Harvey Kruger is famous in financial circles in Israel. His fame comes from his standing in world finance - he serves as vice-chairman of the board of Lehman Bros. brokers company - and no less, from the unabashed exploitation of his status to channel funds to Israel. Even when it was most unpopular to do so, in the 70's and 80's.
To a great extent, the history of Israel's financial activities is synonymous to Harvey Kruger's history, since for many decades he was almost the only one in Wall Street who agreed to handle Israeli affairs. The majority of investors, whether due to Arab pressure or lack of interest, completely ignored the Israeli market.
However, investment activities are only part - a small part - of Kruger's involvement with Israel. Over the years, he has chalked up impressive mileage in another sphere, with a volume just as large. The sphere is fundraising for Israel, mainly for the Hebrew University.
Ambitious Fundraising Goal
Kruger served for several years as chairman of the university, and today he stands at the head of its fundraising committee. This is what has brought him this time to Israel. The Hebrew University this week launched its biggest ever fundraising campaign, with a target of $600 million over 5 years, in preparation for the 21st century. Heading the programme are Harvey Kruger and Babara Mendel, who will coordinate fundraising activities in the US, and Adv. Yigal Arnon, who will coordinate the campaign in Israel.
The $600 million goal in 5 years is extremely ambitious, particularly in a period in which Israel's image among potential donors abroad is down more than ever. The truth is that the actual goal is a little less than that, Kruger admits that the first $200 million have in fact already been raised, yet Kruger claims that setting a high target will in fact be helpful in attaining it. "It gets you working. If we would have set a lower target, we would have been complacent and done very little, since it would have been easy to reach," explains Kruger.
The confidence Kruger exudes in the fundraising campaign does not blind him to the many difficulties along the way. He prefers not to talk about the difficulties caused by the political situation, merely hints that he personally supports the peace process, but that this is his personal stand and not the university's. Kruger stresses the historical conflict of whether donating to Israel gives the donor the right to criticise the state. "There are those who believe they have the right to criticise internal matters in Israel. This is not right. National sovereignty is not up for sale. However, we do have the right to speak out if Israel's actions affect other countries in the world, and myself, as an American Jew," says Kruger.
Kruger alludes to the conflict regarding the Conversion Bill, which hurt fundraising for Israel, when Jews "who cared" (his terminology) ceased in part to donate to Israel out of fear that they funds would find their way to yeshivas (rabbinical seminaries) and the ultra-orthodox sector in Israel, the very sector that casts a doubt as to the Jewishness of the majority of American Jews.
Donors have lost interest
UJA, the principal channel for fundraising in the US, has been harmed the most, but definitely not the sole channel. If anyone believed that funds ceasing to flow to the IJA, due to the anonymity of the donation and the lack of control as to utilization purposes, would flow instead to other philanthropic ventures (the Hebrew University, for example) they were sorely disappointed. "The problem is that people who have ceased to donate to the UJA, due to the Conversion Bill, have ceased to donate completely," says Kruger. "It's not that they have become antagonistic towards Israel, they have simply lost interest. Apathy is the worst danger to fundraising for Israel, in the entire world."
This is not the only problem. According to Kruger, for several years the UJA has been losing its appeal, due to the anonymity inherent in the donation, and because the funds raised cannot be targeted for specific projects (Kruger says that US Jewry fears the UJA channels donated funds to political destinations it does not agree with). In addition, UJA has become a sort of tax all US Jews pay from early childhood and Israel never had the foresight to provide them with an alternative fundraising channel.
On the contrary, several years ago Rabin and Beilin stated that Israel was now an independent state economically and no longer requires donations from the US. Their intentions were good, Kruger admires the sense of pride that stood behind that statement, but it did not take into account US Jews themselves, who have a need to donate no less than Israel has a need to receive donations. It is a matter of identity, effected through donations to the state of Israel.
