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Jewish Journal

ZOA’s lost tax-exemption status prompts demand for new leadership

by Jonah Lowenfeld

September 14, 2012 | 5:55 pm

Mort Klein, President of ZOA

Mort Klein, President of ZOA

On Sept. 11, the Zionist Organization of America’s (ZOA) board of directors met in New York and overwhelmingly approved a resolution expressing confidence in the organization’s direction and in the leadership of Morton Klein, its president of 19 years.

The vote came less than a day after a news report that ZOA had had its tax-exempt status revoked as far back as May 2011 for failing to file three consecutive years of key financial documents with the Internal Revenue Service.

Only one board member present at the meeting, ZOA National Vice Chair Steven Goldberg, voted against the resolution. Goldberg, a Los Angeles resident, told the Journal that he believes ZOA’s loss of tax-exempt status points to larger problems with the 115-year-old educational and advocacy nonprofit. In an interview on Sept. 12, Goldberg insisted Klein must be replaced for the ZOA to move forward.

“He thinks he is the ZOA, and he isn’t,” Goldberg said of Klein. “He deserves credit for dedicating so many years of his life, but right now he is hurting the ZOA.”

Goldberg said he believes in ZOA and in its mission, but said his fellow board members have been derelict in their duty to exercise independent judgment and oversight over Klein.

“The board is made up of cronies, yes-men and sycophants who will do nothing but approve everything he [Klein] says and kvell [rejoice] about it,” Goldberg said. 

Klein has led the ZOA for the past 19 years, thanks to a pair of amendments to the organization’s constitution allowing him to serve an unlimited number of four-year terms. In an interview on Sept. 13, Klein told the Journal that he believes Goldberg is motivated by a personal vendetta and a desire to take over as president.

“The entire board disagrees with this person and is shocked by his irrational actions,” Klein said.

Over the past two decades, ZOA has been the most prominent and relentless critic of those who would have Israel give up territory as part of a peace deal. Claiming a national membership of 30,000, ZOA lobbies Congress frequently to advance its agenda.

Klein, meanwhile, is the organization’s sole public face and has become known on Capitol Hill and beyond. Speaking to the Journal from his home in Pennsylvania, where he has been recovering since undergoing open-heart surgery six weeks ago, Klein said he had received phone calls from Israeli Prime Minister Benjamin Netanyahu and more than a dozen members of Congress wishing him well.

Former board members and ex-employees have criticized Klein for his at times tempestuous leadership style in the past, but for Goldberg, an officer on the board, to take Klein — and the rest of the ZOA board — to task in such a public way is highly unusual.

Both Klein and Goldberg said that at one time they had a friendly relationship; according to Goldberg, it was Klein who invited him to join the national board as an officer. But from the time ZOA was informed on Feb. 22 of this year that its tax-exempt status had been revoked, and throughout the months-long debate ever since over whether the organization should make public the revocation, the two men have staked out opposing positions in a dispute that has become very public, after all.

In accordance with a law passed by Congress in 2006, ZOA’s tax-exempt status was revoked because it did not file three consecutive years of 990 forms, in 2008, 2009 and 2010. Most nonprofits are required to file such forms every year; the filings disclose basic information about an organization, including its overall budget and the salaries paid to top officers.

The deadline for submitting the form is four and a half months after the end of an organization’s fiscal year, but the IRS allows three-month extensions to any organization that requests one, and an additional three months for organizations showing good cause.

David Drimer, national executive director of ZOA, said ZOA typically requested and received six-month extensions, filing annual 990s in November, and that the revocation of tax-exempt status was the result of “missing the technical deadline” for submitting the 2008 form. Drimer, who began working at ZOA in August 2011, said the organization sent the 2008 form to the IRS in November 2011, thinking the submission was timely, only to find out in February that the deadline had passed in May 2011.

ZOA, Drimer said, is not the only organization to fall prey to a regulation, which automatically revokes the tax-exempt status of any organization that fails to file forms for three consecutive years.

Most of the organizations that have had their tax-exempt status revoked were agencies that take in less than $50,000 per year. Under the 2006 law, such groups were, for the first time, required to submit short annual filings.

ZOA, however, has always been required to submit standard 990 forms, which in recent years have run more than 35 pages; according to the three most recent ones — 2009, 2010 and 2011 — shared with the Journal by Drimer, ZOA took in an average of more than $3.6 million a year.

Drimer said those forms would be submitted soon to the IRS, along with a request for retroactive reinstatement of ZOA’s tax-exempt status. The reason for the belated filing, Drimer said, had to do with ZOA’s hiring new accountants in early 2009, Loeb & Troper, and that firm’s questions about the accounting done for ZOA before it hired the firm.

Since February, ZOA has designated FJC, a New York-based public charity, to accept donations earmarked for ZOA on its behalf. Those donations, Drimer said, will remain inaccessible to ZOA until its nonprofit status is reinstated.

Drimer added that all Web sites and ZOA materials had been “cleansed” of anything calling the ZOA a 501(c)(3) organization.

“We never kept it a secret,” he said. “Everybody who donated to the ZOA up to Feb. 22 gets their deduction, and everybody who donated to the ZOA after Feb. 22, gets their deduction. The idea that we have somehow done something wrong, unethical or illegal is preposterous.”

However, until an article about the ZOA’s loss of tax-exemption appeared in The Forward on Sept. 11, few in the Jewish community knew about ZOA’s change in tax-exempt status. Goldberg said even some board members were unaware until recently.

Goldberg said Larry Hochberg, who is listed as a board member on each of the last three years of ZOA 990 forms, wasn’t aware that the tax-exempt status had been revoked until Goldberg e-mailed the entire board about the matter in late August.

“He quit in disgust,” Goldberg said. “He thought he should’ve known back in February when the ZOA found out.” Reached by phone on Sept. 13, Hochberg declined to comment.

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