These are edited extracts from a preliminary investigation carried out for the JNF Charitable Trust by a firm of forensic accountants, Smith & Williamson. The report, dated July 21 2008, was commissioned by the new JNF chairman, Samuel Hayek, amid concerns over allegations of financial mismanagement within the charity, and over the establishment of an Israeli charity, Nes Israel. It emerged in the public domain in a recent court case brought by former JNF chief executive Simon Winters against the charity's lawyers, Mishcon de Reya.
Nes Israel was established in 2004. Its operations appear to have been directed by Ms [Gail] Seal and Mr [Simon] Winters, with involvement from Mr [David] Kibel [then treasurer], amongst others.
Nes Israel has raised all, or substantially all, of its income from donations from the JNF. The results of Nes Israel have not been consolidated into those of JNF group, despite them apparently being under effective common control.
The donations to Nes Israel have been recorded in the JNF's financial statements as charitable donations, but Nes Israel may have spent a proportion of those donations on fundraising activities on behalf of the JNF. If this is the case, the proportion of the JNF's income ultimately spent on fundraising and administration may be understated.
The objectives of Nes Israel and the JNF may not coincide and therefore potential conflicts of interest may have arisen for Ms Seal and Mr Winters.
Nes Israel has been investigated by the Israeli authorities following an anonymous complaint...
Nes Israel has purchased a building for approximately $1m using donations from the JNF which originally came from a KKL CA account holder.
Establishment of nes israel
We understand from its 2004 financial statements that Nes Israel was established in September 2004 and is registered at the registrar of Amutot [charities] in Israel. Nes Israel's 2004 financial statements were signed by Mr Winters in his capacity as General Manager and by Ms Seal in her capacity as chairperson of the Board.
The notes to Nes Israel's 2004 Financial statements refer to the Amuta's income being "made up mainly of donations from JNF UK" and having the following objectives:
1. Promotion and support for Jewish values in Israel
2. Advancement and support for education in Israel
3. Helping the needy in Israel
4. Promotion of programmes to preserve the environment in Israel.
We have not established whether "Amuta" is the Israeli equivalent of a UK charity (regulated by the Charity Commission) or more akin to a not-for-profit entity which is not regulated...
From our review of a range of documents, it appears that Nes Israel was established at about the time the relationship between the JNF and KKL deteriorated. When this happened, the JNF appears to have lost a facility to make payments to projects in Israel, which Nes Israel replaced...
In 2005, Nes Israel raised all its income from donations from the JNF in the UK, whilst in 2006, all but NIS 5,000 was raised from the JNF...
The majority of Nes Israel's expenditure in 2004 aned 2005 was spent on "Tours of Israel for the strengthening of Jewish values", which was also the largest expenditure category in 206. It has been alleged that at least a proportion of these costs were actually fundraising costs for JNF events...
We have been provided with an analysis of the donations by the JNF group to Nes Israel in the years 2004 to 2007. Between 2004 and 2006, between £75,000 and £175,000 was donated annually. In 2007 it appears that over £470,000 has been donated. The donations in the years 2004 to 2006 have been categorised as "Remittances to Israel" which falls within charitable activities...
We do not know whether the JNF's auditors knew of the relationship between the JNF and Nes Israel... We also know from Nes Israel's financial statements that the JNF financed all or substantially all of Nes Israel's activities...
Investigation of Nes Israel
We have been provided with a translation of a letter from Israel's Ministry of Justice to Nes Israel dated January 1, 2007 which refers to an anonymous complaint made through an advocate against the Amuta containing the following allegations:
a) The activities of Nes Israel during 2005 were concentrated in the conduct of tours and extremely high expenses for advertising which is contrary to the purpose of the Amuta.
b) The income of the Amuta is derived from KKL in the UK [ie JNF], whose purpose is the easing of poverty in Israel, whereas most of the participants in the tours were groups from the KKL in England [ie JNF].
c) The tours in question were booked through a travel agency owned or under the control or connected in some way with one of the members of the Amuta.
d) The services of the accountant were engaged through someone who is apparently a "first degree family relative" of one of the members of the "Board of Control Committee".
