The Judges Court of Inquiry appointed by Dr. Chaim Weizmann, President of the World Zionist Organization, to investigate charges of mismanagement against the present Administration of the Zionist Organization of America late last night made public its findings in a ten page report after deliberations which began on Wednesday afternoon and contined for more than ten hours on Thursday.
The complete text of the report which is signed by Judge Edward Lazansky of the Appellate Court, Brooklyn.
Judge Mitchell May of the Supreme Court, Judge Grover Moscowitz of the Federal Court, and Judge Otto Rosalsky, follows:
New York, June 28, 1928 Dr. Chaim Weizmann.
President of the World Zionist Organization.
Dear Sir:
In accordance with your letter of May 26, the undersigned proceeded to investigate the affairs of the Zionist Organization of America in light of press comments that there had been misuse and diversion of funds, and beg to report as follows:
Public hearings were held at which all who wished to present facts to sustain or disprove such charges were heard.
While we were not requested to consider the affairs of the United Palestine Appeal, it is appropriate to state that though its affairs were discussed, there was no suggestion made of any wrongful act, irregularity or mismanagement on the part of this organization, its administration or officers.
We beg to submit the following findings of facts and our conclusions with reference thereto.
Findings of Fact.
I.
On December 15th, 1926, Louis Lipsky, President of Z. O. A. endorsed the signature of Z. O. A., by Louis Lipsky, President, on a demand note for $2,000. of the Springdale Rubber Corporation, of which Mrs. Dorothy E. Lefkowitz was treasurer, and who was and is treasurer of Hadassah.
Springdale Rubber Corporation is a business corporation and in no wise connected with the affairs of Z. O. A.
The note was endorsed for the private use and benefit of the said corporation. Mr. Lipsky knew that the note so endorsed was delivered to Commodore Trading Corporation a private money lending concern, for a loan by it of $2,000. to the Springdale Rubber Corporation. Mr. Lipsky acknowledged that he endorsed the note at the request of Israel Maltin, auditor of Z. O. A., who he knew was a director and stockholder of Commondore Trading Coporation.
At that time Abraham Goldberg, a member of the Administrative Committee, Meyer Weisgal, Secretary of the Administrative Committee, and a number of employees of the Adminis- of Commodore Trading Corporation.
Mr. Lipsky knew that a number of the employees of the Administration had frequently borrowed money from Commodore Trading Corporation.
He further stated that he endorsed said note with object of helping Mrs. Lefkowitz at a time when she was in financial distress, and that Mr. Maltin told him that this act would tend to establish more amicable relations between the treasurer of the Hadassah and the Z. O. A.
Mr. Lipsky endorsed said note as President of the Z. O. A. without authority, and the Zionist Administration does not attempt to justify said act.
It is clear that there was no financial gain accruing to Mr. Lipsky from said act. The loan was fully paid by Mrs. Lefkowitz and the Z. O. A. sustained no loss because of said endorsement. Apparently, neither Mr. Goldberg nor Mr. Weisgal knew of this transaction.
II.
On March 18th, 1926, Maurice Samuel gave his promissory note for $1,000. payable to the order of the Z. O. A. which was discounted by it, and received a check of the Z. O. A. for $1,000. signed, without authority, by Louis Lipsky, as President, and countersigned by Harry P. Fierst. Assistant Treasurer. This note was not paid at maturity, but was finally paid in October, 1926.
Again on August 17th, 1926, a note of $3,000. of Maurice Samuel was endorsed by the Z. O. A. and discounted by it, without authority, and the proceeds given to him by check of the Z. O. A. signed by the Vice-President and Treasurer. This note was paid in October, 1926.
The proof convinces us that this money was needed by Mr. Samuel because of a great bereavement which had come to him and his family, and it was intended by him that the payment thereof would be secured by his future earnings from the Z. O. A.
At the time of these transactions, Mr. Samuel was a member of the Administrative Committee and was also an employee of the Z. O. A. at a salary of $7,500. per year.
As far as disclosed, no member of the Administrative Committee other than those mentioned had any knowledge of these transactions.
During this period the Z. O. A. had a large deficit and was heavily indebted to the banks without the resources available to pay the same.
III.
The American Zion Commonwealth, a New York business corporation, with an authorized capital of $10,000. and which operated as a land selling and purchasing agency in Palestine under the auspices of Z. O. A. found itself unable to meet heavy financial obligations in America and Palestine.
