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Jewish group pays PR firm co-owned by its president
J Street ‘self-dealing’ seen as ‘very messy’
Question of the Day
The Middle East lobby J Street — a tax-exempt 501(c)4 organization — paid tens of thousands of dollars to a consulting firm co-owned by its founder and president, Jeremy Ben-Ami, according to internal documents obtained by The Washington Times.
The documents, including invoices sent to J Street, show that Ben-Or Consulting — the Tel Aviv-based public-relations firm Mr. Ben-Ami co-founded in 1998 while living in Israel — charged J Street at least $56,000 over a roughly six-month period.
Though Mr. Ben-Ami ceased a day-to-day managerial role with Ben-Or a decade ago, he remains a 15 percent shareholder in the company, according to the May 2010 Dun and Bradstreet listings, as well as current filings with the Israeli Ministry of Justice.
According to nonprofit analysts, Mr. Ben-Ami's stake creates a conflict of interest that runs afoul of ethical — if not legal — restrictions on acts of "self-dealing," in which an officer in a tax-exempt organization receives undue benefit from that organization's transactions.
"Even if it's technically legal, it gets very messy when you have these sorts of deals going on because, if you're going to benefit on the other end of it, be it 100 percent or 5 percent, it raises questions about objectivity and the arms' length in the transaction," said Ken Berger, president of Charity Navigator.
"If you want your organization to use a particular company, ideally there would be a clean break one way or the other. So you would either sell off your interest in that company or step down from the board during the period of time when this is going so that there would be no question as to what's going on in the boardroom."
Mr. Ben-Ami declined repeated interview requests, but provided a statement through a spokesman:
"I founded Ben-Or together with Oriella Ben-Zvi in 1998. When I left in 2000, I relinquished all rights to ongoing compensation from Ben-Or in any form. I have received no payments from the company in the past 11 years and have had no role in the management or operation of the firm.
"At the time of my departure, as a token of my role as a co-founder, we left 15 percent of the shares of the firm in my name — an agreement that has no financial implications for me personally, for J Street or for the firm."
Organizations that file with the IRS as 501(c)3's and 501(c)4's must be run as not-for-profit groups. Groups that are 501(c)4 groups, however, are permitted to use more of their time for lobbying and political activities and are not required to disclose their donors the way that 501(c)3 organizations do.
J Street, which bills itself as the progressive alternative to the American Israel Public Affairs Committee (AIPAC) and other pro-Israel groups, has been under fire recently, after The Times reported in September that, contrary to Mr. Ben-Ami's long-standing denials, the group had received $750,000 from billionaire George Soros and $811,697 from Hong Kong donor Consolacion Esdicul.
The full extent of J Street's business relationship with Ben-Or is unclear, but a sample of Ben-Or invoices establish that it involved several transactions.
One marked May 1, 2010, requests payment of $32,581.77 for service fees and expenses associated with the April 2010 visit of a J Street delegation to Israel and the West Bank.
A Feb. 8 letter from Mr. Ben-Ami to Israeli Deputy Foreign Minister Danny Ayalon requesting a Feb. 16 meeting for a congressional delegation sponsored by the J Street Education Fund — J Street's 501(c)3 arm — indicates that Ben-Or was hired for that trip as well. "Your office can contact [senior Ben-Or staffer] Shiri Ourian … at any time to discuss the details of the sponsored trip and our organization," it says.
On Nov. 1, 2009, J Street was charged $4,194 for an unspecified "project."
Another invoice, dated Oct. 26, 2009 — the date of J Street's inaugural conference — appears to charge the group 73,310.80 new Israeli shekels ($19,292.32 at the time) for expenses and service fees associated with "public relations and event coordination."
James Abruzzo, co-director of the Institute for Ethical Leadership at Rutgers Business School, said that aside from a nonprofit's obligation to vet multiple firms in a "competitive-bidding process," someone in Mr. Ben-Ami's position would at a minimum have to disclose his stake in the firm and recuse himself from any decision to hire it.
Even if those conditions were met, Mr. Abruzzo said, "it still doesn't feel right."
"There's a certain amount of trust that is one of the assets of a nonprofit," he said. "And if you undermine that trust by doing something that even seems like it's self-dealing, that's injurious to the organization."
