In the first sign that the Met Council financial scandal may impact on delivery of services to the area’s growing poor population, a spokesman for Mayor Michael Bloomberghas announced that millions in unpaid contract funds for social services will be put on hold during a probe into CEO WIlliam Rapfogel’s dealings with an insurance agency.
“All pending awards have been put on hold until an investigation by DOI is completed,” Kamran Mumtaz told The Jewish Week in an emai Friday morning. The announcement was first announced by the New York Post.
Mumtaz was referring to the city’s Department of Investigation. A separate probe by a taskforce run by the offices of the state attorney general and state comptroller was already under way.
The emerging financial scandal at the area’s largest anti-poverty organization under Jewish auspices sent shockwaves through an election-year political scene and the communal organizational world as a figure widely viewed as well-connected but altruistic fell under criminal investigation and was fired.
In a bombshell statement Monday, Met Council’s board announced it had fired Rapfogel,at the helm since 1992, for “financial irregularities and apparent misconduct in connection with the organization’s insurance policies.”
Soon after, a spokesman for New York Attorney General Eric Schneiderman announced Rapfogel is the subject of “an ongoing criminal investigation” conducted together with the office of State Comptroller Thomas DiNapoli. A public integrity task force formed in 2011 is handling the investigation, the New York Times reported.
Rapfogel’s apology later that day was an unusual spectacle in itself, leading to questions about whether a plea arrangement with investigators was in the works and whether he might point his finger at others embroiled in the scandal.
“I deeply regret the mistakes I have made that led to my departure from the organization,” he said in a statement released by his lawyer, Paul Shechtman.
In a brief telephone conversation with The Jewish Week Tuesday, Shechtman declined to comment on any plea deal.
As of Tuesday afternoon, Rapfogel did not respond to messages left on his cell phone voicemail or to e-mails seeking comment.
Leaks from unnamed law enforcement sources to daily newspapers said that the investigation centered on Century Coverage, a Valley Stream, L.I.-based brokerage whose employees, and particularly CEO Joseph “Yossi” Ross, have a long history of political contributions to local elected officials totaling more than $120,000. While some reports said the probe is focusing on whether Rapfogel directed the firm to donate funds from Met Council payments to specific candidates, the Daily News, citing anonymous sources said Rapfogel himself may have pocketed a six-figure sum.
Rapfogel, 58, whose total compensation from Met Council totals more than $400,000, including a $340,000 salary, has no recent political donations made in his name listed in the city’s Campaign Finance Board database. The most recent was in May 1999, a $250 gift to Herbert Berman, then a councilman running unsuccessfully for comptroller.
According to its website, Century Coverage provides “insurance and risk management products and services to businesses, organizations and individuals,” and was established in 1951. CEO Ross was a co-chair of Met Council’s annual Builder’s Lunch event in August 2011, according to Met Council’s website.
The scandal comes at a time when the number of local Jews living in poverty has risen sharply, leaving questions about the impact on Met Council’s many services.
It also comes at a time when a top Met Council ally, Assembly Speaker Sheldon Silver, is under pressure to resign because of his admitted mishandling of sexual harassment charges against a powerful Brooklyn legislator.
Silver released a statement Monday saying he was as shocked as anyone else at the investigation of Rapfogel, who is the husband of Silver’s longtime chief of staff, Judy Rapfogel.
“I am stunned and deeply saddened by this news,” said Silver in the statement. “While there is still much that we don’t know, we do know that the Metropolitan Council on Jewish Poverty has given tens of thousands of New Yorkers of all faiths and backgrounds lifesaving help over the past four decades.”
Met Council’s board members stressed in a statement Monday that it was the organization’s leaders who discovered the “wrongdoing” and “notified the proper authority.”
Three leading Democrat mayoral candidates on Monday, Bill de Blasio, Christine Quinn and Anthony Weiner announced that they would return donations to their campaign by Century Coverage employees, while the campaign of a fourth, William Thompson, said it was investigating whether such funds, totaling $15,000, were given during the time illegal activity was suspected.
Whatever the outcome of the investigation, the incident has shed light on a pay-to-play system used by nonprofits to stay in the good graces of elected officials and up-and-coming candidates who control, or will control, the grants and contracts that are the lifeblood of social service organizations.
While a chartable organization is legally barred from making direct political donations, a nonprofit’s executives, board members and sometimes staff are often encouraged to fill tables at fundraisers or write large and small checks, assured that politicians have long memories.
