskin said all recipients, from individuals to institutions, are vetted in some way — even the itinerant poor must have certifications from a local rabbinic committee attesting to the veracity of their plight. His finance committee reviews the allocations monthly and the congregation receives an annual report.

Rabbi Mark Diamond, executive vice president of the Board of Rabbis of Southern California, said transparency protects both the congregation and the rabbi.

“I have seen abuses of the funds that have caused great pain and anguish for the rabbi and the congregation, and I have also seen situations where perhaps well-intentioned leadership alleges abuse that did not happen,” he said. Many rabbis tell tales of congregants who latch on to the discretionary fund as an issue to try to prove the rabbi is not honest.

All of this stems from the tension between accountability and protecting the confidentiality of the recipients, a concern Ner Tamid dealt with as it crafted its new policy, Weiner said.

“We wanted the rabbi or the cantor to have the freedom to make a donation. You don’t want to have a whole committee know what is going on,” Weiner said. “But at the same time, as we have learned, it’s good to have trust but you have got to have some sort of oversight.”

Weiner was a close friend of Jeret’s — their families spent the last three Thanksgivings together. Jeret is, Weiner said, a powerful leader.

“To hear him speak was really amazing. The first time you heard one of his sermons, it knocked your socks off. He brought a lot of energy to the synagogue, and I think he had a style that was very much his own,” Weiner said.

Weiner hasn’t spoken with Jeret since his resignation.

“It was completely unexpected. You could have knocked me over with a feather,” Weiner said. “It was devastating.”

Rembaum, who will preside at Ner Tamid part time, said he is impressed with how the community has pulled together, and he looks forward to a year of teaching, praying and forming relationships with congregants to take them through their lifecycle events. As an interim rabbi, he won’t initiate programs or make big decisions, Rembaum said.

Last year, Rembaum, who led Temple Beth Am for 25 years, stepped in as interim rabbi at Congregation Beth Ami in Santa Rosa.

“An interim rabbi needs to help the congregation appreciate the things that they are doing right, because when you have a crisis, people begin to have doubts about themselves, and you need to say: ‘No, no, no — you’re good. You’re doing the right things,’ ” Rembaum said. 

His sermons on the High Holy Days may deal with forgiveness in a universal way, but he doesn’t plan to directly address the situation.

In this healing process, he looks at himself less as the surgeon and more as the physical therapist, he said.

“I’m coming in to get the bones working again, to get the muscles strong, so the congregation can go forward and do the job they want to do. I want them to get the sense that they can legitimately feel optimistic and hopeful about the future and about the fact that they are wonderful shul and community.”

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