Friday, November 27, 2015


Michael Goldblatt, Stanley Benzel, Mel Rubin, Ben Chouake, Harvey Friedman, Leonard Getz, Joshua Landes, Irwin Hochberg -- these are just a few of the Officers and Board Members of the Zionist Organization of America.* If you know these men or any of the men and women and women who serve as Officers or Board Members of the ZOA, my suggestion is, warn them: run, run very fast, from ZOA Board service (whatever that means in the ZOA context) because you may incur personal liability for the excess compensation being paid Morton Klein, your President for life. Let me explain...

Guidestar has explained:

"The IRS is charged with enforcing the Federal Private Inurement Prohibition, which strictly forbids a tax-exempt organization’s decision makers—board members, trustees, officers, or key employees—from receiving unreasonable benefits from the nonprofit’s income or assets. Excessive compensation paid to nonprofit executives is the most common violation of this prohibition,  and it can cause the IRS to levy hefty fines on the persons involved."
And, "persons involved" includes far more "persons" than the recipient of excessive compensation -- to Board Members and officers who have approved or ignored the compensation paid.

Why should this be of concern at the ZOA? Hmmmm. As The Jewish Voice of New York disclosed:
"In early 2014, during the campaign for the election of the President of the Zionist Organization of America (ZOA), there was much controversy about the compensation paid to President Mort Klein in recent years. The Form 990s that were filed and publicly available showed that Klein had been paid more than $3.4 million for the five year period from 2008 through 2012, an average of almost $700,000 per year. This was extraordinary both in absolute and relative terms, as Klein's compensation exceeded 30% of total donations received by the ZOA during that time period. 
The Jewish Voice of New York has now seen the Form 990 filed by the ZOA at the end of 2014 for calendar year 2013. It shows that Klein had his most lucrative year yet, with total compensation of more than $1.5 million, out of total donations to the ZOA of only approximately $5 million."
I have written about the Zionist Organization of America before -- when the IRS revoked its charitable status after the organization failed to file its requisite tax returns for some years while its continued to raise the small amount of contributions it does apparently deploying those to pay and promote the same Morton Klein.

For purposes of this Post I will assume that the Internal Revenue Service will conclusively determine that the compensation paid Morton Klein has been as excessive as it has been egregious. Again, Guidestar:
"Penalties for excess compensation range from fines to revocation of an organization’s tax-exempt status. Fines are the more likely consequence. Known formally as excess benefit transaction excise taxes and informally as intermediate sanctions, the fines can be levied on both the executive who received the overpayment and the board members who approved it or who knew about the excess but did nothing to prevent it. For example:

Say the executive director of ABCD Charity received a compensation package of $250,000 in FY 2008. After an examination (or, in layperson terms, an audit) of the organization, the IRS establishes that $150,000 was the appropriate compensation for the position at that time. As a result of this determination:
  • The IRS requires the executive director to repay the $100,000 overpayment to the organization—with interest. If the executive director fails to repay this amount, or repays only part of it, a 200 percent excise tax may be imposed on the amount yet to be repaid.
  • The IRS may require the executive director to pay an excise tax equal to 25 percent of the overpayment. In this example, the excise tax would be $25,000.
  • The IRS may require each board member who approved the excess compensation, or any board member who knew about the excess but failed to prevent the overpayment, to pay an excise tax equal to 10 percent of the overpayment, not to exceed $20,000 per transaction. In this example, should the IRS decide to impose the excise tax, each board member would owe $10,000. "
Then there is the $1.6 million "bonus" just granted Richard Joel by Yeshiva University. As The Forward disclosed less than one month ago:
"As his college's finances continued to crumble last year, Yeshiva University's president, Richard Joel, publicly took a pay cut. Then months later, he privately pocketed a deferred compensation payment of $1.6 million (which)...took Joel's total compensation for 2014 to $2.8 million, among the highest packages for college presidents nationwide."
An anonymous faculty member was quoted as expressing "wonderment and concern" about the payment -- a sentiment to which I would add "disgust." Wonder what the IRS will think.

We have noted on these pages the excessive compensation paid at least one other non-profit CEO -- that, however, reflected upon excessive compensation based upon performance. What we have referenced here is something else entirely.

Yet another example of a failure of fiduciary responsibility. I can guarantee that in our Jewish non-profit world, CEOs and CEO-applicants will be using Morton Klein's and Richard Joel's compensation figures in attempting to rationalize their own. 

No wonder our donors have lost trust in our organizations.



Anonymous said...

Don't remember you sounding the alarm in the 90s on this, Richard. And yet nothing much is different. Except where you sit.

Anonymous said...

Sadly, given how Congress has gutted the non-profit division of the IRS, and IRS' legitimate fear of investigating a "Republican" (sorry, "non-partisan educational") organization, the odds of the IRS even considering an investigation are about zero, let alone opening one. Even in this most egregious of situations.

Anonymous said...