And elected officials aren’t bashful about asking.
“It is not uncommon for elected officials and campaigns to go to leaders of nonprofit organizations and ask them to round up contributions,” said Cynthia Darrison, who has raised more than $100 million for Democrats such as Thompson, Eliot Spitzer, Andrew Cuomo and David Paterson.
“The employees of the nonprofit and supporters of the organization have a motivation for helping elected officials who help the organizations. When someone writes a check [to an organization] for $100,000, it’s no big deal to ask them for another $5,000” for a candidate.
While there is nothing illegal or even improper about that, says Darrison, who teaches at New York University’s Heyman Center for Philanthropy and Fundraising, “the problem is when some sort of circuitous routing takes place.”
While it should surprise no one that Met Council board members supported prominent city and state officials, in addition to recognizing them at events such as its annual Legislative Breakfast, allegations that Rapfogel might have pocketed money or steered taxpayer or charitable dollars contrast sharply with Rapfogel’s longstanding reputation.
“We were all stunned by this,” said Cynthia Zalisky, executive director of the Queens Jewish Community Council, who called Rapfogel “a champion of the Jewish poor.”
Marketing executive Menachem Lubinsky of Lubicom, who was president of Met Council when Rapfogel was hired in the early 1990s, said he had always viewed Rapfogel as “the epitome of an upstanding capable professional and very ethical. I felt very comfortable with him and thought he did an incredible job building Met Council from the ground up into the structure it is today. …
“So, on a personal level it’s an extremely sad development that I could not have envisioned in my wildest dreams.”
Noting that he was speaking solely as an individual and not as a representative, Jeff Wiesenfield, a board member of the Jewish Community Relations Council and former state official who is a longtime friend of Rapfogel, said he found the news, which he heard shortly before the board announcement, “very upsetting.”
“No one should lose sight of the fact that he built Met Council from nothing to an unprecedented Jewish-oriented anti-poverty network, with a very supportive donor base, which accrued to the benefit of Met Council clients and UJA-Federation as a whole,” Wiesenfeld told The Jewish Week Monday. “I don’t know what transpired, but he is a dear friend.”
A source who knows Rapfogel well and is a board member on a Jewish community council that partners with Met Council in delivering services, said she always viewed Rapfogel as being “squeaky clean.”
The source, who requested anonymity because she is not authorized to speak on behalf of the community council, added, “I don’t believe it’s a matter of his being venal. I don’t think he has houses in the Cayman Islands. It’s probably about securing the position of the organization. When you get money through grants you are not allowed to use any of that money for gaining influence, so maybe he had to get funds another way.”
Lubinsky said he could not discuss the nature of the investigation or the alleged wrongdoing, but said, “The evidence was sufficient enough to have been fired and not even suspended.”
In its announcement Monday, the Met Council board of directors, whose president is attorney Steven Price, said it “retained outside counsel to conduct a full investigation. Based on that investigation, which is ongoing, the Board has terminated Mr. Rapfogel, effective immediately, and notified the proper authority.”
The statement said no other employees are implicated in the investigation. The law firm that conducted the probe was Dechert LLP, which has offices around the United States and in Europe, and whose practices include bankruptcy, business restructuring and reorganization and employee benefits and executive compensation, according to its website.
In his role at Met Council, Rapfogel presided over its growth from a small beneficiary of UJA-Federation of New York to a network of programs with 200 employees that serve 100,000 needy New Yorkers each year, utilizing strong connections with local elected officials to win state and city grants. The organization’s mission has been not only to serve the needy but also to break the stereotype that most Jews are wealthy.
With an annual budget of about $27 million, Met Council relies on a mix of direct donations, government grants and a large allocation from UJA-Federation of New York, which amounts to $3,298,795 in the current fiscal year.
The organization’s annual legislative breakfast, usually held immediately prior to the Celebrate Israel Parade, draws scores of elected officials and honors their work on behalf of the Jewish poor, and the annual Builder’s Lunch honors developers who construct low-income housing.
In his apology to Met Council staff and board members, Rapfogel said: “I particularly hope that my family and friends and all who care about Met Council can find it in their heart to forgive me for my actions. I will do everything possible to make amends. My failings should not reflect poorly on an organization that continues to serve so many people with dignity and kindness every day.”