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Barry Zyskind’s High-Stakes Three-Card Monte Game

A tiny footnote buried in a pair of corporate filings suggests AmTrust Financial Services’ chief executive officer has a great deal of explaining to do about who owns almost 7 percent of the company’s shares.

Barry Zyskind, according to an early January Securities and Exchange Commission Form 4 filing, transferred 12,020,000 million shares of AmTrust — then worth more than $378.2 million — to a “charitable organization” called Gevurah from Teferes, a tax-exempt personal foundation he set up in 2006. (The number of shares reflects a Feb. 15 2-for-1 stock split.) According to the filing, he serves as a trustee and officer for the entity, with voting and investment authority. The company’s proxy, filed on March 29, also mentions this transfer.

Oddly, those two footnotes are the only mentions of Gevurah seemingly anywhere.

The Southern Investigative Reporting Foundation called American Stock Transfer & Trust, the transfer agent for AmTrust shareholders — the Karfunkel brothers founded it in 1971 and sold it in 2008 for about $1 billion — on May 12 to ask if Barry Zyskind had made a share transfer to Gevurah. A company representative told us there was no record for Gevurah in their computer system. (A transfer agent maintains shareholder records and balances for its corporate clients.)

There is no listing of a Zyskind-linked Gevurah foundation in the official record of tax-exempt organizations, the Internal Revenue Service’s Exempt Organization Business master file. Nor was there any success with the Canadian, United Kingdom or Israeli equivalents. (Zyskind, the son-in-law of the recently deceased AmTrust chairman and co-founder Michael Karfunkel, is a supporter of Haredi educational and religious institutions in Brooklyn; many of these institutions have links to Israel.)

Gevurah is similarly absent from the or the OpenCorporates databases; in contrast, Zyskind’s Teferes foundation, his former father-in-law Michael Karfunkel’s Hod Foundation and AmTrust’s other co-founder, Michael’s younger brother George’s Chesed Foundation for America, all show up in both. Foundation Source, a business that provides advisory and administrative services to private foundations, maintains a comprehensive database of public charities called GrantSafe but Gevurah isn’t in it.

To reiterate: Gevurah might exist in some form somewhere on earth but as of this writing, it’s not one with a charitable registration in the United States, at least with that name and connected to Barry Zyskind. The Southern Investigative Reporting Foundation even tried inputting various spellings of its name or searching for a filing made by Zyskind’s family, such as his wife Esther, in each of the named databases above. Finally, none of the Zyskind or Karfunkel private foundations have any alternate names, often referred to as “DBA’s,” that they are doing business under, attached to their registrations.

Regardless of whether it’s an “organization” or foundation, Gevurah needs to be registered somewhere to receive a grant from another public charity, as Teferes’ own registration stipulates.

Earning a fortune is assuredly hard but giving (some) of it away is not, at least if you choose to set up a personal foundation. Getting a nonprofit like Gevurah entered onto the New York state’s books (where Zyskind registered Teferes) is simply a matter of completing a Certificate of Incorporation form and filing some standard bylaws. After applying for and receiving an Employee Identification Number, the foundation can operate without restrictions for up to 27 months as the IRS considers its application for tax exemption. Assuming no mistakes, within about four weeks of filing most charitable organizations are registered.

All of the above costs about $530: $80 for the state and $450 for the IRS.

Possibly the only scenario in which Gevurah could have been granted the shares without potential legal headaches is if it’s considered a place of worship, but virtually all synagogues and churches register so donations to them can be tax deductible. From a practical perspective, a congregation launching with an endowment of this size would be unprecedented.

Zyskind’s Gevurah problems emerge as the SEC has put renewed emphasis on compliance with Section 16 of the Securities and Exchange Act of 1934, a series of rules that mandate company insiders disclose material changes in holdings in a timely and accurate manner. One large law firm called this the “broken windows” theory of securities enforcement. (Mary Jo White, SEC chairwoman, used the phrase in a 2013 speech.) Notably, in September 2014 the SEC’s enforcement unit filed suit against 28 corporate directors and officers, as well as six companies, for such violations.


The ongoing saga of the Karfunkel brothers, Barry Zyskind and their private foundations are a familiar topic to Southern Investigative Reporting Foundation readers.

Per our reporting, the Karfunkel-Zyskind foundations have so much AmTrust stock that they have run afoul of an IRS rule known as excess business holdings that addresses how much of a single company a private foundation can own.

Excess business holdings is the IRS’ framework of rules developed as a response to the practice of some 1960s-era donors who made tax-exempt donations of their shares to private foundations, albeit with a great deal of string attached. Instead of selling the stock and using the proceeds to make grants, these foundations held onto the stock, allowing the donors to maintain control of the company.

To prevent this, IRS rule permits private foundations to hold up to 2 percent of a company’s shares outstanding and levies sharp fines and penalties for non-compliance.

In order to meet the IRS’s rules, the Teferes, Gevurah and Chesed Foundation for America, which currently own 26.6 million shares between them, would be permitted to own 2 percent of the 175,356,577 shares outstanding, or a little more than 3.5 million shares. This means that they would potentially have to sell over 23.1 million shares, a prospective dilution of 13.1 percent. They could do this via direct sales or through unencumbered grants to unaffiliated charities like Habitat for Humanity or United Way, which would likely sell the stock quickly upon receipt.

Being forced to massively reduce their AmTrust holdings — and thus sharply diminishing their voting power — might not be the only migraine in store for George Karfunkel and Barry Zyskind: IRS Section 4943 levies a 10 percent excise tax based on the value of their “peak holdings” within a given tax year. In light of this, based on the Southern Investigative Reporting Foundation’s analysis of Gevurah, Teferes and Chesed Foundation for America’s excess business holdings of AmTrust shares, their prospective liability would appear to be $296.6 million.

