January 10, 2008
The Spinka money trail—and the informant who brought them down
The first snow flutters hesitantly in Brooklyn. Men wearing fur streimel hats and women wearing sheitls walk briskly past the corner of 15th Avenue and 58th Street in Boro Park as if nothing extraordinary has happened here. |
And why not? The kosher shops of this self-contained ultra-Orthodox neighborhood -- practically a city onto itself -- are still a few blocks down, and here on this bleak corner, there are only three orange school buses parked in front of a four-story, dark-red brick building, which sits on a residential street, where tall, narrow houses nearly overlap. The structure (photo below) is rather nondescript and unimposing -- garbage bags are piled haphazardly by a front gate, bars protect the windows, young boys can be heard chanting from behind the locked door and a white sign with sky blue Hebrew lettering reads: "Yeshiva Imrei Yosef Spinka."
A buzzer sounds. The door opens. No one asks who rang the bell. Up the four steps, a reception window sits empty. Hazy yellow fluorescent lights illuminate the narrow hallways adorned with graying yellow paint and frayed industrial carpeting. If there are millions -- or even thousands -- of dollars going to the Spinka yeshiva, it certainly doesn't seem like it's coming here.
This despite the fact that on Dec. 19, 2007, the U.S. Attorney General's Office filed an indictment in the U.S. District Court for the Central District of California naming the Chasidic yeshiva and four other Spinka organizations, as well as eight people, in a multimillion dollar tax fraud and money-laundering ring that stretched from Brooklyn to Los Angeles to Israel and elsewhere.
Two of those indicted are Rabbi Naftali Tzi Weisz, 59, the Grand Rabbi of Spinka, a Brooklyn-based Chasidic sect, whose yeshiva is in this undistinguished building, and his gabbai (assistant), Moshe Zigelman, 60.
Weisz is just one of a number of Grand Rebbes of Spinka, a Chasidic sect that originated in Romania in the 19th century. He is the great-great-grandson of the founding rabbi, and one of about a dozen Grand Spinka Rebbes who live in Boro Park or Williamsburg, in Brooklyn, or Bnei Brak and Jerusalem in Israel.
Four Los Angeles men were among those charged with taking part in the scheme: Yaacov (Yankel) Zeivald, 43, a self-described scribe (sofer) from Valley Village (photo, right); Yosef Nachum Naiman, 55, the owner of Shatz Et Naiman, d.b.a. Jerusalem Tours; Alan Jay Friedman, 43, a businessman from Pico-Robertson who sits on the board of the Orthodox Union; and Moshe Lazar, 60, owner of Lazar Diamonds, a Los Angeles jewelry company.
Although many of the details of the case have not yet been revealed -- a trial date is set for Feb. 12, but the defendants' lawyers say it will be postponed at least a year -- what is emerging from the indictment, the search warrant and other documents of public record is a complex money-laundering scheme. According to the documents, people donated money to the Spinka institutions but then received 80 percent to 95 percent of their donations back, yet wrote off the full amount on their taxes.
These charges are just the beginning of a much larger case, Daniel J. O'Brien, an assistant U.S. attorney in the major frauds section, based in Los Angeles, said in an interview with The Journal.
"There were many other people that contributed in this fashion that would be the subject of government investigations," O'Brien said.
While O'Brien said he has documentation that the Spinka institutions took in about $750,000 through the scheme -- then writing receipts for $8.7 million -- in 2007 alone, the assistant U.S. attorney believes the fraud has been going on for decades: "I believe this goes on beyond living memory," possibly for generations.
This is certainly not the first time an ultra-Orthodox sect has been accused of attempting to break the laws of the secular government -- aramos, or schemes, were perpetrated over the centuries in the shtetls of Europe. In the last decade, arrests have occurred in religious communities in Brooklyn, Lakewood, N.J., and upstate New York.
However, this particular case has shocked Los Angeles' ultra-Orthodox community, not only because Los Angeles had largely been exempt from such cases in the past, but also because some of the city's prominent members have been charged as being at the center of the scheme.
As a result, the case has sparked a fierce debate about the type of behavior that is acceptable for observant people and what type of religious community Los Angeles would like to be. But there's also debate about the laws of a moser, an informant, because one person who was not charged was the primary source of information for the federal case -- though he allegedly started out as one of the perpetrators.
On June 29, 2004, the U.S. Securities and Exchange Commission filed civil fraud charges against Robert A. Kasirer and four executives of Heritage Healthcare of America, which sold $131 million in bonds to 1,800 investors in 36 states from 1996-1999, claiming that the money would be used to fund 10 health care facilities. In October of that year, Kasirer approached the federal government and "expressed a desire to plead guilty to criminal charges arising out of the investigation and agreed to reveal other criminal conduct he and others had committed, with a view that any sentence he might receive would be reduced," according to an affidavit for a search warrant submitted by FBI Special Agent Ryan Heaton on Dec. 18, 2007.
