Israeli Court Orders Association Officials to Repay $500,000 in Misused Charity Funds

Seven officials from the "L'Chaim Fund" and "L'Chaim Fund for Children and Youth" associations have been ordered by the Haifa District Court to return approximately 1.85 million shekels (about $500,000), plus interest, to the associations' liquidation fund. The funds originated from the estate of Helen Hatav, intended to aid children and teenagers with cancer. However, the money was transferred to a different association, its purpose was changed without court approval, and part of it was used for improper payments, including salary and rent for the CEO.

Senior Judge Ron Sokol ruled on October 8 that the officials breached their duties of trust and care. While acknowledging their past genuine efforts to help the needy, he stated they also "exploited the donation funds for personal gain." The case began when the estate manager, Sharon Yanco, decided to allocate Hatav's funds to cancer patients, believing it aligned with Hatav's wishes as a former teacher who died of cancer.

In March 2019, the Family Court approved an agreement with "L'Chaim Fund" for educational support, recovery aid, and funding for equipment, medications, and treatments. However, the CEO, Galit Pauker Shemesh, provided bank account details for a different, recently established association, "L'Chaim Fund for Children and Youth." The International Bank refused the transfer upon realizing the account did not belong to the court-approved association. Consequently, the associations' accounts were closed, and new ones were opened at Mizrahi Tefahot, where the donation was deposited into the new association's account.

The judge also found that a forged court order, with the recipient association's number altered, was submitted to the International Bank. This occurred against a backdrop of severe criticism from the Registrar of Associations regarding the older association's operations. Despite commitments to rectify issues, most were not addressed, leading to the court ordering the dissolution of both associations in June 2024.

Judge Sokol determined that the transfer to the new association and the change in its purpose were intended to evade scrutiny and allow officials to use the funds without restrictions. Significant findings included payments to Pauker Shemesh: about 180,000 shekels in salary and 112,000 shekels for renting a room in her law office. Her husband, Adi Pauker, who chaired the association, approved her salary, despite her being listed as a volunteer with no familial ties to board members in reports to the Registrar. The judge ruled her employment involved a severe conflict of interest and that the need for the office rental was unproven, calling the arrangement a "cover for payments made to Galit from the donation funds."

An additional 149,000 shekels were transferred to "Ha'marchivim Chadera," controlled by Ariel Klein, the estate manager's father-in-law. The association and company claimed this was for brokerage fees for the donation, but the invoice was for aluminum work that was not performed. The judge was unconvinced of any brokerage and suggested the payment was an indirect benefit to the estate manager for securing the donation, ordering the company to return the money in July.

Pauker Shemesh claimed most funds were used to renovate a hostel for at-risk girls in Hadera, asserting the purpose change was approved by the estate manager and that evidence of renovation costs, salary, and rent was presented. The court ruled the estate manager's approval did not substitute for required judicial approval, and the claimed expenses were not proven. While acknowledging some renovation work might have occurred, the court recognized only about 42,000 shekels for the repayment calculation.

Board members argued they acted voluntarily, relied on management and professionals, and received no personal benefit. Judge Sokol rejected this defense, stating that the belief that no one was taking money for themselves does not replace their duty to ensure funds are used for their intended purpose. The 1.85 million shekel liability is joint and several for the seven respondents. Pauker Shemesh is personally liable for 292,500 shekels in salary and rent, which will be deducted from the joint liability. The court also awarded 20,000 shekels in legal costs.

Shuli Avni Shoham, Head of the Corporations Authority and Registrar of Associations, stated, "Membership on an association's board is not a symbolic role, and volunteering does not absolve responsibility. Those who undertake to manage public funds must supervise their use, act transparently, and prevent conflicts of interest."