Remember the days when Jewish communal service was a calling for all as opposed to a means to unearned riches, and perks befitting a successful commercial enterprise? That's what we have come to. Today we present (and thereby vouch for) at a GA the "guru" of vastly increased overhead to "tumultuous applause" because that's what we have allowed JFNA to become. Sure, Klein and Joel are outrageous examples but what about Silverman and his ilk? They are only better by degrees. There's plenty of shame to go around.

Anonymous said...

The less said about the ZOA the better. Why they are even in the President's Conference befuddles the mind.

Anonymous said...

Anon 1:43, you missed the whole point of what Pallotta was saying. It's not a call for "vastly increased overhead." It's the recognition that overhead is nothing more than the tools to get a good job done. Why shouldn't nonprofits have the best people and the best mechanisms, when they are doing the best work? Sure, some may be excesses; but the majority don't have what they need to succeed because of antiquated views that "overhead" is somehow a dirty word. Why is service to people in need any less worthy than service to personal greed?

David said...

Dear Mr. Wexler:

Your post regarding Mort Klein’s earnings from the ZOA is replete with misinformation and demands a rebuttal.
Note there never has been a true controversy over Mr. Klein’s salary or pension. This “issue” was nothing but a campaign ploy by a former ZOA Board member seeking to oust Mr. Klein in the election for president at the last ZOA Convention. It was and remains a “straw man” argument. Despite the allegation, the delegates well understood this phony issue and afforded Mr. Klein a landslide victory.

It is a verifiable fact Mr. Klein worked for over 5 years as president of the ZOA without being on the organization’s payroll, as he has asserted in the media many times over the years. In fact, Mr. Klein prepared to leave the organization because he had exhausted the savings he was living off of during that period. On learning this, a major ZOA donor significantly increased his gift for the express purpose of providing Mr. Klein with a salary. The ZOA Constitution had to be amended to allow for the president to be paid. Over the years, this same donor has increased his annual gifts to the organization. In a very real sense, one generous donor has in large part underwritten Mr. Klein’s total earnings from ZOA.

Mr. Klein did receive the payout at maturity of a Rabbi Trust; it is a common method of providing a deferred earnings pension plan for a key employee in a not-for-profit organization. It is clearly labeled in the IRS form 990. The set-up of the plan was recommended by a prominent third-party compensation consultant and approved by the ZOA Board of Directors, which was appropriately recorded. Yet another qualified third-party compensation consultant reviewed and reaffirmed the reasonableness of Mr. Klein’s current compensation for 2014/2015 (also easily substantiated in ZOA’s most recent 990 filing). Under this legal schema, the establishment of Mr. Klein’s compensation enjoys a rebuttable presumption of reasonableness under IRS guidelines and is immune from intermediate sanctions. Pointedly, there is no reason for the fine Jewish activists you call out by name to “run, run, run.” There is literally no liability for them, the ZOA, its members, directors and officers or Mort Klein. In your article, you explicitly and falsely claim there is.

In short, the answer to your rhetorical question regarding what the IRS might think of Mr. Klein’s earnings is simple: They think nothing of it, other than assuming it is perfectly reasonable (and rightly so). Why? Because it passes every standardized test of reasonableness required by law and was evaluated by qualified professionals (in this case, a prominent ERISA law firm, experts on not-for-profit compensation using up-to-the-minute comparable compensation data provided by a specialized vendor). Ask an appropriate lawyer or accountant about the process; you will find it enlightening, I am sure.

Bear in mind that in 2013, the year you specifically complained about, Mr. Klein’s pension equaled roughly 75% of his total earnings that year. Even the Forward, the most prominent of Jewish publications – with an editorial slant diametrically opposed to the ZOA’s policies – excluded the Rabbi Trust earnings from their annual Jewish organizational salary survey. Consequently, the characterization of the one-time payout of Mr. Klein’s pension plan or his annual salary as inappropriate is totally lacking in foundation. You chose to proceed with incomplete and unsubstantiated facts because it made for a more salacious story; I assert you were wrong to do so.

May I take the liberty of suggesting you promptly print a retraction? It would be the moral and just thing to do.


David P. Drimer
National Executive Director, ZOA

RWEX said...

Dear David,

Thank you for your comprehensive rebuttal to the portions of the Post which referenced the excessive compensation paid to Mort Klein by the ZOA. Unless you have documentation from the IRS exempting Mr. Klein's 2013 compensation from scrutiny, we will have to wait and see what it might later determine on this issue.

Perhaps I have misinterpreted what you have written -- ZOA apparently created a deferred compensation scheme -- the Rabbi Trust -- when its Board decided to convert Mr. Klein's role from unpaid lay leader to paid President; immediately vested that deferred compensation; and then paid it out in 2013, "maturity" reached just a few years after the Trust was established. I leave it to the IRS to ultimately determine whether the structure and payout pass legal muster; I can't get beyond the smell test.

If you would page back in this Blog you will find other Posts dealing with the "value" of compensation consultants.

Thanks for your interest.