Although the search warrant affidavit identifies Kasirer only as "confidential witness (CW-1)" and the recent grand jury indictment refers to a witness named only as RK, the companies in the affidavit attributed to CW-1 and RK are run by Kasirer, and several members of the Los Angeles community, who asked for confidentiality, have confirmed his involvement.
In 2004, under federal surveillance, the informant identified in the transcript as CW-1 resumed activities he admitted to having conducted with the Spinka since 1990, in which "he caused several million dollars in contributions to be mailed to the tax-exempt organizations operating within the umbrella of Spinka," he is quoted in federal documents as having told the FBI. As part of the scam, Weisz and Zigelman allegedly would return 80 to 95 percent of Kasirer's contributions.
On Oct. 31, 2007, the SEC issued a final judgment against Kasirer, ordering him to pay $4,991,434.
"Kasirer consented to the entry of the final judgment without admitting or denying the allegations contained in the commission's case," according to the SEC enforcement proceedings.
In the interim, according to the transcripts, Kasirer began to wear a device to record his interactions for the government. On Dec. 20, 2004, he told Zigelman, the Spinka rebbe's gabbai, that he never intended to pay the SEC.
According to the wiretapped transcripts, Kasirer told Zigelman: "The SEC investigation is done. But they want me to pay them a lot of money."
"How much?" Zigelman asked.
"Possibly one, one and a half," Kasirer said.
"Million?" Zigelman asked.
Kasirer confirmed the amount and said he had told the SEC he didn't have the money. In the transcript, Kasirer then went on to say that he'd lied to the SEC, and that, in fact he had the money but wanted to hide that fact.
"What is SEC?" Zigelman asked.
Kasirer explained, and Zigelman replied, "Yes, yes, but you don't have to give it to them."
For the next three years, Kasirer recorded conversations with targets of the government investigation, and, using government funds, conducted a dozen monetary transactions with Zigelman, according to transcripts of conversations conducted in English, Hebrew, Yiddish and Hungarian. The government also tapped the phones of Zigelman and Weisz.
CASH OR CHARGE?
For Kasirer, there were two ways the operation worked: At first he reportedly received his "donations" back in cash, and when he became uncomfortable with the large cash amounts floating around, he set up an Israeli account.
According to the transcripts, Kasirer's money was allegedly refunded to him by various men, all now defendants in the case: Naiman, Zeivald, Friedman and Lazar, all of whom have pleaded not guilty to the charges against them.
Among the transactions in the transcripts, for example, was one on Feb. 8, 2007. Kasirer FedEx-ed a check for $20,000 made out to Yeshiva Imrei Yosef to Zigelman. On Feb. 15, 2007, Lazar delivered $18,600 to Kasirer's house. On Feb. 22, 2007, Kasirer got a letter in the mail on a Yeshiva Imrei Yosef Spinka letterhead thanking Kasirer for his $20,000 donation to a tax-exempt organization, saying the "donation" was entirely tax deductible and Kasirer had received no "goods" or "services" in exchange for the contribution.
The Spinka Yeshiva charged Kasirer up to 7.5 percent for laundering the money, which was a cause for some dispute, according to the wiretaps.
On Dec. 16, 2005, Kasirer told Joseph Roth, an assistant manager at Bank Mizrahi -- which is based in Israel but has a branch in Los Angeles -- to set up a new account so he could move money internationally.
On Jan. 12, 2006, Tel Aviv lawyer Jacob Kantor -- the only one of those named in the indictment who is still at large -- is reported in the transcripts offering to Kasirer to create documents to incorporate a company called Bedford Holdings & Investments, which would be "held in confidence by the bank and can only be disclosed after a complicated procedure by the Bank of Israel, if there is evidence that the monies resulted from criminal activities, such as drugs -- tax matters are not an issue." Much like Switzerland, Israel has laws that protect investors, and the country does not investigate monetary origins, even on suspicion of tax fraud.
"So, we wanted to basically set everything up the same way as it was before," Kasirer told Roth in the affidavit transcripts. Later in the document, he tells Zigelman that Kantor set up a trust in Israel so that nothing would be left in Kasirer's name in order to hide his money from the SEC. Then he'd take a loan from the Los Angeles branch of an unnamed Israeli bank, "so I can use the money here." Later, he says in the affidavit, he would take the money back from Israel and repay the loan here.
Mizrahi Bank, which is never named in the affidavit, is under investigation by the federal government, according to Assistant U.S. Attorney O'Brien.
