Key Figure in American Jewish Philanthropy Linked to Israeli Investigation

Two small charities connected to one of the foremost figures in American Jewish philanthropy have been named in an Israeli investigation of Prime Minister Ariel Sharon’s 1999 election campaign.

Israel’s state comptroller says in a new report that three nonprofit organizations, two of them linked to Arnold Forster, general counsel of the Anti-Defamation League of B’nai B’rith, donated nearly $1.5-million to an Israeli company that illegally transferred the money to Mr. Sharon’s campaign.

Mr. Forster, who has been the Anti-Defamation League’s top lawyer since 1946, is an officer of two of the three nonprofit groups named in the report, according to their informational tax returns.

He is listed on the organization’s 1999 informational tax return — the most recent available — as president of the American and Israeli Research and Friendship Foundation, in New York. It was formed in 1998 and describes its purpose as promoting better understanding between Israelis and Americans. In addition, he is a director of the Center for National Studies and International Relations, in Beverly Hills, Calif., which was created in 1999 and describes its purpose as providing educational scholarships in Israel.

A third group, the College for National Studies, also in Beverly Hills, was formed in 1994 to raise money from U.S. donors for Ben Eliezer College in Israel.

It remains unclear what effect the investigation may have on American Jewish philanthropy. Abraham H. Foxman, national director of the Anti-Defamation League, declined to comment directly on Mr. Forster’s alleged ties to the Sharon campaign, but said that neither American Jewish nonprofit groups nor individual American Jews should get involved in Israeli politics. “It undermines the relationship between the state of Israel and the United States, and it dissipates the sovereign rights of Israeli citizens to have foreign money influencing their elections,” Mr. Foxman said.

Mr. Forster has a longstanding relationship with the Israeli prime minister. In 1983 he was one of Mr. Sharon’s lawyers when he brought a lawsuit against Time magazine for falsely reporting that Mr. Sharon encouraged a massacre of Palestinian refugees.

In an interview, Mr. Forster acknowledged having been president of the Israeli Research and Friendship Foundation in 1999, but said he had not been involved with the organization for “a couple of years.” He added that he could not recall anything about the group’s activities, saying, “I’m past 90. My memory isn’t so good anymore.”

Mr. Forster referred all questions to Eugene Scheiman, a lawyer in New York who is listed as secretary and treasurer of the foundation. Mr. Scheiman’s secretary said he was out of the country and unavailable for comment.

Officials of the other groups named in the report did not respond to four telephone requests for interviews. Arnold Schlesinger and Herbert N. Wolfe, both lawyers in Beverly Hills, and Stan Weiss, a real-estate developer in Woodland Hills, Calif., are listed as directors of the Center for National Studies and International Relations.

Mr. Wolfe and Gideon Gadot, a politician in Mr. Sharon’s Likud Party who headed Israel’s national lottery for 15 years, are listed as directors of the College for National Studies.

Tax-Exempt Status

The donations to Mr. Sharon’s campaign could potentially cost the three groups their nonprofit status, according to legal experts, because Internal Revenue Service regulations prohibit charities from participating in political campaigns, whether in the United States or abroad.

Last year, the federal Court of Appeals in Washington upheld the IRS’s revocation of the tax-exempt status of Branch Ministries, in Binghamton, N.Y., because the church ran advertisements telling Christians they should not vote for Bill Clinton in 1992.

The nonprofit groups named in the Sharon case could avoid potential IRS sanctions by showing both that they did not know the money was being used for a political campaign and that they made a reasonable effort to see that their grants were spent for charitable purposes, according to Catherine Livingston, a former U.S. Treasury Department official and now a Washington lawyer who works with nonprofit organizations.

But, Ms. Livingston said, “They better have a documentary record which shows they gave the money to be used for a particular purpose. And you’d expect after the money was spent to get a report back that said how it was spent.”

Whether Mr. Forster and the other charity officers knew or had reason to suspect that the money they donated would be used for noncharitable purposes remains a subject of the Israeli investigation.

According to the Israeli comptroller, the president of the American and Israeli Research and Friendship Foundation — it did not cite Mr. Forster by name — and several other officers of the charities were also investors in an Israeli company through which the donations were funneled to Mr. Sharon’s campaign. The company, Annex Research Limited, is controlled by Ariel Sharon’s son and top political adviser, Omri Sharon.

The investment activity could make it more difficult for Mr. Forster and the other charity officials to show that they were unaware of how the charities’ money would be used, said Celia Roady, a Washington lawyer who specializes in representing nonprofit groups. “That would raise the stakes,” she said. “You’re supposed to make reasonable investigations and take reasonable steps to get a sense that they’re going to do what you’re expecting them to do with the money.”

The American and Israeli Research and Friendship Foundation received a fund-raising letter from Annex Research on August 27, 2000, that pledged the money would be spent on a “project for the encouragement of economic investments in Israel” that would be “highly important” to the peace process.

But the letter was dated several days after the foundation had already sent Annex Research a $175,000 check, the comptroller’s report says.