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Thursday, May 23, 2024 | Back issues
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Investors Sue Israel’s|Former Tourism Minister

BROOKLYN (CN) - Israel's former tourism minister duped a Jewish-American foundation of $545,000 to buy land in the West Bank, then diverted the money and used threats and violence to deny it access to the property, the foundation claims in court.

Bought on the cheap during the Second Intifada, the property next to Rachel's Tomb, in historic Bethlehem, is now worth $5 million to $7 million, according to the complaint.

Rachel's Children Reclamation Foundation and its president Evelyn Haies sued Binyamin Elon, Bnei Rachel Inc., Chearland, Homebred III and American Friends of Beit Orot, in Kings County Court.

Also named as defendants are six current and former directors and officers of the defendant corporations.

Haies and the defendants formed Bnei Rachel, Chearland and Homebred III in the United States to buy, develop and manage three parcels of land next to the Tomb of the Biblical matriarch Rachel in Bethlehem. Haies and the foundation hold 60 percent of Bnei Rachel's shares, 30 percent of Chearland's shares, and 35.8 percent of Homebred III's shares, according to the complaint.

Haies co-managed the corporations with the individual defendants, who served as directors and officers of the three corporations. She claims that after she put down most of the money to buy the lots, Elon and his co-defendants diverted the money to their own use, took control of the property, and stopped her and the foundation from using it.

"Defendant Binyamin Elon, a former Israeli tourism minister and a rabbinical seminary dean (known as a 'rosh yeshiva' in Hebrew) of Yeshiva Beit Orot ('YBO'), and the other individual defendants engaged in deliberate mismanagement, waste of corporate assets, self-dealing of corporate assets and receipt of improper personal benefits over the course of the defendant corporations' efforts to acquire the combined properties," the complaint states. "Specifically, the individual defendants have conspired to prevent plaintiff RCRF from using the combined properties for its organizational functions, as it is entitled to do as a shareholder in all three of the defendant corporations and as the primary funder, albeit through deceit by certain defendants, of the acquisition of the combined properties.

"Defendants Elon and Chaim Silberstein ('defendant Silberstein') proposed the original purchase of a parcel of land in Bethlehem to plaintiffs RCRF and Haies in or about 2000. Plaintiff Haies declined defendants Elon's and Silberstein's request for a charitable donation to defendant Elon's organization and agreed to fund the proposed property purchase through her foundation, plaintiff RCRF, if plaintiff RCRF would use this property for its educational, cultural and religious activities, and defendant Silberstein's group, defendant American Friends of Beit Orot ('defendant AFBO'), would take responsibility for the purchase, development, improvement and management of property that was to be purchased by Bnei Rachel Inc. (the 'BR property'). After receiving plaintiff RCRF's investment for the BR property, defendant Silberstein fraudulently demanded that plaintiffs RCRF and Haies purchase the two adjoining parcels (the 'second parcel' and the 'third parcel') in order to get use and access to the BR property, ostensibly because a building was situated across all three parcels. Plaintiff RCRF and Haies later learned that they were duped into investing in the three defendant corporations, the directors of which have negligently co-managed the combined properties and defeated plaintiffs' right to enjoy the benefit of any of their investments.


"Upon information and belief, the purchase prices for the three plots were very low because they were purchased during the Second Intifada, which was a period of intensified violence between the Palestinians and Israel. During that period of conflict, much of the violence occurred in the West Bank and public access to the Tomb of Rachel was extremely limited. Since 2001, the political climate in the West Bank has changed dramatically, public access to the Tomb of Rachel has improved with more frequent bus service, and visitors stream on a daily basis to the Tomb of Rachel (which underwent a five million dollar renovation).

"Since in or about 2009, defendant Elon, assisted by certain individuals who are his followers and claim to be students in his Yeshiva (rabbinical seminary) called 'Bnei Rachel-V'Shavu Banim L'Gvulam,' have been seizing control of the combined properties, harassing participants in plaintiff RCRF's activities and defeating plaintiff RCRF's rights to realize its benefit from a collective investment of over $545,000 into the defendant corporations. In so doing, defendant Elon has abused the authority granted to him as an officer and director of two of the three defendant corporations by some of the individual defendants. Even worse, the individual defendants knowingly and intentionally facilitated defendant Elon's wrongdoings, including defendant Elon's efforts and intention to oust plaintiffs from the combined properties." (Parentheses in complaint).

The foundation claims that Silberstein appointed two trustees who had no money invested in the property and no shares in the corporations, to buy and manage the lots. The trustees bought the land with the plaintiffs' money, but registered the property titles in their own name and took control of the property, according to the complaint.

Haies and the foundation claim that Elon made side deals with the trustees, including a property management agreement, without the plaintiffs' knowledge.

They claim that Elon and his co-defendants failed to settle disputes over the property with the trustees, despite a settlement agreement, and never transferred the titles to the rightful owners, the plaintiffs.

Haies, founder and director of Rachel's Children Reclamation Foundation, which educates the public about the Biblical matriarch Rachel and advocates for preservation and restoration of Rachel's burial site, claims Elon approached her in 2001 about buying a parcel close to the holy site.

