New York Rabbi Sentenced to Two Years in Federal Prison in Scheme to Defraud Federal Tax Authorities
|U.S. Attorney’s Office December 21, 2009|
LOS ANGELES—The Grand Rabbi of Spinka, a religious group within Orthodox Judaism, was sentenced this morning to two years in federal prison for orchestrating a tax evasion scheme that prosecutors called “an astonishingly complex and sinister enterprise.”
Grand Rabbi Naftali Tzi Weisz, 61, of Brooklyn, New York, pleaded guilty last summer to a criminal conspiracy charge in which he admitting working with others to obstruct the Internal Revenue Service by soliciting charitable donations to Spinka-related organizations with secret promises to refund donors the vast majority of the money they “donated.”
Weisz was sentenced by United States District Judge John F. Walter, who echoed findings in a pre-sentence report that the refunding and laundering of charitable contributions is a routine and generational practice among certain Hasidic sects that has resulted in hundreds of millions of dollars of unreported income.
Following Weisz’s sentencing, Judge Walter sentenced the final defendant involved in the scheme to defraud the Internal Revenue Service when he ordered that Yaacov Zeivald, 45, of Valley Village, California, go to prison for four months for participating in the underground money transfer system that allowed some of the donors to be reimbursed for their “donations.”
With today’s sentencings of Weisz and Zeivald, a total of seven individuals have been convicted and sentenced for working together to obstruct the IRS and to operate an unlicensed money transmitting business. Additionally, three donors who “donated” money to Spinka organizations have pleaded guilty to tax evasion prior to indictment and received sentences ranging from three months to six months in prison. Prosecutors have told judge Walter that authorities are investigating more than 100 individuals who were contributors to Spinka organizations. In sentencing one of the donors earlier this year to six months in prison, Judge Walter said that the crime reflected “arrogance” and that other contributors who do not come forward to authorities could face “significantly higher” sentences.
Weisz, several associates and five charitable organizations associated with Spinka were indicted by a federal grand jury two years ago in a scheme in which Weisz and his assistant solicited millions of dollars of contributions to the Spinka organizations by promising to secretly refund up to 95 percent of the contributions. In this manner, the contributors could claim as tax deductions the full amounts of their contributions, while actually having contributed as little as 5 percent of the amount they would declare on their federal income tax returns.
Weisz's assistant, Gabbai Moshe E. Zigelman, 62, also of Brooklyn, pleaded guilty last year to conspiring with Weisz and was sentenced to two years in federal prison.
According to court documents, Weisz and Zigelman surreptitiously refunded up to 95 percent of the contributions through several methods. In some cases, the contributors received cash payments through an underground money transfer network involving various parties, some of whom operated businesses in and around the Los Angeles jewelry district. In addition to Zeivald, three other men pleaded guilty and have been sentenced. Yosef Nachum Naiman, 57, of Los Angeles, was sentenced last Monday to four months in prison, ordered to perform 1,500 hours of community service, and ordered to pay a $25,000 fine, which is in addition to $10,000 he previously forfeited to the government; Alan Jay Friedman, 45, of Los Angeles, was sentenced last Monday to four months in prison, ordered to perform 1,500 hours of community service, and ordered to pay a $15,000 fine; and Moshe Arie Lazar, 62, of Los Angeles, was sentenced last Wednesday to four months in prison, ordered to perform 1,500 hours of community service, and ordered to forfeit $146,164 to the government.
A second method used to reimburse contributors was wire transfers from Spinka-controlled entities into accounts secretly held at a bank in Israel. The accounts were established with the assistance of an international accounts manager at the bank, Joseph Roth, 68, of Tel Aviv, who received a 14-month prison sentence after pleading guilty to helping contributors in the United States obtain loans from the Los Angeles branch of the Israeli bank, loans that were secured by the funds in the secret bank accounts in Israel, so the contributors could have the use of the funds in the United States.
One of the Spinka charitable organizations—Yeshiva Imrei Yosef—also pleaded guilty and is scheduled to be sentenced by Judge Walter on January 15.
“This was not a case about religion, tradition, or charitable giving. This was simply a case about greed,” said Leslie P. DeMarco, Special Agent in Charge of IRS - Criminal Investigation's Los Angeles Field Office. “Grand Rabbi Naftali Weisz exploited his position in the community, knowingly using the Spinka charitable organizations for the benefit of greedy donors. Today's sentencings close this aspect of the investigation. The donors, who were refunded up to 95 percent of the contributions they made to the Spinka charities but falsely claimed a charitable contribution deduction for the entire donation, are put on notice that they, too, have committed a crime, and that crime is tax fraud.”
The case was investigated by the Federal Bureau of Investigation and IRS-Criminal Investigation.
CONTACT: Assistant United States Attorney Daniel J. O'Brien
Major Frauds Section
Assistant United States Attorney Stephen Goorvitch
Major Frauds Section
Release No. 09-148