City Money Uncertain Despite Hire

Even as the board of the city’s largest Jewish anti-poverty agency rushed to do damage control this week in the wake of the corruption scandal ensnaring its longtime CEO, one insider admitted it was far from certain whether the board’s action would result in the city quickly releasing $1.4 million in taxpayer funds it froze in the wake of the scandal.

The board of the Metropolitan Council on Jewish Poverty announced Monday the appointment of New York City Finance Commissioner David Frankel to head the organization just one week after it fired CEO and Executive Director William Rapfogel. But other than issuing a press release that lauded Frankel, the board made no mention of the scandal and Met Council’s president and co-chairs declined interview requests. Frankel, who starts his new job Sept. 30, declined to be interviewed.

“Commissioner Frankel is focused on his current job,” a spokesman for the Finance Commission, Eric Munson, wrote in an e-mail to The Jewish Week.

One source, who requested anonymity because he was speaking without authorization, said the organization’s leaders would have nothing to say until investigations into the scandal have been completed. He noted that last week the board issued a statement saying that an initial investigation found no evidence that any current employees were involved.

Another source with inside knowledge of Met Council said the board “had to act quickly [in appointing Frankel] because city money was frozen. But we don’t know” if the appointment will lead to a speedy release of the money. The source added that it “remains to be seen” just how much damage the scandal has inflicted upon Met Council.

One political expert, Hank Sheinkopf, said that although Frankel, 58, has the requisite financial experience and expertise, he questioned whether Frankel has the political saavy needed to ensure that Met Council continues to bring in more than $90 million in government grants and another $14 million from private grants each year as it did in 2012.

A source familiar with Met Council’s operations said the organization just began its fiscal year July 1 and is not now short of cash.

Met Council’s board issued a statement saying it has been “in contact with the government agencies responsible for awarding our grants and are committed to addressing any concerns. We will continue to work with them to ensure that our vital services are provided without disruption.”

John Ruskay, executive vice president and CEO of UJA-Federation of New York, echoed that sentiment, saying in a statement that his organization would “work with Met Council, government officials and others to make certain that essential services are maintained for the poorest in our community.”

Diana Aviv, a nonprofit expert, declined to comment on the Met Council scandal but said that when boards deal with crisis management it is best to be transparent, to bring in outside experts to examine the organization’s operations, and to propose corrective measures to prevent abuse in the future.

When the Met Council board first became aware of the alleged financial improprieties involving Rapfogel earlier this month, it called in the international law firm of Dechert LLP, which has an office in Manhattan, to conduct an investigation. Within days, the firm handed the board a preliminary report that contained sufficient evidence to warrant Rapfogel’s dismissal, according to a source familiar with the situation.

The board was then convened and presented with evidence that Rapfogel, one of the most influential Jewish professionals in the city who had headed Met Council since 1992, inflated bills to the organization’s insurance company. It is then alleged that Rapfogel had the insurance company use the extra money for designated political contributions.

It was the first time the board was told of the corruption allegations. Rapfogel, who was on vacation at the time, was not present at the meeting.

“Everyone was incredulous,” said another insider of the allegations against Rapfogel. “The board was stunned — many were in tears.”

Asked if there was evidence Rapfogel pocketed any of the extra money, the source said that was still to be determined.

Armed with the evidence of wrongdoing that was said to be overwhelming, the board summarily fired Rapfogel and informed the office of State Attorney General Eric Schneiderman, which oversees charities in the state. Schneiderman then opened up a criminal investigation with State Comptroller Thomas DiNapoli as part of Operation Integrity, their ongoing joint investigations into corruption in the state.

The announcement of Rapfogel’s firing was made just days later on Aug. 12. That same day, Rapfogel issued an apology through his lawyer.

“I deeply regret the mistakes I have made that have led to my departure from the organization,” Rapfogel wrote. “I pray that my family and friends and all who care about the Met Council can find it in their heart to forgive me for my actions.”

A source said insiders have been given no indication how long the corruption investigations are expected to take.

The city’s Investigations Department is doing its own probe to learn whether city funds were improperly used by Met Council. Until that is determined, the city said it would put on hold all pending awards — the $1.4 million plus grants made in installments from prior years.

In the meantime, Dechert lawyers are now continuing their own independent investigation on behalf of the board, looking for any evidence of further financial irregularities.

“First they need to establish what happened and then suggest how to stop it from happening again,” said a source. “The board is committed to ensuring that Met Council operations are conducted with integrity. That means that if any operational or structural issues are found that allowed improprieties, action will be taken to prevent it from happening again. That might mean bringing in outside consultants and experts to advise them on what procedures to take.”

Aviv, the nonprofit expert who is president and CEO of the Independent Sector, which represents tens of thousands of nonprofits, foundations and corporate giving programs, said, “Where there is a scandal, it is extremely important for the organization’s leadership to consider whether to appoint an independent task force not connected to the organization to come in and see whether other aspects of the way the organization is run requires remediation. …It’s important to have a fresh set of eyes come in and examine what needs to happen.”

“Very powerful organizations have done [these audits] and come through [the scandal],” Aviv added. “Such reviews give aid and comfort to outside stakeholders, who see that the organization has nothing to hide and that the scandal involved one individual and nobody else. And if improper practices are found, the board can change it. Another advantage is that it allows the new guy to move forward while the outside group looks to clean up the past; it empowers the new executive.”

The scandal comes at a time when poverty in the Jewish community is on the rise. A 2011 study by http://www.ujafedny.orgUJA-Federation found that twice as many people are living in poor Jewish households in the New York area as there were in 1991. And it noted that 45 percent of all children in Jewish households — more than 180,000 children — live in households with income near or below the poverty level. It said that in Brooklyn alone, there are 25,800 poor Jewish households with children.

In announcing Frankel’s appointment, the board cited his experience and integrity. Sheinkopf said Frankel is a “good choice” because of his expertise, but he noted that Met Council also “has to replace a political infrastructure that Frankel does not bring — and it will take time to do that.”

He said Rapfogel became a master in interacting with political leaders to win government grants and that with him gone Met Council might have to hire a lobbyist “to pick up the slack”

“He had a lifetime of relationships that are hardly transferrable to anybody else,” Sheinkopf said of Rapfogel. “The battle for government grants now has to be fought on the merits and in a more competitive funding environment than existed before. Relationships create shortcuts; now there are no shortcuts.”

stewart@jewishweek.org