In the clearest account to date of how Israeli political candidates exploit U.S. charities for their campaign needs, an activist for Israel’s new centrist party, Mercaz, this week detailed its plans to raise at least $750,000 from U.S. donors through an American nonprofit organization.
“[We’ve] created a ‘Friends of Mercaz’-type agency to which people can actually donate their money,” enthused Shelly Sitton, referring to the Mercaz Party. “The other parties have been doing it for decades.”
Sitton, who described herself as a chief organizer of this fund-raising effort, said her small network of activists was now planning a fund-raising drive tied to a visit here later this month by former Israeli Defense Minister Yitzchak Mordechai, the Mercaz’s standard bearer for prime minister.
The donations, said Sitton, would go to the American Friends of the Amuta for Renewal and Democracy — a New York State registered nonprofit corporation established two months ago that has applied to the IRS for recognition as a tax-exempt public charity. The Hebrew word “amuta” translates roughly as nonprofit association.
Sitton said the money would go from the charity to campaign-related expenses such as “promoting your image; to commercials on TV, to pamphlets, to mailing the pamphlets to people [and] to organizing fund-raising dinners.”
The only problem with the scenario the Mercaz activist laid out in a lengthy interview with The Jewish Week is that on the American side, channeling charitable funds into political campaigns is illegal.
And in Israel, it is illegal for foreigners — including American Jews — to donate money to that country’s national political campaigns.
But Sitton, a graduate student at Columbia University’s School of International and Public Affairs, pointed to U.S. corporations that give to American campaigns despite numerous restrictions and said, “It just takes some creativity. It’s a matter of finding the right loopholes.”
In fact, as detailed in a Jewish Week story last month, fund-raisers for Israel’s Likud Party have set up a network of children’s charities here tied closely to the party. And at least some of the money donated to them in the past has gone directly into party coffers and associated political causes rather than to children. Hundreds of thousands of dollars more appear to have vanished before reaching their charitable destination.
The Labor Party also reportedly has used U.S. charity funds to circumvent Israeli campaign finance restrictions.
In the 1996 election, according to the Jerusalem Post, American supporters of Labor gave a total of $1.7 million to the tax-exempt Peace for Education Fund at two fund-raising gatherings alone.
These funds, the paper reported, were then used for so-called “atmosphere ads” by purportedly independent groups in Israel supporting the party’s campaign positions.
Sitton, who described herself as a member of Mordechai’s extended family through her mother, a cousin who grew up with Mordechai, said that Menachem Ben-Haim, Mordechai’s chief political aide, had asked her to organize the fund-raising for Mordechai’s upcoming visit. That five-day visit, she said, was scheduled to begin March 17. Sitton said her uncle, a major Mercaz donor in Israel, had suggested her for the volunteer job.
The Israeli consulate confirmed that Mordechai was scheduled to be at a Friends of the Israel Defense Forces dinner in New York on March 17. Sitton said that among other things, she was organizing a meeting with potential New York donors during this visit.
In Israel Ben-Haim, Mordechai’s aide, said: “Mr. Mordechai’s trip is private. It’s not for the newspapers. I”ll speak to Shelly and explain it to her.”
Whatever Sitton’s role , it seemed clear from Sitton’s description of her activities that she was deeply immersed in the new party’s U.S. fund-raising effort.
According to Sitton, Mercaz will seek to raise at least $750,000 from a base of some 5,000 potential U.S. donors. Contributors to date, she said, include S. Daniel Abraham, founder of Slim-Fast, the dieting drink, and Michel Bitan of the family that owns Guess Jeans. Efforts to reach Bitan and Abraham to confirm this were unsuccessful.
Playing off Mordechai’s Kurdish Jewish heritage, said Sitton, the U.S. fund-raising effort will especially target Sephardic Jews.
