WASHINGTON
— To find lax funding controls of Palestinian charities, one only need
take a look at one of the Ford Foundation’s beneficiaries, the
Palestinian Committee for the Protection of Human Rights and the
Environment, also known as LAW.
The
group — whose acronym comes from the name of its predecessor activist
organization, Land and Water — was a key organizer of the anti-Israel
debacle at the September 2001 U.N. World Conference Against Racism in
Durban, South Africa.
LAW received
$9,628,942 during the five years ending August 31, 2002, from a long
list of philanthropic donors. Besides the Ford Foundation’s $1.1
million, LAW received direct grants from more than 30 European and
American public entities.
These
include $1.5 million from the Dutch charity Cordaid; $853,000 from the
Grand Duchy of Luxembourg; more than $93,974 from the Swedish unit of
Save the Children, and $33,000 from the Canadian Embassy, according to
audits obtained for this investigation.
No Arab sources were listed in LAW’s five-year donor record.
Last fall,
donors became concerned when LAW officials were unresponsive to
spending inquiries, according to a newly installed senior LAW official.
Soon it became clear to the donors that vast monies — more than $2
million — were unaccounted for, misappropriated or being secreted in
bank accounts instead of being spent on programs.
A
consortium of worried benefactors formed an evolving committee, made up
mainly of Ford Foundation officials and Norwegian and Swiss donors,
according to a source with the International Commission of Jurists in
Sweden, one of the concerned donors.
The
consortium wanted a major accounting firm to launch an immediate
investigation and asked the Swedish relief agency SIDA to quickly
commission an audit. SIDA enjoyed an ongoing contract with Ernst &
Young, which accepted the assignment immediately.
Ernst
& Young’s offices in Stockholm and the West Bank city of Ramallah
then undertook the investigation, according to a SIDA spokeswoman.
Approximately
80% of the estimated $100,000 audit cost was to be reimbursed by Ford,
in concert with several European charitable groups, she said.
SIDA’s
spokeswoman explained her agency was not actually a LAW donor, but
merely facilitated the audit as a convenience to Ford and other
funders.
Ernst & Young
headquarters in London refused to discuss any aspect of its audit or
provide a copy of the investigative report, which was submitted to the
donor consortium on March 25 of this year.
But
a copy of the 60-page investigation, obtained from overseas sources,
catalogs a stunning list of financial improprieties.
Nearly
40% of the $9.6 million donated was either ineligible, unsupported,
misappropriated, or never spent on programs, according to the
investigative report.
And more than
$2.3 million was “ retained,” turning LAW into a sort of bank under the
nominal control of its then-executive director, Khader Shkirat, and
other senior officials, the report asserted.
Indeed,
three interest-free loans were made to a moneychanger, Izz Shkirat,
related to the executive director at the time, according to the report.
Two of the three loans, $30,000 and $40,000, were repaid, the report
stated.
But a May 1999 loan for $130,000 has yet to be repaid, according to the report.
More
than $160,000 in expenses was paid on behalf of an entity called the
Centre for Democratic Advancement, reportedly formed by Khader Shkirat,
which then used the money to purchase a destroyed radio station,
according to the audit.
Asked about
press reports that LAW funds were embezzled, an American employee of
Ernst & Young familiar with the audit replied, “It depends what
dictionary you use. They were certainly misappropriated.”
Moreover,
$490,000 from LAW became part of a series of transactions among other
LAW board members and used to acquire a 56 percent ownership in Arab
Phone Inc., according to the audit.
In
addition, more than $75,000 was spent on first-class or business-class
international airline tickets, and lavish hospitality, which added
$109,000 to the impermissible expenses, according to the report.
Seven
cars and trucks were purchased for personal use of several former board
members, and several of the vehicles have remained with those former
trustees, according to the report.
Ernst
& Young also concluded that the unused money arose from “fictitious
financial reporting” to donors as a result of “collusion” among LAW’s
board, Khader Shkirat, and local accountants.
In
June of this year, CBS News interviewed Mr. Shkirat as attorney for
Fatah leader Marwan Barghouti, who is being tried in Israel for
terrorism.
The Ford Foundation
recently granted Mr. Shkirat a $60,000 grant to conduct human rights
research at Harvard and complete English courses at Boston University.
Mr. Shkirat could not be located for comment, and Ford officials refused all comment on the case.
While
spotlighting LAW’s abuses, Ernst & Young also reported to donors
that the foundations’ controls were so sloppy that “it cannot be ruled
out that LAW was under the impression that it had the donor’s silent
consent to use the funds in any way it saw fit.”
A
key American Ernst & Young source familiar with the report
denigrated the funding arrangements as “goulash.”
“Everything
goes into the pot, everything goes out of the pot. No one knows what is
what — not Ford, not any of them,” he explained.
A
senior LAW executive added: “What do you expect? I know of one grant
for $200,000 made from the European Commission with nothing more than a
phone call.”
When reached, LAW’s new
director, a Lebanese Canadian named Jihad Sarhan, apologized for LAW’s
former management and said LAW would not engage in future agitation or
name-calling, simply human rights advocacy.
Mr.
Sarhan stated that he did not completely agree with the Ernst &
Young report and was hoping to retain Price Waterhouse Coopers to
conduct a follow-up audit. He added that the group appointed a new
board, and in early August changed its name to Law Association for
Human Rights.
LAW correspondence and
submissions over recent months to Ford and other donors, obtained
exclusively for this investigation, thanked international donors for
continuing their financing and promised strict financial controls in
the future.
As of this writing, Ford
was still scheduled to continue its funding of LAW through 2005,
according to LAW and Ford sources.
Edwin
Black is the author of the newly released “War Against the Weak:
Eugenics and America’s Campaign to Create a Master Race” (Four Walls
Eight Windows), which investigates corporate philanthropic involvement
in American and Nazi eugenics. In May 2003, he won the American Society
of Journalists and Authors’ award for best book of the year for his
previous book, “IBM and the Holocaust” (Crown Publishing, 2001).