In the summer of 1926, the A. Z. C. was indebted in the sum of $180,000 upon its promissory notes to a bank in New York City. One of these notes became due and payable in December, 1926, and was not paid. Thereupon Mr. Lipsky, at the request of Hon. Bernard Rosenblatt, a member of the Aministrative Committee of Z. O. A. but without any authority from such Committee, executed in the name of Z. O. A. an unlimited guaranty of payment to the bank which held these notes, for any past, present and future liabilities of the A. Z. C. to the bank. The assumption of this liability by the Z. O. A. was never officially communicated to the Administrative Committee.
Mr. Lipsky’s explanation was that he intended that this guaranty should temporarily meet the situation until the United Palestine Appeal should assume the obligation of the A. Z. C. He stated he believed that under a resolution which had been adopted by the Directors of the U. P. A. on December 7th, 1926, the U. P. A. would guaranty the payment of advances to be made by private individuals to A. Z. C. to the aggregate amount of $500,000. for the purpose of saving the A. Z. C. from threatening collapse.
Mr. Lipsky stated, and it appears to be the fact, that Zionist leaders seemed to be of the opinion that this was advisable to prevent the A. Z. C. from being discredited. But this did not justify the unauthorized execution of said unlimited guaranty. It appears, however, that what he did in this respect was in the belief that it was for the best interests of Z. O. A., which was never required to redeem the obligations of this guaranty.
Mr. Lipsky admitted that he made a statement, which appeared in the public press on May 6th, 1928, denying that he, as President of Z. O. A., had, without the knowledge or consent of the Administrative Committee, signed notes to the extent of $285,000. with the New York City bank above mentioned for the benefit of the A. Z. C. He said when he made this statement he was thinking of “notes” which he had not, in fact, executed and had forgotten the “guaranty.”
IV.
On June 11th, 1924, the Z. O. A. received a legacy of $3,000 for the benefit of the Hebrew University of Jerusalem to be transmitted by it to the University. During 1925-1926 Z. O. A. received other sums from different individuals aggregating $9046.45 as donations to the Hebrew University to be transmitted by Z. O. A. to it. Instead of transmitting these sums aggregating $12.046.45 to the Hebrew University, as these items were received. Z. O. A. used the entire amount for its purposes in America and sent no part to the Hebrew University until June 16th, 1928. The amount was adjusted by the payment of $4,000. to the representative of the Hebrew University in New York, and $6,000. by six promissory notes to the order of the University, each for $1,000. pavable with interest on October 10th. November 10th December 10th, 1928, and January 10th, February 10th and March 10th, 1929. During the four years that these moneyes were held in trust for the Hebrew University and used by Z. O. A. no interest was allowed thereon. Z. O. A. charged the Hebrew University with the sum of $1,876.27 for expenses in connection with the matter and deducted this amount from the total due the University. These sums of money, which should have been transmitted to the Hebrew University were used for the general purposes of Z. O. A.
The Auditor of Z. O. A., when questioned, on this subject, stated that the amount due the Hebrew University had been fully paid prior to May 31st, 1928, and did not state the aforesaid details. Such details were first called to our attention by the certified public accountant who made an investigation of some of the items from the books and records of the Z. O. A. at the request of this Committee.
The financial statement of Z. O. A. for the year ending May 31st, 1928, shows no indebtedness from Z. O. A. to the Hebrew University.
The members of the Administration present at the hearing specifically disclaimed any knowledge of this condition of affairs, and they emphatically condemned the same.
V.
Mr. Isidore D. Morrison, Chairman of the Finance Committee of Z. O. A., stated to us that at a recent meeting of the Finance Committee, “the accountant reported that while the deficit of the Organization has actually increased during the year, he nevertheless, can so arrange the figures as to show a decrease.” He also stated that “it was the consensus of opinion that if we come before the Convention with an increased deficit, the resentment will be hard to overcome and I, therefore, have to lend my name to a manipulation of figures which will cover up the true state of affairs.”
Since this statement was made, Mr. Morrison writes that he had made a mistake and that by the use of the interest on life membership as an item of income the certified public accountant’s report would “indicate that the deficit for the fiscal year has been reduced by over $37,000.” We set this forth merely as an item indicating some confusion in the mind of the Chairman of the Finance Committee as to the financial condition of affairs.