"Upon information and belief, from 1990 to 1996, defendant Elon was a founder and rabbinical dean of YBO, a rabbinical seminary located on Mount of Olives in Jerusalem, Israel," the complaint states. "Defendant Elon was elected as a member of Knesset (Israeli parliament) in 1996, where he served as Minister of Tourism from 2001-02 and 2003-04. Throughout that time period and at all times relevant hereto, defendant Elon has continued to exercise control over all of YBO's activities.

"Upon information and belief, defendant AFBO is the United States-based fundraising arm for YBO's activities in Israel, and is wholly owned, operated and controlled by YBO and defendant Elon.

"Upon information and belief, in or about November 2000, defendant Elon announced at a fundraising dinner for defendant AFBO in New York City that certain real property in proximity to the Tomb of Rachel had become available for purchase from an Arab landowner. Defendant Elon expressed an imperative that such a holy site be purchased and brought into Jewish ownership and possession.

"Upon information and belief, defendant Elon knew of plaintiff RCRF's mission to teach about the Biblical matriarch Rachel, plaintiff Haies' key role in plaintiff RCRF, and targeted her as a potential donor for purchasing the BR property. Defendant Elon spoke with plaintiff Haies at the fundraising dinner about purchasing the BR property in order to create a presence in proximity to the Tomb of Rachel for the Jewish people.


"Upon information and belief, plaintiff Haies made it clear to defendant Elon that she was not interested in making a donation, but would be thrilled to finance the purchase of the BR property to be used as the center for plaintiff RCRF's activities and would consider sharing the use of the space with a yeshiva."

Silberstein, a former executive director of the seminary and a close friend of Elon, asked Haies to invest $375,000 in the first lot, according to the complaint.

Haies claims she agreed to form Bnei Rachel Inc. to buy the property, relying on Silberstein's assurances that she and the foundation would control the development and improvement of the property, and would use it for their activities.

Haies intended to build a visitors' center, a banquet hall, a museum of Jewish immigration to Israel, and an institute for women's religious studies on the property, according to the complaint.

"Upon information and belief, on or about May 10, 2001, the directors of Bnei Rachel, Inc. authorized defendant Silberstein to purchase the BR property from Yusef Musallem," the complaint states.

"Upon information and belief, on or about May 17, 2001, Mr. Musallem executed a power of attorney to Bnei Rachel, Inc. to effect the transfer of title of the BR property. Upon information and belief, that power of attorney was executed in Central America because Mr. Musallem, an Arab, feared that the Arabs of Bethlehem would literally kill him once they found out that he had sold his land to Jews. (Plaintiff Haies discovered in 2012 that a second power of attorney was purportedly executed in favor of both Bnei Rachel, Inc. and Bnei Rachel, Ltd., a Judea-Samaria corporation that was owned by the self-dealing trustees who were appointed for the purpose of purchasing BR property for Bnei Rachel, Inc.)" (Parentheses in complaint).

Elon and Silberstein then got Haies to invest in two more lots next to the BR property, to have full access to the first lot, according to the complaint.

Haies says she spent a total of $545,000 on the three lots, but never received title to any of them.

She claims the trustees appointed by Silberstein registered one of the lots to their corporation, never completed the purchase of the third lot, and failed to transfer title to the property to the plaintiffs or return their money.

Though Haies and the foundation were able to use the property until 2010, they claim that Elon and members of his seminary recently ousted them, destroyed their personal property, and harassed and intimidated participants in the foundation's activities.

The complaint states: "Upon information and belief, the Yeshiva students' most recent attacks on plaintiff RCRF have included: threatening volunteers of plaintiff RCRF, who were responsible for safeguarding plaintiff RCRF's personal property and right of access to the combined properties; contacting plaintiff RCRF's guest lecturers to intimidate them from coming to the combined properties; violently interrupting plaintiff RCRF's classes; stealing tables and chairs from plaintiff RCRF; and changing the locks to the combined properties and locking plaintiff RCRF out of the combined properties.

"Upon information and belief, defendant Elon personally directed many of the above malicious acts against plaintiff RCRF's personal property.

"Upon information and belief, the Yeshiva has been operating in the combined properties without a valid lease, license or operating agreement from the defendant corporations."

The foundation removed Elon from his position for breach of duties in 2011, but Elon refused to leave the property, and voted himself director of Chearland and Homebred III, according to the complaint.

Haies says Elon and his co-defendants slandered her in the press and to other directors and shareholders, claiming that "Haies is old and they want new blood to manage the defendant corporations."

And she claims that Silberstein, who no longer is an officer of the defendant corporations, improperly seized the corporate books and records in 2011, and refused to let the plaintiffs review them.

Haies and the foundation seek an injunction and compensatory and punitive damages for breach of fiduciary duties, corporate mismanagement and waste, self-dealing, conversion, breach of contract, and unjust enrichment, and they want the individual defendants removed as directors and officers of the landowning corporations.

They are represented by Mitchell Shapiro with Shapiro Tamir Law Group of Manhattan.

The individual defendants are Binyamin Elon, Chaim Silberstein, Michael Fischberger, Benny Michalowitz, Fredrick Stern, Howard Zelczer and Sholomo Zwickler.

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