Sources: 990-PF filings via and historical prices from Nasdaq
Sources: 990-PF filings via and historical prices from Nasdaq


For over a month, starting on April 13, the Southern Investigative Reporting Foundation repeatedly emailed and called Elizabeth Malone, AmTrust’s investor relations executive. She consistently stated that she “would check” with management about the Gevurah questions but never called back.

The emails to Malone went unanswered.

Calls to Stephen Ungar, AmTrust’s general counsel, and Harold Schlacter, the treasurer, were not returned.

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Michael Karfunkel’s Bridge to Nowhere

It’s not every day that someone makes a $373 million grant of shares in a company he co-founded. But on Nov. 12 that’s exactly what Michael Karfunkel did when his Hod Foundation donated 7.21 million AmTrust shares to the Teferes Foundation, whose founder and manager is Barry Zyskind, Karfunkel’s son-in-law.

But the grant disclosed on Friday afternoon, Nov. 20, after the close of trading, becomes a lot more interesting when one understands that Zyskind is the chief executive of AmTrust.

As Southern Investigative Reporting Foundation readers will recall from its August investigation, the 71-year-old Michael Karfunkel is one-half of a fraternal duo (his brother George is six years younger) that founded AmTrust, a high-flying insurance company. What the investigation uncovered was that the two brothers’ foundations—while certainly active grant-makers to synagogues and institutions connected to Brooklyn’s Haredi Jewish community — benefited mightily from using their foundations to maintain family control of AmTrust.

With that in mind, the Southern Investigative Reporting Foundation took a hard look at the deal and it appears that charity is the last reason this was done. Moreover, a close reading of the rules governing inter-private foundation transfers suggests Michael Karfunkel hasn’t done his son-in-law any favors.

In the Southern Investigative Reporting Foundation’s August story, an examination of several years’ worth of IRS Form 990s — the annual report for tax-exempt foundations — revealed the Karfunkel brothers had stuffed their foundations with so much AmTrust stock that they violated longstanding IRS rules governing something called “excess business holdings.”

You can be forgiven if the term doesn’t roll off your tongue, but for tax-exempt private foundations, it’s a very big deal. In short, the permitted holdings of a foundation and its disqualified persons — an IRS term for the network of foundation insiders that include its manager, their family members, the directors and key donors — boil down to a formula: 20% minus the amount held by disqualified persons. Given the Karfunkel insiders fail this test via their ownership of just over 59 percent of AmTrust’s shares, another IRS rule permits their private foundations to each hold as much as 2 percent of a company’s shares outstanding.

(Starting in the late 1960s the IRS began seeking to prevent private foundations from warehousing large holdings in closely held businesses.)

So did the Hod Foundation’s grant of all of its AmTrust shares to the Teferes Foundation put it in the clear?

Not hardly.

As before, there is a long-standing rule in place that somehow Michael Karfunkel or the people advising him missed. It’s called Internal Revenue Code Section 507(b)(2) and it deals with asset transfers between private foundations. The upshot of the rule is that when 25 percent or more of the fair market value of a foundation’s net assets are transferred, the recipient assumes the grantor’s tax liabilities (as well as the obligation to dispose of the excess business holdings.)

In the case of Hod Foundation, this liability is potentially mounting into the tens of millions of dollars. Filings with the Securities and Exchange Commission indicate that the Hod Foundation received a block of shares on Aug. 1, 2008, that pushed its ownership to just below 10 percent of the shares outstanding. Under Internal Revenue Code Section 4943, a private foundation has five years to liquidate the excess business holding; by August 2013, according to the timetable in its own SEC filings document, Hod was in violation of the IRS rules.

Ultimately the Hod-to-Teferes transaction is astoundingly strange: it solves no problems and only serves to highlight the very issue it was supposed to address, and raises additional ones, like charitable intent. The Karfunkels’ and Zyskind private foundations remain every bit in violation of the excess business holdings rule as they were before the move. And Zyskind’s Teferes Foundation has been afoul of the rules from the minute the deal closed, and as such, no holding period “clock” reset would be permitted.

Getting right with the IRS will mean that some painful arithmetic is in store for the Karfunkel family.

Using the figure of 74,886,335 shares outstanding as disclosed in last week’s 13-D filing, the 2 percent exemption means that Barry Zyskind’s Teferes Foundation and George Karfunkel’s Chesed Foundation for America would have to dispose of over 12 million AmTrust shares combined, either through direct sales or grants to public charities.  Breaking it down further, the maximum permissible holding for each foundation is 1,497,726 shares, implying that Teferes (which currently holds 7,347,555 shares) would have to sell 5,849,828 shares and Chesed (which currently holds 7,707,918 shares) would have to sell 6,210,192 shares.

What’s more, if they donate these shares to a public charity like the United Way or the Red Cross, the donations must be unencumbered, meaning there are no strings attached — so the charity would almost certainly sell them in the open market in short order.

Given the simple remedy to this expensive problem, and the Karfunkel family’s refusal to do so, it’s obvious that maintaining this status quo is vitally important to them.

The only question remaining is why.


A spokesman for the Karfunkel brothers, Kekst & Co.’s Robert Siegfried, was asked for comment about the transaction. In response to a question about excess business holdings, he said there was “no excessive business holdings” issue and noted that Teferes was a long time donor to Jewish organizations. The Southern Investigative Reporting Foundation sought clarifications in a follow-up email; Kekst’s Siegfried did not answer the questions and repeated his initial response.

Update: This article has been updated.