Deep inside the breakdown of the AJCongress

After a death watch lasting nearly two years, news that the end of the American Jewish Congress was finally imminent broke last Friday, July 16, with a one-line post on eJewishPhilanthropy.

"We were told that the American Jewish Congress closed their doors yesterday. We understand (from employees) they are no longer drawing paychecks," wrote the site. "No additional information is currently available."

The short post set off a flurry of emails in the Jewish nonprofit world from those wondering if the news was true. In essence it was. The 90-year-old organization that had been decimated in December of 2008 after losing most of its assets with Bernard Madoff had laid off nearly all of its remaining employees and suspended most of its activities until further notice, its co-executive director Marc Stern confirmed to The Fundermentalist.

But like most stories, there was a lot more here than just one line.

You can read about the end of AJCongress on JTA, or for an excellent historical perspective on organization, check out Jerome Chanes’ retrospective. For some of the inside scoop on what actually went on behind the scenes, keep reading. [[READMORE]]

Is the AJCongress really dead?

First let’s clear up where exactly the AJCongress is right now. It is not officially and technically dead. It is on hiatus, or as its president Richard Gordon explained both in a widely circulated email Wednesday and in several conversations with JTA over the past week, the organization is taking a breather, reassessing and trying to figure out its next steps.

Those include the possibility of the much-discussed merger with the American Jewish Committee. Conversations are ongoing, but neither side will talk about what that could look like. Another option if for AJCongress to take some time and redefine its mission and relaunch down the road. But if the organization really does want to emerge from the ranks of the walking dead, it might have to disassemble its board and recruit one that is almost entirely new, which is also under some discussion. 

"Clearly we have a lot of things to consider, and at this point it made no sense to go on spending additional funds until we have taken the time to discuss it," Gordon told me Thursday. "I honestly don’t know where my board is today."

One can debate forever whether the Congress in its last incarnation was a necessary and relevant organization — and indeed over the past two years, the organization became the primary focus of those calling for the Jewish world to contract. But wherever the board stands now, even some of its members believe that its dysfunction was the primary cause for the organization’s apparent demise.

The Madoff losses could have been worse

No one debates that the losses the AJCongress suffered in the Bernie Madoff scandal proved the dagger in the organization’s heart. The Madoff losses erased the sum total of a bequest left to the organization by philanthropists Martin and Lillian Steinberg in 2001 — they were close with Madoff, according to the Forward. The losses also wiped out half of the remaining proceeds from the 2004 sale of the organization’s building on East 84th Street in Manhattan. In total, $21 million of its $24 million in assets were wiped out.

There is some postmortem debate now about whether the losses could have been avoided. One board member told me that several years ago he urged the organization to diversify its accounts, just in case (it struck him as preposterous that someone could score more than 20 years of continuous gains).

Gordon refuted that claim. What is true, he said, was that in November of 2008 some board members pushed to invest the organization’s remaining $3 million with Madoff that it had with another investment firm. That motion was tabled only several weeks before Madoff admitted that he was a thief.

But that was only the first part of the story — it seems the board simply did not step up after the loss became clear.

Immediately following the Madoff scandal, board member Jay Umansky issued a challenge to other board members that they should each contribute a low four-figure gift to help the organization get back on its feet, according to several sources. But only a small handful actually accepted the challenge.

"I don’t know how much the board could have done right after Madoff," the organization’s co-executive director, Marc Stern, said. At the same time, he added, "I can’t say that nobody threw up their hands."

Gordon put it more bluntly.

Within other organizations that were hit by Madoff, the "board sat down and wrote check," he said. "My board sat down and said, ‘That’s too bad.’ No one offered to be helpful."

Longstanding fund-raising weaknesses

The organization is now left with $2.5 million in the bank, of which about $500,000 is owed to employees. But the irony is that the reserve is more than it had for many years. Before 2001, according to several sources, AJCongress had less than one month’s payroll in the bank.

