New York / Los Angeles Rabbi sent to prison for Tax Fraud
We suspect this scheme ran so long with out being uncovered because it was cleverly devious. That said, federal prison was the outcome 🙁
The 61-year-old rabbi, Naftali Tzi Weisz, the head of an Orthodox Jewish group received a 2-year prison sentence in Los Angeles for his part in what laid out as a 10+ year tax fraud and money laundering scheme.
Rabbi Weisz, pleaded guilty in August to criminal conspiracy charges before U.S. District Judge John F. Walter.
According to NBC News, the Rabbi told the judge: “I’m embarrassed beyond words, my remorse is deep and heartfelt.”
Money laundering – a generational practice
Prosecutors revealed that Weisz and other sect members assisted donors to avoid paying federal income taxes by having them make contributions to charitable groups that were operated by Spinka, a Brooklyn, N.Y. based Orthodox Jewish group overseen by rabbi Weisz. Apparently 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 and the U.S. Treasury is always on the lookout for such schemes.
Rabbi Weisz’s assistant, 62-year old Gabbai Moshe Zigelman, also pleaded guilty to conspiracy and was sentenced to a 2-year federal prison term.
According to the government prosecutors, the illegal operation had two goals: to obstruct the IRS and to running an unlicensed and illegal money-transmitting business.
Rabbi Weisz was facing 5-years in federal prison, but District judge Walter imposed the lesser 2-year sentence because it was shown that the rabbi did not undertake the fraud to enrich himself: just others.
According to sources, judge Walter said: “I’m convinced he never took a penny for himself.”
Rabbi Weisz, several associates and five charitable organizations associated with Brooklyn based Spinka were indicted by a federal grand jury in 2007.
Money was funneled back to the LA Jewelry Mart
Weisz and Zigelman, according to court documents, secretly refunded up to 95% of the “charitable contributions” through multiple methods. Some contributors received cash payments through an underground money transfer network using participants, some of whom owned businesses in the downtown Los Angeles jewelry district. Other contributors received most of their contributions returned to them via wire transfers from Spinka-controlled entities into bank accounts secretly held at a bank in Israel according to prosecutors.
The financial accounts is Israel were set-up with the assistance of international accounts manager Joseph Roth at the bank, who had previously pleaded guilty in the scheme, according to court documents.
The 66-year old Mr. Roth, of Tel Aviv, admitted helping contributors in the United States obtain essentially “hard money loans” from the Los Angeles branch of the Israeli bank that were secured 1:1 by the secret funds in Israel. The contributors could then use the funds in the United States – their own money that had been “donated” and thus not taxed by the IRS.
In addition the the “loan program” at the Los Angeles bank, contributors who had their “charitable contributions” placed in the secret Israel bank accounts could also hire Spinka to help them secretly repatriate the money back into the United States in exchange for an additional money laundering fee, according to the details laid out in an indictment.
In 2006 alone, $8 Million Dollars “washed!”
Rabbi Weisz, in his plea agreement, admitted he learned from Zigelman that the Spinka charitable organizations had received a sizable $8,493,659.00 in calendar year 2006 alone, and that Spinka had earned “profits” (i.e. money laundering fees) of $744,596, after deducting the amounts paid back to the numerous charitable contributors. Prosecutors are investigating in excess of 100 contributors to Spinka organizations.
Judge Walter sentenced one donor to a 6-month prison sentence, rejected the donor’s plea for probation, saying the crime reflected “arrogance” and using the prison sentence to warn other Spinka contributors who do not voluntarily come forward could face “significantly higher” sentences.
According to Leslie P. DeMarco, Special Agent in Charge of IRS – Criminal Investigation’s Los Angeles Field Office: “This was not a case about religion, tradition, or charitable giving. This was simply a case about greed. 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.”
Are you anxious about something the IRS might frown over?
If you got involved in something by accident or on purpose that might be considered tax fraud, tax evasion, or money laundering, it might be wise to seek confidential legal counsel from a tax attorney. A taxpayers’ attempt to right a wrong will often rectify the worst of circumstances with the best possible outcome when compared to those who wait until an investigation uncovers wrongdoing. By waiting to be “found out,” you are more likely to be charged with a crime and face serious consequences. Call tax lawyer Paul Staley to schedule a no cost, confidential meeting at (619) 235-4095.