Chabad Leaders in Israel Arrested on Fraud Charges

By Anthony Weiss

Published November 21, 2007, issue of November 23, 2007.
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In the midst of a massive raid on the main Israeli enclave of the Chabad-Lubavitch ultra-Orthodox sect, police arrested a number of the sect’s top local leaders.

Among those arrested on Wednesday was Rabbi Yosef Aharonov, the chairman of the Chabad Youth Organization in Israel, who was charged with tax evasion. On that same day, Israeli police arrested several other members of the organization and staged a raid on the town of Kfar Chabad, seizing documents and detaining several people for questioning.

Chabad has gained prominence in America, where it is known for its outreach to unaffiliated Jews. But the arrests bring new attention to the group’s operations in Israel and potentially imperils the standing of Aharonov, a prominent and divisive figure in Chabad’s activities outside the U.S.

“He has a lot of power because he has a lot of money to spread,” said Menachem Friedman, a sociologist at Bar-Ilan University who studies ultra-Orthodox society in Israel. “The youth movement is the most active part of Chabad, because all the activities of Chabad are done through the youth.”

Israeli newspapers reported that the Chabad Youth Organization’s budget is 30 million shekels, or $7.7 million, of which 7 million shekels, or $1.8 million comes from the Israeli government. The organization also controls the country’s 220 Chabad houses, which are funded separately. Ha’aretz reported last year that the youth organization and the houses together receive about 100 million shekels, or $25.8 million, per year from the government.

Aharonov’s power has already caused internal rifts within Chabad. Last year, a yeshiva in Israel went to court in an attempt to block the Chabad Youth Organization from taking over the organization and selling its assets.

More recently, Aharonov was at the center of a spat with the chief rabbi of Russia, who is a member of Chabad, involving a yeshiva that Aharonov runs in Rostov, Russia. The yeshiva was shut down by the local authorities and 13 students were imprisoned, then released.

Aharonov has long been a political player in Israel. He was widely reported to be one of the main forces behind Israeli Chabad’s controversial decision in 1996 to support Benjamin Netanyahu’s candidacy for prime minister, and there is a picture of him with Netanyahu on Netanyahu’s website.

Aharonov also leads the Israeli branch of Agudas Chassidei Chabad, the umbrella organization for the worldwide Chabad-Lubavitch movement.

Also arrested on Wednesday was George Segal, the former financial manager for the Chabad Youth Organization, who is accused of embezzling 17.5 million shekels from the organization. Last year, the Chabad Youth Organization sued Segal for 17 million shekels and Segal responded with his own accusations that Aharonov had pocketed organization money and was paying salaries in cash to avoid taxes and save money.

The police announced the arrests last week in a press conference with Israeli media.

“We discovered that money was changing hands left and right, and it seems that the suspects were treating the money as though it belonged to them personally,” investigating officer Avi Mantzour told Ha’aretz.

In the wake of the arrests, the central organization of Chabad is awaiting further developments before making any moves, according to Rabbi Abraham Shemtov, the chairman of Agudas Chassidei Chabad in New York.

“It’s all being handled inside, and that’s where it remains so far,” said Shemtov, who declined to elaborate further on Agudas Chabad’s handling of the matter.

In the wake of the arrests, Agudas Chassidei Chabad issued a carefully worded statement that expressed support for the embattled Israeli organization while keeping a distance.

“We are deeply troubled by news reports concerning allegations against certain personnel of Israel’s Chabad Youth Organization,” said the statement, issued the day the arrests were announced. “Like Chabad-Lubavitch offices everywhere, the Chabad Youth Organization in Israel is fiscally independent. However, its noble social service programs and educational outreach are legendary and a source of pride to the Jewish people everywhere.”

Shemtov said that despite the arrests, he expects the Chabad Youth Organization to continue with its work as normal.

“It’s disappointing to have this confusion, especially at this time, as they prepare for Hannukah,” he said. “But I don’t think it will affect the effort.”

CORRECTION: Arkady Gaidamek is not under suspicion in the investigation that was originally reported in this article. We regret the error.

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