VI.
The following telegram was sent to the Chairman and Secretaries of Zionist districts throughout the United States:
1928 May 31 A.M. 10.30.
RECORDS DISTRICT MEMBERSHIP NOW BEING PRINTED FOR CONVENTION REPORT. PLEASE FORWARD ALL MEMBERSHIP DUES IMMEDIATELY. ALSO LISTS, INCLUDING THOSE MEMBERS WHO ENROLLED, BUT NOT PAID THEIR DUES. WE WILL CREDIT YOUR DISTRICT AND CHARGE YOUR ACCOUNT WITH ENROLLED BUT UNPAID MEMBERS. URGE YOU INCREASE MEMBERSHIP.
LOUIS LIPSKY, PRESIDENT, ZIONIST ORGANIZATION OF AMERICA.
Public objection having been made to this method of seating delegates, the following letter was sent to Mr. Lipsky:
June 3, 1928.
To the Chairmen and Secretaries of Zionist Districts:
The following telegram was sent to all Zionist Districts:
May 31, 1928.
RECORDS DISTRICT MEMBERSHIP NOW BEING PRINTED FOR CONVENTION REPORT. PLEASE FORWARD ALL MEMBERSHIP DUES IMMEDIATELY. ALSO LISTS, INCLUDING THOSE MEMBERS WHO HAVE ENROLLED BUT NOT PAID THEIR DUES. WE WILL CREDIT YOUR DISTRICT AND CHARGE YOUR ACCOUNT WITH ENROLLED BUT UNPAID MEMBERS. URGE YOU INCREASE MEMBERSHIP.
LOUIS LIPSKY, PRESIDENT, ZIONIST ORGANIZATION OF AMERICA.
It is essential that we have the records complete for the report to the Convention. Therefore we urge the Districts to take immediate steps to comply with the request contained in the above telegram.
It must be definitely understood that when electing delegates to the Convention, only those members who have actually paid their dues to the District or to the national office for the year 1928 are eligible to vote, and the number of delegates to be elected must be based on the number of paid members. The unpaid members, whose names we have asked you to forward to the national office cannot be included in the total for the election of delegates.
In order that your delegates may be seated at the Convention, it is essential that every District comply strictly with the above rules.
Very cordially yours,
LOUIS LIPSKY,
President.
At the hearing Mr. Lipsky asserted that he knew nothing about the sending of the telegram. He does not, however, repudiate the telegram.
CONCLUSIONS
1. No reason exists why there should be any loss of public confidence in Z. O. A., as there is no proof that any person has acted or omitted to act for personal financial gain and there is no proof of any financial loss to Z. O. A.
2. There have been instances of loose management in the financial affairs of Z. O. A.
3. Trust funds have been improperly transferred from their proper channels until recently to the general funds of Z. O. A. However, such sums were subsequently applied to their proper purposes.
4. Trust funds should always be kept separate and apart, and never used for general purposes.
5. In light of the facts which have been disclosed and reported above, it is our opinion that no one responsible for the irregularities pointed out should be continued as an officer or a member of any committee of the Z. O. A.
6. Immediate steps should be taken to install a system which so far as possible would prevent future irregularities, or, in the event that they did exist, they would speedily become known.
7. No officer or member of any Committee should receive any pay or other emolument for any services rendered to the cause.
8. No future liability by note or otherwise should be executed without the authority of the Administrative Committee expressed by the vote of a majority of the entire Committee thereof at a meeting duly held.
9. In no event shall the credit of Z. O. A be extended or its obligation incurred for private purposes.
Time did not permit of a detailed and thorough investigation of the affairs of Z. O. A. We have been able to hold only six hearings, but we believe we have obtained a fairly clear insight into the affairs of Z. O. A. as the result of the endeavor of all who appeared before us to present the facts fully, fairly and frankly.
We express the hope that out of this investigation there will come appropriate action looking to remedy any of the shortcomings of the past and with the result that the dissensions which have heretofore existed will disappear and that concord will follow to the end that the movement towards the restoration of Palestine may speed on unimpeded and unhampered.
Respectfully submitted,
EDWARD LAZANSKY, (Chairman),
MITCHELL MAY, GROVER M. MOSCOWITZ, OTTO A. ROSALSKY, Committee.
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