Naftalie Tzi Weisz, the 59-year old grand rabbi, and the other accused appeared in U.S. District Court in downtown Los Angeles before U.S. Magistrate Judge Alicia Rosenberg, who set Feb. 12 for trial.
A federal grand jury indicted the men and five Spinka charities on Dec. 18 on charges of participating in fraudulent kickback scheme that cheated the Internal Revenue Service of at least $33 million.
In the alleged scheme, donors to Spinka charities were refunded up to 95 percent of their donations, who then claimed the full amounts as tax deductions.
The kickbacks were laundered through the Mizrahi Bank in Tel Aviv and businesses in the Los Angeles jewelry district, according to prosecutors.
Other named defendants are Weisz's gabbai, or assistant, Moshe Zigelman, 60, also of Brooklyn, Joseph Roth, 66, of Tel Aviv, and three Los Angeles area residents, Yaacov Zeivald, 43, Alan Jay Friedman, 43, and Yosef Nachum Naiman, 55.
Weisz and Zigelman allegedly made more than $750,000 from the transactions.
All are free on bond, except Roth, an assistant manager at the Mizrahi Bank, who is considered a flight risk to Israel by the prosecution. Roth had been granted a $1.9 million bond by another magistrate, but who stayed the decision so that government prosecutors could draft an appeal. The defendants face lengthy terms in prison terms if convicted of the charges.
Local Orthodox community in shock after arrest of Spinka rabbi By Amy Klein, Religion Editor
The Los Angeles Orthodox Community went into shock this week over the federal indictment of four of their own. They were among eight men accused of running a tax fraud scheme funneled through a Brooklyn Yeshiva.
On Dec. 19, Los Angeles authorities arrested six people, including Naftali Tzi Weisz, 59, the grand rabbi of Spinka, a Brooklyn-based Hasidic sect, on charges of creating a money-laundering scheme that worked through financial networks in Los Angeles and Israel. Two of the eight remained at large as of Dec. 21. The four men arrested have been released on bail.
The 37-count indictment against the rabbi, who is being represented by well-known attorney Donald Etra, alleges that he and his gabbai (assistant), Moshe E. Zigelman, 60, raked in more than $750,000 by soliciting millions of dollars in contributions to Spinka charities while promising to secretly return up to 95% of donations.
Four Los Angeles men were among those charged with taking part in the scheme: Yaacov (Yankel) Zeivald, 43, a self-described scribe from Valley Village ; Yosef Nachum Naiman, 55, the owner of Shatz Et Naiman, dba Jerusalem Tours; Alan Jay Friedman, 43, a businessman, also from Los Angeles. All three were released on bail on Wednesday. Moshe (Marvin) Arie Lazar, 60, the owner of Lazar Diamonds here, is believed to be in Israel, according to the federal officials.
Naiman, Friedman and Lazar all reside in the Hancock Park/Fairfax ultra-Orthodox neighborhood, although they are not all Hasidic. Friedman sits on the Board of Directors of the Orthodox Union.
A fifth Angeleno, named in the indictment as R.K., was a member of the conspiracy from 1996 through October 2004 and then became a cooperating witness for the government. The Journal could not confirm at press time the alleged identity of R.K., which was being circulated in the Orthodox community.
"The Fraudulent Charitable Contribution Scheme," according to the grand jury, began in 1996 and continued through 2007, where the defendants would secretly refund to certain Spinka contributors from 80 to 95 percent of their nominal contributions to Spinka charitable organizations," the indictment said. "In this manner, the conspiring contributors could fraudulently claim as tax deductions the full amounts of their nominal contributions to the Spinka charitable organizations, while having actually contributed as little as 5 to 20 percent of the amounts of the claimed deductions. The conspiring contributors could also use the fraudulent Spinka charitable contributions to promote other unlawful activity including, in the case of co-conspirator R.K., the fraudulent concealment of assets from the SEC."
In Los Angeles' tight-knit ultra-Orthodox community in the Fairfax-Beverly, Hancock Park neighborhood, people were quietly talking about the case and were extremely upset that members of their community may have been involved in such a "non-religious" activity.
"One thing is clear: The Orthodox community deplores any attempt to defraud the government of the United States, and there is no excuse for it, and there's no rationalizations that are acceptable," said Rabbi Meyer H. May, president of the Rabbinical Council of California. "It's against the Torah and it's against our moral foundation. At the same time, regarding these specific individuals, they should be allowed to have a fair trial, as everyone is innocent until proven guilty." He also stressed that people should beware of lashon hara, or gossip, of discussing this case, and to keep in mind that there are wives and children and family members who might also be hurt.
But whatever the verdict on the accused, Rabbi May said this should be a wake-up call to the community. "The community should look deeply inside itself to examine its values, its commitment to truth, and its understanding of what God really wants us to be and how he wants us to act. We are here in this world to sanctify the name of God and not to denigrate it."
He stressed that the accused are individuals, not representatives of the Orthodox or Hasidic community. "Ninety nine percent do pay taxes correctly, do abide by the law, do take their positions as citizens of the United States seriously and ethically."
This is not the first time a Hasidic sect has been using their institution to funnel money. In January 2001, outgoing president Bill Clinton controversially pardoned four Sqverer Hasidim who were serving prison sentences of up to 6 1/2 years for bilking $40 million worth of student Pell grants and loans from government sources for a phony school in the Hasidic community of New Square, N.Y. While no rabbi today would condone any illegal activity, occurrences of tight-knit religious communities defrauding the government dates back to Europe, says Jonathan Sarna, a professor of American Jewish history at Brandeis University. "I think that in Eastern Europe, especially where corruption was rampant, it was very common for Jews to engage in, shall we say, 'extra-legal activities,' when they believed they were doing so not for their personal gain but for the good of the community or for some higher purpose." Since the governments for the most part were corrupt, it became part of the culture, he said - a culture that unfortunately may have at times carried to the United States.
In the New Square case, the money was diverted for Jewish education, he said.
"I think the idea is that Jewish education is so important and so expensive and the folks say to themselves, 'we're forced to pay for public education which we don't use,' and they manage to sometimes justify in their own minds these kinds of activities that are for the sake of a holy end."
But no one condones it, he added. "Naturally in a free country that runs according to law that we vote upon, we do not permit individuals to violate the law."
If convicted, all of the defendants face substantial federal prison sentences, a trial date has not been set.