Money Laundering and Nepotism Rule in NGOs Run by Rabbi Yitzhak Goldknopf

Up until 2015, some of the NGOs managed by newly-elected Israeli lawmaker Yitzchak Goldknopf served as a kind of go-between for obtaining public funds. Two of those NGOs, the Association of Jerusalem Talmud Torahs and the Society of Talmud Torahs, recieved roughly 120 millions shekels a year (roughly $35 million) from the state to operate kindergartens and elementary schools for ultra-Orthodox boys.
Other than a 5 percent fee that both NGOs took, all the money was funneled to other organizations operated by actual educational institutions. Some of the intermediary’s fees found their way into the pockets of Goldknopf, the leader of the United Torah Judaism party, and two of his children, in the form of salaries.
At the same time, Goldknopf’s sons, Yisrael and Reuven, were paid to work towards getting additional government funding for educational institutions through a commercial company with identical aims to the NGOs.
The two NGOs are only a small part of a much larger network of educational institutions. The largest and best known of these is Beit Ya’akov, which operates kindergartens and day-care centers for the ultra-Orthodox community throughout the country. The educational project was founded by the UTJ chair’s father, Yehuda Aryeh Goldknopf, in the early years after the establishment of Israel. In the 1980s, Yitzchak Goldknopf inherited his father’s place as executive director of the network.
Quite a few reports in recent weeks have undertaken the gargantuan task of estimating Goldknopf’s wealth and the way he conducts himself with regard to the apartments registered under his name. One source of the family’s livelihood, responsible for at least some of the accumulated wealth, is the network of family-run educational institutions, one of the largest in Israel. The annual turnover of the associations is estimated at over 400 million shekels – roughly 114 million dollars – most of which comes from the Education Ministry.
According to the Beit Ya’akov website, it operates some 1,300 educational institutions attended by more than 50,000 children and employing approximately 10,000 people. Until the middle of the previous decade, more than one third of the activities of Goldknopf’s NGOs were attributed to the two aforementioned entities – the go-betweens for distributing education funding, or as the Education Ministry itself defines them, “pipeline NGOs” – pipelines for money, that is.
The office of the Registrar of Nonprofit Associations was not happy with this state of affairs, and in the middle of the last decade launched a deep examination into the two groups. The accountant Rami Elhanati was appointed to investigate, and wondered in the report he produced what the actual difference was between these NGOs and profit-making entities. “The association is in fact a pipeline to receive a license from the Education Ministry and ongoing funding…without carrying out any actual activities,” he wrote of the Center for the Association of Jerusalem Talmud Torahs.
“There are private bodies that operate in a similar manner,” the report stated, adding that the main difference between a business formed as a company and an NGO is its tax-exempt status. The law grants NGOs an exemption to encourage philanthropic activities.
Elhanati noted in his report that Goldknopf’s son, Yisrael, who according to the records works for both of the pipeline NGOs (and recently succeeded his father in his position) founded the Centers for Early Childhood Education, a private company that “deals with realms identical to the NGOs,” in 2012.
The company, whose other shareholder is Yisrael’s brother Reuven Goldknopf, also contracted with the NGOs to the tune of hundreds of thousands of shekels. Elhanati’s report warned of “fear of smuggling properties from the association to the private company.” In the wake of the report, the company returned tens of thousands of shekels to the NGO. The company did not contract again with the NGOs, but neither did it close down. It may have found another business model.
Another issue the report targeted is the pipeline NGO director MK Goldknopf’s bloated salary. Goldknopf, the chairman of United Torah Judaism, took an annual salary of 435,000 shekels ($124,205) from the pipeline NGO as of 2014, while he was serving at the same time as director of other associations and taking a full salary from Beit Ya’akov as well.
“The cost of the director’s salary is irregular in comparison to the extent of his activity in the association,” the report states. It was also noted that Goldknopf receives a car from the NGO at an annual cost of 160,000 shekels ($45,684) a year and a driver, whose salary is financed partly by the NGO. The salary bears no relation to the number of hours he works for the NGO.
In response to the report, Goldknopf reduced his salary from the Talmud Torah association. At the same time, he raised his salary from Beit Ya’akov. When the two associations were asked to respond to the report, they tried to describe it differently. Goldknopf and his associates preferred to call the NGO an “umbrella organization” that operates subsidiary NGOs. But the explanations did not help.