This letter was responded to by advocates on behalf of Nes Israel. The complaint was... strongly rejected.
Nes Israel's auditor
One of the specific complaints relates to a "first degree family relative"... The accountant for the Amuta, Ms Revital Kibel, is married to the son of one of the members of the Amuta... From our review of the Nes Israel financial statements for 2004 and 2006, we note that the auditor was Revital Kibel...
In an email dated January 11, 2008 from Mr [David] Pollock [the financial controller] to Revital Kibel (cc Mr Winters) Mr Pollock suggested that "Instead of stating Charlie Sherling's donation was the only income of Nes Israel, could we state that each of the 26 cars that took part, paid $5,000 for Nes Israel." Revital Kibel responds to all addressees that this is "... a good idea".
She further stated: "Please provide a letter from JNF UK to Nes Israel dated December 31 2006 stating that Nes Israel is to receive $130,000 (5,000 x 26 cars) raised from the car rally that took place in 2006."
It appears therefore that the 2006 JNF Car Rally has been used to raise funds specifically for Nes Israel rather than general funds for the work of the JNF. It also appears that Nes Israel's auditor has condoned a suggestion to misrepresent the source of funds and to backdate a letter by more than a year to support this misrepresentation.
We note that Mr Winters' reply to Mr Pollock regarding these emails between Revital Kibel and Mr Pollock was "Looks like you've sorted it!". Mr Winters appears to have also condoned the suggestion to misrepresent the source of funds and the backdating of the letter...
Cost of the audit
We have reviewed Nes Israel's 2006 Financial Statements which disclose that the cost of the audit was NIS 17,586 in 2005 and NIS 15,000 in 2006.
It therefore appears that... Nes Israel may have been charged at a higher than market rate for its audit.
Ichlu reim (soup kitchen)
Mr Leaver [a donor] wrote to Hilary Cane, the manager of KKL CA, on 5 December 2007 explaining that he had sent a KKL CA voucher to the JNF for £400,000 for the purchase of a building in Jerusalem.
We have been provided with a copy of a receipt from Nes Israel to the JNF acknowledging a deposit of $820,000 on December 12, 2007.
The transfer on December 12, 2007 was followed by a similar deposit on April 5, 2008 in the sum of $270,000. We do not know if the amount was transferred to Nes Israel via the JNF.
We understand that KKL CA received a request to transfer a further sum from Mr Leaver of £150,000 to Nes Israel, but this time the transfer was to be made directly and not through the JNF. This request was highlight to Mr Hayek who emailed Ms Cane on May 2, 2008 expressing concern about the proposed transfer and asking for information concerning Nes Israel. This email was copied to Mr Winters, Mr Pollock and Mr Kibel.
We have been provided with a copy of a completed information sheet dated May 15, 2008, signed by Gail Seal and one other Trustee of Nes Israel. The sheet included, as an example of a recent project, the "promotion of Zionism and tourism to Israel". We understand that this response caused concern as tourism is not a charitable objective in the UK and that "gift aid" had been claimed on the amounts to be remitted.
There is evidence that Nes Israel and the JNF have been under common control and yet the results of Nes Israel have not been consolidated with those of JNF group.
There is evidence that Mr Winters attempted to divert a donation to the JNF directly to Nes Israel's bank account.
Allegations have been made that Nes Israel acted outside of its charitable objectives.
There is evidence that Nes Israel has been audited by a family member of one of its Board members and evidence that the cost of audit services is excessive.
There is evidence that the JNF Car Rally has been used to raise funds for Nes Israel. There is also evidence that the auditor and Financial Controller misrepresented the source of Nes Israel's income through the creation of backdated documentation. This practice was condoned by Mr Winters.
There is evidence that donations from the JNF to Nes Israel have been used to purchase a property costing approximately US$1m which appears to be 100 per cent owned by Nes Israel.
Nes Israel be considered for consolidation into JNF group; and legal advice be obtained as to whether the JNF has a claim on the ownership or control of the building.