UTJ head used Haredi educational network to enrich family with public funds – report

Incoming housing minister Yitzhak Goldknopf, the leader of the United Torah Judaism party, reportedly used a network of educational institutes to increase his family’s wealth from public coffers, and has ensured the coalition agreement will include increased funding for Haredi preschools in what could be a conflict of interest.

According to a Friday report in the Haaretz daily, until 2015 two of the educational nonprofits controlled by Goldknopf received approximately NIS 120 million per year (approximately $34 million) to operate kindergartens and other educational institutions within the Haredi community.

The associations would take a five percent brokerage fee before passing on the money to a second set of nonprofits that actually operated the educational institutions, the report said.

At least part of those brokerage fees reportedly went to Goldknopf and two of his sons as salaries. The report said the sons also operated a commercial enterprise whose aim was to provide assistance in obtaining government funding for educational institutions.

In total, the report said, the network of educational nonprofits operated by the Goldknopf family had an annual turnover of over NIS 400 million ($114 million), with the vast majority of that money coming from the Education Ministry’s budget. Those associations include the Bais Yaakov (for girls) and Talmud Torah Association (for boys) educational networks.

According to the report, the Registrar of Associations, which is responsible for deciding whether groups are eligible for nonprofit status, ordered an investigation due to the apparent lack of distinction between the actual nonprofit organizations and the sons’ for-profit consultancy, which took brokerage fees.

“The association is actually a conduit for obtaining a license from the Education Ministry and ongoing funding… without conducting actual activity,” read a report on one of the associations. “It does not seem that there is a real difference between the activity of the association and the activity of the business entities.”

The report also noted that Goldknopf received a large salary — NIS 435,000 (approximately $125,000) a year as of 2014 — from the Jerusalem Talmud Torah association, as well as serving as CEO of a number of other associations and also drawing a full-time salary as the head of the Bais Yaakov network.

“The cost of the CEO’s salary is irregular in relation to the scope of his activities in the association,” the auditor reportedly wrote, noting that Goldknopf also received a car from the association valued at a yearly NIS 160,000 ($45,000), as well as partial funding for a driver.

According to Haaretz, Goldknopf took a cut to his salary at Talmud Torah in response to the auditor, though at the same time he raised hisBais Yaakov salary.

The Haaretz report also noted the Or Malka kindergarten network, saying the nonprofit received its funding through the Talmud Torah Association and was used to misappropriate tens of millions of shekels.

In addition, the report cited the case of a valuable property in Jerusalem’s upscale German Colony neighborhood that the municipality granted to the Bais Yaakov organization, under the leadership of Goldknopf. When Bais Yaakov stopped running a kindergarten at the site, instead of returning the property to the municipality, it rented the building to a private kindergarten for 24 years.

The situation came to light when the original Palestinian owners of the property finally managed to establish their rights to the site and sold it to a developer. When the developer tried to have the kindergarten removed from the site, Bais Yaakov started to pay the kindergarten owner a salary in an attempt to create the impression that Bais Yaakov had always been in operation there and could not be evicted.

When a court ruled that Goldknopf’s Bais Yaakov had rented out the property in violation of its agreement with the municipality, the nonprofit received compensation for the eviction as part of a settlement.

Goldknopf began working in education in his early twenties, first running Talmud Torah elementary schools and then joining his father Yehuda Arieh Goldknopf, in managing a network of Bais Yaakov kindergartens and daycares in the early 1980s.

After his father died in 1988, Goldknopf took over the school system, made up of hundreds of kindergartens and daycare centers that cared for thousands of children. In 1990, he opened a network of special needs schools for Haredi students, called Petachya.

Within years, Goldknopf came under fire for his management of the Bais Yaakov kindergartens and daycares. A 2008 state comptroller report identified a host of unfair labor practices, including paying teachers and daycare workers far below the standard rates for their positions and forcing staff to quit in order to prevent them from gaining seniority.

According to Haaretz, reports from Bais Yaakov alone reveal that six of Goldknopf’s daughters are employed by the organization, as well as a son-in-law. The position of CEO, vacated by Goldknopf when he was elected to the Knesset, will be filled by one of his sons.

While Goldknopf will step down as the CEO of Petachya, he still holds 50 percent of the organization’s shares, and his wife, daughter and daughter-in-law are all employed there.

During coalition negotiations with incoming prime minister Benjamin Netanyahu’s Likud, Goldknopf reportedly demanded that supervision of preschools be transferred from the Education Ministry to the Economy Ministry, rolling back a recent reform that was aimed at increasing regulation of those institutions. Ultimately, the move was not included in the deal between UTJ and Likud.

However, Goldknopf will sit on a committee that will have oversight over increased funding to Haredi educational institutions in a clear conflict of interest.

In response to the report, Goldknopf pushed back against the accusations, saying in a statement: “The conduct of the associations has been checked countless times and found to be flawless. The attempt to discredit Rabbi Goldknopf against the backdrop of the victory of the right-wing bloc in the elections is predictable and embarrassing.”

Goldknopf, who entered the Knesset for the first time after the November election, is slated to be housing minister. According to reports last week, he owns a property in Jerusalem that was divided into five separate apartments without a permit. He also said he didn’t know much about whether there was a housing crisis in Israel.

Judah Ari Gross and Carrie Keller-Lynn contributed to this report.