The organization seemingly was built with a potentially fatal flaw. It was started at the end of World War I as an answer to the American Jewish Committee, which was seen as too German-America-centric and elitist. AJCongress founders recruited a broad spectrum of American Jewish intellectual elites, but not financial elites.

Until the middle of the 2000s, the AJCongress still was managing to raise between $3 million and $4 million per year from bequests and living donors. About a quarter of its budget came from the endowments it would eventually lose.

In recent years, some tried to bring in more board members with significant means, and for a time it might have helped. But in the end it was never able to solicit huge funds from its board, and, with few exceptions, its board was unable to solicit huge funds from outside the organization.

"There are some people who gave a lot of money, but over the last number of years that has not been very robust at all, even before Madoff," Gordon said.

According to several sources, even top top board members — including its chairman, Jack Rosen — only gave the minimum annual board contribution to the AJCongress in recent years, $2,000.

Several last-ditch attempts to infuse the organization with cash fell flat.

In November of 2009, the organization was hoping to help bail itself out with a mission to Jordan to meet with King Abdullah and Queen Rania. It hoped to bring 15-20 board members on the trip and to raise at least $250,000 in donations from them. Instead, only eight attended and the organization raised virtually nothing, with most who attended either never making pledges or never paying up.

Other missteps

The organization’s merger discussions with the American Jewish Committee were set back by up to six months after AJCongress was given bad legal advice regarding whether or not it had to pay off its pensions to ex-employees before any merger could happen.

But more importantly, it seems that the board did not put its remaining employees in a position to succeed, especially under difficult circumstances, as it did not put in place an effective professional fund-raising apparatus following the departure of its previous executive director, Neil Goldstein, in 2008. Instead of hiring a CEO, the board named Stern, its legal counsel, and Matt Horn, its policy chief, as co-executive directors. The two are both highly respected policy guys, Horn an expert in international relations and Stern an expert in church-state matters, but neither was a fund raiser. They were both told that the situation was temporary as the board searched for an executive, and both had to fulfill their previous job descriptions as well.

The board never completed its search.  

"Board members at other organizations have unabiding love and affection for their organizations," said one AJCongress board member. "Except for a couple of people, I never felt that. And it has gotten worse and worse over the years."

Fund raising was a ‘joke’

By the end, the fund raising seemed to have become a farce.

Several board members recalled a meeting sometime in November, where one prominent board member pledged $250,000 to help bail out the organization. The pledge had a number of conditions, according to sources. It would only be given as a matching grant, and others had to match it within a short period of time.

In that meeting, another high-up board member then pledged another $300,000 with similar caveats. Then another pledged $2 million.

"What a joke," said one board member present at the meeting. "If you are serious, put up the money. But it was only valid for the next 48 hours. After the $2 million pledge, everyone else started laughing. It was a joke."

Board dissent

So how did the board become so apathetic?

Critics of the organization will say that in the end it would not have mattered. They would say that AJCongress over the past several decades had become largely irrelevant and while its mission may have hit on important issues, they were not issues that resonated with the larger Jewish community and they were being overshadowed by the behemoths in the Jewish advocacy world.

But some insiders tell a story of dysfunction, infighting and power plays that seemingly crippled the organization, giving it no chance to survive — regardless of its mission.

Much of this line of criticism centers on the chairman, Rosen. Critics have described him as a polarizing force within the organization who wanted to take AJCongress in a different direction, focusing increasingly on international issues and battling anti-Semitism.

Several sources indicated that the battling visions on the correct course for the organization often dissuaded prospective donors.

Rosen and his allies are throwing it back on the professional staff and other board members for not choosing and executing a mission that would resonate with modern donors.

One insider in that camp said: "When you don’t have the voice of the Jewish community, you don’t get contributors to support you, you don’t get board members excited and motivated."

Fundermentalist’s take: So what will happen to the AJCongress in the end?  Wait and see. But there seem to be a number of lessons here for the boards of struggling organizations.