"We believe the bank offers this thing as a product to clients in the U.S. -- the bank pitches this as a money-laundering product. I believe there are multiple agents involved," O'Brien said, including Kantor.
The government also believes that there are many people like Kasirer, "who occupy the same role as he did in this conspiracy," O'Brien said.
But Kasirer was not the creator of this conspiracy, according to the government. His father -- the recently deceased Jacob (Yankel) Kasirer who founded the Bais Yaakov School for Girls on Beverly Boulevard in Los Angeles and is known as a "stalwart" of the Jewish community -- was involved with the scheme. According to the transcripts, when Kasirer was discussing his distress over his earlier money-laundering penalty with Lazar, the diamond dealer said, "It's not something you started."
Kasirer replied, "I was really not aware of what he did with my father."
In addition, in a taped conversation, the Spinka Rebbe told Kasirer he wanted to meet with his father.
"RK's father was engaged in this prior to RK being involved in it," O'Brien said in an interview. "We believe that this has origins much earlier than that -- beyond living memory."
CRIME IS NOT SO BAD
"There are a million ways that religious institutions defraud the government," said one Brooklyn accountant who asked that his name be withheld. However, it's not just the Jews, he claimed, "churches do the same thing." Churches and synagogues are exempt from filing tax returns -- although many do -- and the government usually does not audit unless it has probable cause. As a result, this can make fraud easier. In the last decade or so, a number of Chasidic institutions on the East Coast have been charged with such crimes, including the 1997 case against the Skverer Hasidim in Rockland County, N.Y., where four men were found guilty of defrauding the government of millions of dollars in federal Pell Grants. But in the Orthodox community, many defended them, despite the crime, because the money was used to support needy yeshiva students.
"Nobody here owns a yacht," a resident reportedly said, and the feeling then -- as with many such institutional fraud cases -- that if the money is used to help the community and not line someone's pockets, it's not so bad.
That, in fact, is a pervasive attitude these days in Brooklyn, where the Spinka case raised fewer eyebrows than in Los Angeles, because the attitude is everyone does something. This kind of discussion has been a hot topic on many Internet blogs that discuss the ultra-Orthodox community.
"The government are thieves, what gives them the right to take 40 percent to 50 percent of someone's income? Anyone who can save yiddishe gelt from going down that toilet is doing a mitzvah," one contributor wrote on the Vosizneias (Yiddish for "What Is News?") blog.
The blog comments, though, seem to be about evenly divided between two camps: On one hand are those castigating the government or the bloggers posting the news for spreading gossip; on the other are those demanding that the community finally put a stop to criminal behavior.
One particularly poignant plea came from New York white-collar defense attorney Joel Cohen, in an essay published in 2006 titled, "Jewish Felons: The Problem of Criminality in Observant Communities." Cohen described witnessing a disturbing rise in crime among Orthodox and Chasidic Jews.
"The problem in the observant community, however, is not merely occasional, nor does it often make headlines. Daily, in metropolises around the country, yarmulka-wearing criminal defendants appear before the bar of justice," he wrote.
Some prisons -- especially in New York, Los Angeles and Miami -- have daily minyans, visiting rabbis, kosher food, classes and Shabbat meals, Cohen wrote. "The most common charge is fraud: against businessmen and run-of-the-mill citizens alike, most frequently involving victims outside of the Jewish community, against the government, against insurance carriers, against banking institutions, health care fraud, money-laundering and stock-swindling."
Cohen pleads with his fellow Orthodox Jews to denounce the criminal activity:
"Only with the open denouncement of wrongdoing from within the particular observant community can the community hope to demonstrate and protect the Torah's commitment to honesty in one's interpersonal dealings as being at least equal to, if not greater than, its commitment to technical observance of mitzvoth," he wrote
DON'T BLAME THE MESSENGER
But the most talked-about aspect of the case -- both among bloggers and at Shabbat tables on both coasts -- has been the involvement of Kasirer. From the start, most here guessed accurately who he was -- an informant who turned state's evidence to save his own skin -- but what they wanted to know was what was he? Was he a moser -- an informer, who, according to traditional Jewish law, must be killed for turning against a Jew and is denied access to "the world to come."
The Talmud forbids a Jew to inform on another Jew to a secular government, even if that Jew violated both secular and Jewish law.
Today, among poskim -- Orthodox rabbinic deciders -- there is a debate over whether a Jew may turn in another Jew in a democratic state. Some rabbis say that laws of moser do not hold in the United States because they were established to protect Jews from corrupt and anti-Semitic governments that would likely torture and give Jews worse treatment than other prisoners than merited by Jewish law.
This is not the case today in a democracy, they say. "These rules apply only to one who informs on another to bandits and so endangers that person's money and life, as these bandits chase after a person's body and money, and thus one may use deadly force to save oneself," it is written in the Aruch Hashulchan, ("Laying the Table," a book about Jewish law written in the late 19th century).