501(c)4 and 501(c)3 organizations are required to report "business transactions involving interested persons" on their annual Form 990 tax returns. On J Street's most recent form — covering the fiscal year from July 1, 2008 to June 30, 2009 — one J Street official was designated an interested party, though it was not Mr. Ben-Ami.
According to the form, J Street paid $61,000 in the reporting year to Gerstein Agne, the consulting firm of Jim Gerstein, vice president of J Street's board.
"The payment was at fair-market value," the form says, though it does not indicate whether other firms were explored before Gerstein Agne was hired.
Charity Navigator's Mr. Berger said that without a competitive-bidding process, "you're getting into some very gray area, and you don't want to have a look back from the IRS later that's going to bite you."
"In other words," he said, "if you have a financial interest in the company and then the IRS checks and sees that the decision was based without looking at any other options — because you said it was the best, then there's exposure there."
The documents also hint at an added level of collaboration between J Street and Ben-Or.
In a March 1, 2010, e-mail from senior Ben-Or partner Didi Remez to Noam Lekach — communications coordinator for Amnesty International's Israel branch, a Ben-Or client — Mr. Remez suggested a fundraising vehicle through which they could "raise the necessary amount" to buy drums for an anti-settler demonstration in the disputed East Jerusalem neighborhood of Sheik Jarrah: "Maybe via the J Street student list," he wrote.
When reached by e-mail, Mr. Remez declined comment on whether he had used the list or had J Street's permission to do so.
Ben-Or's website lists 91 (mostly Israeli) clients, including peace groups, human rights organizations, international figures, such as former President Jimmy Carter, and campaigns for Israeli politicians from the center-left Labor Party and the more leftist Meretz party. Though the client list included Americans for Peace Now — J Street's leading organizational ally in the U.S. — J Street was absent as of press time.
A statement from Ben-Or, facilitated by a Ben-Ami spokesman, echoed Mr. Ben-Ami's statement that he received "no compensation" for the past 11 years. But it called into question his claim that his stake in the company had no financial implications for him, saying "he would receive 15 percent of the proceeds if the firm is ever sold."
Mr. Ben-Ami declined requests to explain his arrangement with Ben-Or or to provide evidence that he had forfeited all dividends upon leaving the firm. His spokesman promised The Times a letter from the lawyer who oversaw the agreement, but no letter was ever received.
Mr. Ben-Ami has earned plaudits for his managerial skills — since its 2008 inception, J Street has built itself into a political force on the Jewish left — but he also has drawn fire for a string of misleading and evasive statements regarding J Street controversies.
He had long denied the Soros funding, telling Moment magazine earlier this year that "we got tagged as having his support, without the benefit of actually getting funded!" He later apologized for being "less than clear" on the matter.
The Times subsequently reported that J Street had helped facilitate meetings between members of Congress and Judge Richard Goldstone, author of a U.N. report that accused Israel of systematic war crimes in its three-week 2008-2009 war against Hamas in Gaza. The information was gleaned from former Israeli Knesset member Colette Avital, who told The Times that she had stepped down as J Street's Israel liaison in part because of the group's "connection to Judge Goldstone."
"When Judge Goldstone came to Washington, [J Street leaders were] suggesting that they might help him set up his appointments on Capitol Hill," Ms. Avital said.
In a statement to the Times, Mr. Ben-Ami said J Street "reached out to a handful of congressional staff to inquire whether members would be interested in seeing Judge Goldstone," thinking it would "be a good idea for him and for members of Congress to meet personally."
According to a follow-up report by the Jewish Telegraphic Agency, "Jeremy says that, after that info-sharing and those calls, J Street solicited Avital's advice on whether to make such appointments. She said Goldstone was at that time regarded as something akin to the devil in Israel, and that it would harm J Street's brand. Jeremy says he took the advice."
But a day earlier, in a conference call with The Times, Mr. Ben-Ami said emphatically that there had been no such discussion: "The entirety of our communication with Ms. Avital concerning Judge Goldstone was her inquiring of me, whether e-mail or by phone, I don't remember — whether or not J Street was in fact helping with Judge Goldstone's visit to Congress, and me telling her, 'No, we're not.'"
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
About the Author
Ben Birnbaum is a reporter covering foreign affairs for The Washington Times. Prior to joining The Times, Birnbaum worked as a reporter-researcher at the New Republic. A Boston-area native, he graduated magna cum laude from Cornell University with a degree in government and psychology. He won multiple collegiate journalism awards for his articles and columns in the Cornell Daily Sun.
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