Israeli Court Orders Charity Leaders to Repay $500,000 Misused for Salaries

A Haifa District Court has ordered seven former leaders and board members of two Israeli charities to return approximately 1.85 million shekels (about $500,000) that originated from the inheritance of Helen Khatab. The funds were intended for children and adolescents with cancer but were transferred to a different organization, had their purpose altered without court permission, and were partially used for personal gain, according to the economic publication "Calcalist." The court's decision came in response to a petition filed by attorney Ron Kahana, who is overseeing the liquidation of the "Keren Le'Haim" (Fund for the Sake of Life) and "Keren Le'Haim Le'Yeladim Ve'Noar" (Fund for the Sake of Life for Children and Youth) organizations.

The sum to be repaid includes indexation and interest from April 2019, plus 20,000 shekels in legal costs. While the court acknowledged the defendants' history of helping those in need and their apparent desire to continue this work, it found that they had violated the terms of the donation by using part of it for personal benefit.

Specifically, the former CEO, attorney Galit Pauker-Shemesh, received about 180,000 shekels in salary from the new organization and an additional 112,000 shekels for renting office space in her own law firm. Her husband, Adi Pauker, who chaired the organization, approved her salary. Pauker-Shemesh was listed as a volunteer in official reports, and family ties were denied, leading the court to find a serious conflict of interest in her employment and question the necessity of renting space in her office.

Furthermore, approximately 149,000 shekels were transferred to "Ha'Markivim Ha'Der" company, controlled by Ariel Klein, the father-in-law of estate administrator Sharon Yanco. This payment, ostensibly for intermediary services in obtaining the donation, was billed as aluminum work that was never performed. The court doubted the company's or Klein's role in securing the donation and suggested the payment was an indirect benefit to the estate administrator for transferring the funds. The company was previously ordered to return this sum.

The funds were originally designated for cancer-stricken children and adolescents through the "Keren Le'Haim" foundation, as approved by a court in March 2019. However, Pauker-Shemesh provided the bank details of the newly established "Keren Le'Haim Le'Yeladim Ve'Noar." Bank Leumi initially refused the transfer upon discovering the discrepancy and later had its accounts closed. The donation was eventually deposited into the new entity's account at Mizrahi-Tefahot Bank after a forged court order, with a replaced registration number, was allegedly presented to Bank Leumi. By then, the registrar of non-profit organizations had already identified serious violations in the old organization's operations.

In June 2024, the court ordered the liquidation of both entities. The judge concluded that transferring the donation and altering its purpose allowed the leaders to bypass oversight and continue managing the funds without restrictions. Pauker-Shemesh claimed the funds were used for renovations at "Beit Kerem," a shelter for at-risk girls, and that the estate administrator had permitted the change in purpose. The court, however, stated that the administrator's consent did not replace the required judicial approval and found that most renovation expenses were unproven, allowing only about 42,000 shekels for such work.

The board members claimed they worked voluntarily and trusted management, but the court rejected these arguments, emphasizing their duty to ensure funds were used appropriately. The 1.85 million shekels are to be recovered jointly from the seven defendants. Pauker-Shemesh is personally liable for an additional 292,500 shekels in salary and rent, with any amounts she or "Ha'Markivim" repaying being deducted from the total judgment.