Self-dealing on J Street?

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December 30, 2010; Source: Washington Times | The question of whether and how to do business with firms associated with board members is one of those recurring topics among nonprofits. Some say the practice should be avoided at all costs but most agree that formal procedures should be sparked at the point that any question arises – and that these procedures should include disclosure, recusal, and bidding.

These procedures are as much to protect the group from accusations as they are to protect donors from self dealing trustees. This recent story from the Washington Times is a case in point. NPQ has no idea if there was any wrong doing in this situation but the Times recently published information purporting to show that J Street, the lobby group, paid more than $56,000 to a public relations consulting firm, Ben-Or Consulting, founded and partially owned by J Street’s founder and president, Jeremy Ben-Ami.

J Street is a 501(c)(4) promoting peace in the Middle East based on support for Israel but with a commitment to a two-state solution between Israelis and Palestinians.

Interviewed by the Times, Charity Navigator president Ken Berger described the possible self-dealing as “very messy . . . even if it’s technically legal.” Berger advised, “If you want your organization to use a particular company, ideally there would be a clean break one way or the other . . . so that there would be no question as to what’s going on in the boardroom.”

James Abruzzo of the Institute for Ethical Leadership at Rutgers University said that Ben-Ami should have disclosed his ownership stake in the company and recused himself from any J Street decisions involving the firm and, indeed, there is no evidence in the article that he did or did not do so.

On J Street’s very large advisory committee are some prominent U.S. nonprofit leaders — Diana Aviv (CEO of Independent Sector), Daniel Bader (president of the Helen Bader Foundation in Milwaukee), Patricia Bauman (Bauman Foundation in DC), David Cohen (co-founder of the Advocacy Institute, former executive director of Common Cause), Peter Edelman (board chair of the New Israel Fund), and Stan Katz (Princeton University), among others.

It is a solidly liberal if not politically progressive cast, quite different from the much larger and better-known pro-Israel lobby, the American-Israel Public Affairs Committee (AIPAC).

Ben-Ami’s position is that he left the PR firm in 2000, has no management role in it, and gets no compensation from it, though he may, according to a statement from Ben-Or, still get dividends from his 15 percent ownership stake if the firm is sold. Because J Street has received funding from George Soros, conservative critics of the dovish J Street will be eager to find the soft ethical underbelly of an organization that sees the rights of Palestinians to a two state solution as key to long term success.

Without seeing the documents that the Times possesses, all we can say is that, whether for a lot of money or an inconsequential sum, the appearance and the reality of self-dealing are best avoided by nonprofits. —Rick Cohen