After years of support and donations, US Jewry suddenly got the message that they were no longer needed, that Israel could manage without them. The positive side of the message left them confused. Two phenomena grew out of that confusion: One is that bodies raising funds for specific projects benefit from the change and today manage to raise a little more. The other phenomenon is that US Jewry has begun to review its relations with Israel, the closeness and the differences, and the need to continue cooperation between the two communities, despite their huge differences.
In other words, donor-recipient relations between US Jewry and Israel, according to Kruger, have gone through a metamorphosis in recent years, in which US Jewry is attempting to base its relations on an equal footing, while Israel, for the moment, is rejecting that stance. "Israel will shortly be the venue of the largest concentration of Jews in the world, and it is already a rich, successful community," says Kruger. "The expectation is for the two communities to cooperate. US Jewry already understands that they must give. The problem is that the Jews in Israel do not yet understand this."
Irresistible Offer
Kruger, as mentioned earlier, was the first to bring US investors' money to Israel, as far back as in the '60's. Today as well, even with fierce competition from the many foreign banks, he continues to be one of the outstanding figures in bringing investors to Israel, as part of Lehman Bros. investment activities and of the Renaissance Fund.
There were shocks in both these spheres recently, which nearly caused a decrease in the flow of funds to Israel. The stock exchange shocks and the fall of Funds in emerging markets in East Asia appeared to threaten the stock exchange in Israel, while the acquisition of the controlling interest in Koor by Claridge threatens the future of the Renaissance Fund, in which Claridge is one of the major investors.
Kruger has soothing words to say in both spheres. He dismisses the whole discussion on the Renaissance Fund, which raised $150 million from various investors for the purpose of investing in Israel. The initiative for the Fund was Kruger's and it is run by him. The Fund has actually finished investing most of the money raised, and today mainly deals with maintaining its existing investments. Among its outstanding investments in Israel are Shikun U'Pituach and Paz.
The latter is the reason for so much recent interest in Renaissance. Acquisition of controlling interest in Koor by Claridge gave rise to suspicions of a conflict of interests
between Claridge's holdings, direct or through the Fund, and Koor's holdings. The main problems were with regard to double holdings of ICA and Tadiran, and double holdings of Granit (Sonol) and Paz, in which Renaissance invested.
The various conflicts of interest, the subject of meetings between Claridge and the Restraint of Trade Commissioner, raised a series of rumours that Claridge was about to realize its Paz holdings, that is its holdings in Renaissance, which raised doubts as to the Fund's future.
Kruger dismisses these rumours. According to him, there is no relation between Claridge problems with the Restraint of Trade Commissioner and the Renaissance Fund. "I will not rejoice if Claridge investments in the Fund are sold. Cooperation with them has been wonderful," says Kruger.
In any event, even if Claridge is forced to realize its holdings in Renaissance, there would be no impact beyond that on the Fund, since it is a closed investment fund,
intended to function 10 years. The Fund has another 5 years to go but Kruger dismisses any danger exists of it folding before the 10 years are up. There will definitely be one precedent: to date no units have been sold in Renaissance and no-one knows if a buyer will be found and what they are worth. There is another alternative -
Renaissance will realize the problematic holdings (mainly Paz), and not Claridge. "I hope we will succeed in realizing our investment in Paz, and if Koor makes a good offer, I will not refuse," says Kruger.
Kruger has soothing words to say in the other sphere as well, that of financial investments by stock exchange investors in Israel. No, he does not believe foreign investments in Israel will be hurt in the aftermath of the recent stock exchanges crisis, which he shrugs off, saying "The US market looked for an excuse to drop and found it in Hong Kong."
According to Kruger, the effect on Israel was even more negligible. "Israel is not just another emerging market. It has the characteristics of such a market, but also characteristics of a mature, developed market." Kruger says that Israel suffers from the disadvantages of a small market, which restricts its potential. However, export companies in the high-tech field and others are very successful, thanks to their management knowhow and ability to compete on world markets, despite the rise in labour costs.