“There’s a general base of donors that all three parties and UJA … always seem to go to,” Sitton explained. “What we’re trying to do now is find ourselves a different donor base … specifically Sephardim, because if you look at the breakdowns of who gives to UJA, it’s mostly Ashkenazi Jews.”
Sitton said she used a book listing Sephardic synagogues throughout North America to call up rabbis and ask if they would be interested in having a speaker address their congregants about Mercaz. “I told them that if Mordechai was in the area, maybe he could come there,” she said.
The response, Sitton related, has been generally positive, with many curious to learn about the new party. “We’re going to places like Brooklyn, on Ocean Parkway, where all the Syrian communities are, to try to tap into those funds,” she said.
“Sephardic Jews are very emotional givers,” Sitton elaborated. “It’s like, ‘I like this man; I will give him my money.’ It’s not even based on, ‘What’s in it for me?’ or because they want to manipulate the decisions that are made in Israel. … It’s more a matter of affection.”
In contrast, Sitton said, with Ashkenazi Jews, “It’s a matter of control.” And unlike the Sephardim, she said,
“They wouldn’t give without the tax deduction.”
On account of such Ashkenazi donors, said Sitton, the availability of Mercaz’s new nonprofit vehicle is important to the fund-raising campaign. Initially, Sitton stated that this vehicle, the American Friends of the Amuta for the Renewal and Advancement of Democracy, had recently received official tax-exempt charitable status from the IRS. She cited Ben-Haim, Mordechai’s aide, as her source.
But attorneys for the organization, at the New York firm of Stroock and Stroock and Lavan, said the group’s application for tax-deductible charitable status was still in process.
Nevertheless, according to IRS spokesman Bob Kobel, when organizations receive tax-exempt status, it is generally applied retroactively to the date the group was incorporated. “Once we’ve told them it’s just a matter of processing, they can act legally as a tax-exempt group,” he said. This enables early contributors to deduct these sums from their taxes as charitable donations, Kobel explained.
Tax experts said the larger issue was justifying the use of tax exempt, purportedly charitable funds for political purposes, even indirectly, and notwithstanding Sitton’s faith in creativity and loopholes.
“To give to a charity that was supporting a campaign — you’d have to be very clever to thread that needle,” said Sheldon Cohen, a former head of the IRS who is now in private tax law practice. “The IRS has just been making all kinds of noises about charities even coming close to endorsing a candidate, or even inferentially favoring one side or another.”
But Cohen acknowledged, with finite resources limiting IRS scrutiny of hundreds of thousands of charities, “My guess is, there’s a fair amount of this going on.”
On the Israeli side, where the state comptroller enforces the campaign finance law, Shlomit Lavi, the comptroller’s spokeswoman, assessed her agency’s ability to detect and deter violations with some modesty.
“Political parties are not like the government” where the comptroller has sweeping power to examine everything under its audit functions, said Lavi. With the parties, she said, her office can scrutinize “only a few things.”
Any penalties imposed come through an official report issued more than six months after the election, Lavi explained. The report is based on finance data submitted by the political parties and information the comptroller “gathers or collects from many sources,” she said. Findings that a party subverted or violated the restrictions on contributions can result in a deduction in the public financing the party receives under Israel’s election laws.
Asked if she thought this process deterred the parties, Lavi replied, “We can’t say. A few things have become better; a few not.”
Hebrew University political science professor Menachem Hofnung, who helped write Israel’s 1994 campaign finance reform law, said, “It is already clear that politicians are getting around the law.” Hofnung described the use of not-for-profit groups tied to a party as one of the primary means of doing so.
Hofnung said political realities at the time the law was written imposed serious limits on its scope. He termed the lack of transparency required under it today “the real issue.”
Asked about the prospects for closing what appear to be widening loopholes, Hofnung replied, “Right now, it’s hard to move forward with any legislation advancing the rule of law” because of the election. “Now, even the term ‘rule of law’ is emotional and politicized.”
“Many politicians do feel good with the situation as it is now.”