The Haifa District Court has ordered seven people who ran two linked charities to personally repay NIS 1.85 million after finding that a donation intended to help children and teenagers with cancer was diverted to another organization and spent outside its approved purpose.
Senior Judge Ron Sokol ruled that the officials breached their duties by allowing the transfer, submitting misleading reports and failing to account adequately for the money. His October 8 decision also found that substantial sums were paid unlawfully to the charities’ leading figure, attorney Galit Pauker Shemesh, as salary and rent.
The ruling, announced by the Justice Ministry on Sunday, concerns the charities, Keren L’Chaim and Keren L’Chaim L’Yeladim V’Noar (for children and youth), both ordered by the court to close in 2024.
All seven must repay the money, and any one of them can be required to cover the full amount still owed. Interest and inflation adjustments will be added from April 2019. They were also ordered to pay a total of NIS 20,000 in legal costs.
Donation intended to support children with cancer
The money came from the estate of Helen Hatab. Her estate administrator told the court that she had been a teacher and had suffered from cancer, leading him to propose using part of her estate to support children and teenagers with the disease.
A family court approved the arrangement in March 2019. The program was to provide educational support during illness, guidance for recovering patients and funding for equipment, medicines and treatment through the original Keren L’Chaim charity.
But the bank details supplied for the transfer belonged to the newer organization, Keren L’Chaim L’Yeladim V’Noar. The family court did not approve transferring the donation to a different charity or using it for a different purpose.
The First International Bank of Israel (FIBI) initially refused to transfer the money after identifying the mismatch between the approved recipient and the account. The charities subsequently opened accounts at Bank Mizrahi-Tefahot, where the donation was deposited in the newer charity’s account in April 2019.
Sokol also found that a document submitted to FIBI had been altered to replace the original charity’s registration number with that of the newer organization.
Charity officials defend spending on hostel renovations
The seven argued that the money had supported legitimate charitable work, principally renovations at Beit Keren, a hostel for at-risk girls in Hadera. Pauker Shemesh maintained that the estate administrator had approved redirecting funds, that she had provided evidence of the renovation costs and other expenses, and that her salary and rent payments were justified and approved.
The other six argued that they had volunteered, received no personal benefit, and relied on Pauker Shemesh and professional advisers to oversee the finances.
The court rejected those defenses. The approved cancer-support program could not simply be replaced with another charitable project without the required approval, Sokol found. He concluded that transferring the donation and changing its purpose were intended to evade scrutiny of the original charity and allow the officials to continue handling donations without restrictions.
The officials said that roughly NIS 1m. had been spent on the hostel, but did not provide sufficient invoices, plans or other evidence to establish that expenditure. A promised expert assessment of the work’s value was never submitted.
Sokol accepted that some renovation work had taken place. In calculating the repayment, he deducted NIS 41,621 for that work, using the amount recorded in the charity’s financial report.
Court orders repayment of salary and rent
Pauker Shemesh was separately ordered to return NIS 180,390 in salary and NIS 112,110 in rent, plus interest and inflation adjustments. Any salary and rent she returns will reduce the total amount the seven must repay.
Sokol acknowledged that the officials had genuinely wanted to help people in need and had done so for years. But he found that the money had also been used improperly for personal benefits, mainly for Pauker Shemesh, and that the other officials’ failure to oversee spending had allowed this to happen.
“We cannot accept the respondents’ claim that they are exempt from any duty merely because they acted as volunteers,” Sokol wrote.
Trusting that nobody was pocketing money was no substitute for checking that donations were used for their intended purpose, he added.