How to avoid the next Gmach Shefa Chaim scandal

I’ve blogged quite a bit about the issue of irresponsibility and transparency in Jewish philanthropy and tzedakah organizations – see here and here, for example – but the newest scandal, the New Jersey/New York money laundering (and organ sales?!) scandal, demands a response.

So far, it sounds like a basic money-laundering scheme, for all of the complexity of the different pieces involved. Criminals run illicit businesses, and send checks to so-called tzedakah funds, which then spend the money for “program services” that funnel the money back to the criminals. The tzedakah funds benefit by receiving a commission or a fee.

We can’t prevent these altogether – criminals will always find ways to commit crimes – but I believe we could do a lot to stem the tide with the following four rules:


First: Give only to tzedakah organizations that file a 990 or similar financial disclosure of their funding sources, their program services, and their oversight.

I don’t care if they are exempt. Yes, preparing a 990 will cost them money. But it’s a responsible way to function. I hate to say this, but I will no longer give significant money to Ner Yisrael, to the OU, to National Council of Young Israel, to Chaim Berlin, etc. They are all legally exempt from transparency, but as the Rama wrote in Yoreh Deah 257:2, tzedakah distributors must transcend their legal obligations in order to demonstrate innocence in the eyes of ה' and the Jewish people.

I would accept an annual public meeting with an explanation of the organization's finances, though. (Many synagogues, including my own, do this.)


Second: Give only to organizations that can explain their mission and program services in a clear, coherent way.
Open-ended gemachs, as well as Rabbi’s Benevolent Funds that don’t offer a clearly defined mission, are too open to abuse.


Third: Give only to organizations that mail you an annual report.
The report should summarize and explain the information outlined in Item 1 above – funding sources, program services, and oversight, and any significant changes therein. I do this for my Benevolent Fund (this year's report is here), and it has made me much more careful about how I handle the Fund.


Fourth: Eliminate the culture of winking and nodding.
As I discussed here, communities often assume that tzedakah funds, including the Rabbi’s Benevolent Fund, can somehow operate outside the law.

I have had people try to give me honoraria by writing checks to the Benevolent Fund;
I have had people try to write checks to support individuals and claim a tax deduction by doing it through the benevolent fund (you can’t claim a tax deduction for checks written to a specific person) [Yes, a fund can collect for individuals if the collection is in-line with the mission, but this is easily bent and broken.];
A few years ago a local bank went public and offer shares to local people, and I had out-of-town people try to get me to open an account with benevolent fund money, as their partners.

This is wrong, and it creates a culture of approving illegal operations. It must stop.


Ultimately, nothing will deter a determined criminal - but that doesn't mean we shouldn't bother with security systems for our homes, and for our communities.