An effort by Brooklyn’s Sephardic community to reform its charities is making modest headway eight months after three prominent community rabbis were arrested on suspicion of money laundering via their personal charity funds.
A model compliance plan developed by communal leaders and provided to the Forward goes some way toward addressing concerns raised by the scandal, in which donations to rabbis’ charities were allegedly returned surreptitiously in cash, less a 5% or 10% takeout.
Beyond a code of ethics, a conflict-of-interest policy, a document-retention policy and a policy to protect whistleblowers, the plan includes guidelines that seem aimed at diminishing the amount of business done in cash. Grants are required to be paid by check and to be awarded via a standardized process.
Still, the model plan leaves some unresolved issues. For instance, organizations are required only to “consider” not accepting cash payment for services. And it’s not clear how many of the policies will be legally enforceable. Individual charities are also allowed to adjust the compliance plan to their specific needs.
“Obviously this is voluntary,” said Eli Greenberg, a board member of the predominantly Syrian Sephardic Community Federation who is spearheading the project. Still, Greenberg, a New York attorney, expects the guidelines to have an impact on communal giving, including donations to the often opaque personal charity funds controlled by individual rabbis in the Syrian community. “Those rabbis who don’t [participate]… they may have trouble getting donors,” he said.
So far, at least four Sephardic community charities have adopted the guidelines, Greenberg said. The boards of some 15 other groups are currently considering them, he added. Greenberg hopes the guidelines will eventually be adopted by at least 40 groups.
The Brooklyn-based Syrian Jewish community of about 75,000, which dominates Sephardic life there, is widely noted for both the wealth of many of its members and the extensive charity network by which it maintains a large array of communal services.
Greenberg said that sometime this summer, participating charitable organizations will be asked to submit to external audits. The specific findings of these audits are not likely to be published, he said, but whether the charities passed the audits will be publicly indicated.
A list of those charities that adopt the guidelines and those that decline to do so will be published sometime in the fall, he said.
Religious charities of the sort ensnared in last year’s federal sweep can be an inviting haven for illicit activity, simply because their reporting obligations and the government’s standards for oversight are much lower than those of other not-for-profits. They don’t have to file tax returns, and it’s much harder for the IRS to audit them.
The push for greater transparency to remedy this was spurred by the arrest last July of three Sephardic rabbis from the Syrian Jewish enclave of Deal, N.J., and two Ashkenazi rabbis from Brooklyn’s ultra-Orthodox community as part of a sprawling corruption investigation by federal authorities. Some 44 individuals, including several prominent New Jersey elected officials, were arrested in total. Among the arrested was Rabbi Saul Kassin, the Syrian community’s chief rabbi and leader of the one of the largest Sephardic synagogues in the United States.
The money-laundering suspects were alleged then to have moved “at least tens of millions of dollars through charitable, nonprofit entities controlled by rabbis in New York and New Jersey,” according to a press release by Ralph Marra, the acting U.S. attorney for the district of New Jersey. Laywers for the rabbis have asserted their innocence.
A spokesman for the U.S. Attorney’s Office in New Jersey said that the five rabbis, all arrested on the basis of a criminal complaint, have yet to be formally indicted. The extended delay may indicate that they are plea bargaining or, perhaps, even offering information on others in exchange for leniency. In a mid-March statement to a New Jersey newspaper, the lawyer of one of the rabbis indicated that his client was engaged in negotiations with the government.
In August, David Greenfield, then executive vice president of the Sephardic Community Federation, announced that in response to the scandal, the federation would certify Sephardic charities that met certain standards of fiscal and ethical governance.
“It sounds to me like they are taking this problem very seriously,” said Moses Pava, a professor of business ethics at the Sy Syms School of Business at Yeshiva University who has advocated stricter ethical standards for Jewish organizations. “Instead of ignoring the crisis, they are using [it] to make what might end up being some significant changes.”
Greenberg said that he knows people who gave money in good faith to the funds involved in last year’s scandal. “They don’t want to get caught up in this anymore,” he said. “I think that there will be the social pressure on even the smaller [charities] to be clean. Why would you want to get involved with somebody who will be causing you trouble?”
But one observer of the Sephardic community thinks that Greenberg’s effort, while well intentioned, will serve only to distract from the corruption that he believes to be endemic to the community’s charities.
The certifications will create “a false sense of security concerning the behavior of certain corrupt charities and organizations within the Syrian community,” wrote former community member Sam E. Antar in an e-mail to the Forward. In 1991, Antar pleaded guilty to fraud as chief financial officer of Crazy Eddie Inc., a high-profile company that was run by Syrian Jews and went down in a flurry of indictments and Securities and Exchange Commission investigations in the early1990s. Antar now advises law enforcement and businesses on white-collar crime.
“It will simply ‘paper over’ the pervasive, systemic and widespread problem of tax evasion involving certain criminal elements within that community and do little, if anything, to prevent or deter criminal conduct,” Antar wrote.
Antar said that FBI agents have interviewed him in the course of what he believes to be an ongoing investigation into money laundering by Sephardic Jewish charities that goes beyond those cited in last summer’s scandal. A spokesman for the FBI’s New York office declined to comment on whether such an investigation was under way; a spokesman for the FBI’s New Jersey office did not respond to an inquiry.
Still, Pava sees the effort as an important step. “There’s no reason why, in the year 2010, charities don’t have codes of ethics,” he said.
Contact Josh Nathan-Kazis at firstname.lastname@example.org