But many insist that the laws of moser do apply today, and that it is forbidden by Jewish law for one Jew to inform on another to any secular government.
Rabbi Ezra Batzri in "Dinnai Mamonut" ("Laws of Money") says informing is prohibited. "All rules of informing are applicable even currently .... Even if they bring all matter to court, it is clear that, through interrogation and the police, government can destroy people, and in many places they do, in fact, destroy people."
Some rabbis say you cannot be a moser, even in America, except when the person doing the questionable act may be a danger to others -- a child molester, a rapist, a murderer. In those cases, it would be "permitted" to inform the authorities, writes Rabbi Hershel Schacther, a top posek. Which means that in the case of financial wrongdoings, a Jew is not allowed to inform on another Jew.
When the Spinka case broke, the Rabbinical Council of California (RCC) discussed the informant issue, RCC President Rabbi Meyer May said. But the council decided to let other halachic authorities deal with the question.
"There is no way to explain how perfidious what RK did is. He violated the spirit of Jewish law," May said. "Having said that, it doesn't justify what was done on the other side [by the defendants]." Although many were focusing on the moser and other justifications like "everybody does it" and "we pay more taxes than everyone else," that is beside the point, May said. The point, he continued, is to own up to any wrongdoings. "Our business is the integrity [of the individual]," he said. "Something which is wrong is wrong."
Still, others, like lawyer and blog commentator Cohen, argue that it is precisely such concern about laws like that of moser -- which forbid a Jew to turn in another Jew to authorities, and chilul Hashem, desecrating God's name in public, which has created an atmosphere were people are more concerned with protecting their own than following the laws of the U.S. government.
"To ignore crime within our ranks does us a great disservice, both because it weakens us as a community and because tolerating it suggests to the outside world that Judaism does not promote a righteous moral compass," Cohen wrote.
BUSINESS AS USUAL
On Monday morning, Dec. 31, the streets of downtown Los Angeles were eerily empty; nearly everyone had left town. But the Roybal Federal Courthouse was open, and by 8:30 a.m. there were enough Chasidic men in the third-floor corridor for a minyan: 11 -- not to mention a few clean-shaven men wearing black yarmulkes -- all waiting for the morning's arraignment hearings to begin.
Grand Spinka Rebbe Weisz didn't converse much with his gabbai Zigelman. The men pored over Hebrew books -- either studying holy texts or reciting psalms -- and intermittently conversed with the lawyers. It would be an hour until the court would open and another until their own hearing would begin.
Everyone was anxious for the hearing to start -- not because of the upcoming secular New Year, which the ultra-Orthodox do not celebrate -- but so that they could return to their homes and to their lives in Brooklyn.
The seven men had been arrested and jailed on Dec. 19, a Wednesday, and most were released before Shabbat.
Weisz and Zeligman had spent another Shabbat in Los Angeles, detained until the arraignment. The Spinka Rebbe attended Rabbi Chaim Boruch Rubin's synagogue in Hancock Park -- which itself is entangled in a legal battle over land use -- and was given the honor of leading services. At this, a few men walked out in protest.
"As a parent in the community and as a rabbi in the community, since there were children in the room and since we have an obligation to teach our children right and wrong," one person who left quietly said later. "I have no problem [with the Spinka Rebbe] sitting in the front in his normal [honored] seat," but the man who walked out said he would have preferred "one stage less than normal" to show children "that it's not business as usual."
When the court opened for the hearing, most of the defendants and their supporters filed into the first row of the courtroom, except for the clean-shaven Friedman, who sat in the back, a few seats away from Zeivald, who was accompanied by an Israeli translator.
A Yiddish translator sat next to the Spinka Rebbe, and only Roth, the Israeli banker, came from the entrance behind a glass partition, clad in green prison outfit. He was the only one not yet released on bail, at the time, because the government said he was believed to pose a flight risk. Roth remains in custody.
Finally, their turn arrived. The seven filed up front, each with his separate lawyers. (Famed lawyer Donald Etra, who was originally retained to defend Weisz, was by then no longer on the case). They each declined to have the charges read to them.
"How do you plead?" Magistrate Judge Alicia G. Rosenberg asked.
One by one, Weisz, Zigelman, Naiman, Zievald, Friedman, Lazar and Roth each said: "Not guilty."
By 11 a.m., they filed out of the courtroom.
By Shabbat, Jan. 4, the Grand Spinka Rebbe was back in Boro Park to lead his congregation. He's free on $2 million bail, allowed to travel for work in New York and New Jersey, and of course, to California, where he and Zigelman, among others, await trial.
Yeshiva snapshot (above) by Amy Klein