A chief rabbi of the Spinka ultra-Orthodox sect and his aide were indicted in California last week for using their synagogues to launder money.
Rabbi Naftali Tzvi Weisz was arrested in Los Angeles along with his top aide, Moshe Zigelman, for what the U.S. Attorney’s Office describes as a “sophisticated tax fraud and money laundering scheme” spanning from Israel to Los Angeles via Brooklyn.
According to the 37-count indictment handed down December 19 by a grand jury, Weisz and Zigelman solicited donations to several Brooklyn-based charities connected to the Spinka ultra-Orthodox sect.
The donations were declared as tax deductible, but Weisz and his aide secretly promised to return between 80% and 95% of the money to the donors while keeping the difference as a fee, according to the charges.
Weisz is the grand rabbi of Brooklyn’s Boro Park branch of the Spinka, a small Hasidic movement named after the Romanian town where it was founded in the 19th century.
After the first grand rabbi’s son was killed during the Holocaust, the Spinka sect split into a number of offshoots, following different grand rabbis around the world. Many Spinka Hasidim live in Brooklyn, but there are also communities in Israel, Europe and Los Angeles.
According to the indictment unsealed last week, the scam began in 1996 and continued through 2007. It involved millions of dollars channeled through five Brooklyn-based charities, which were also cited as defendants in the case.
The charities used two methods to hide the money and to return up to 95% of the money to the donors, the indictment said. One was to pass the cash through a money transfer network based in the Los Angeles jewelry district.
The second method was to wire the donations from Spinka-controlled entities to secret bank accounts established at a bank in Tel Aviv, with the support of a bank manager and a local attorney. The money was then used to obtain loans from the Los Angeles branch of the bank, where the donors could retrieve it. Another possibility for donors was to ask Spinka leaders to secretly repatriate the money into the United States in exchange for an extra fee.
In January of this year, according to the indictment, Zigelman and Weisz estimated that they had collected more than $8 million in phony donations, securing for themselves a profit of nearly $750,000.
The indictment charges them with conspiracy to defraud the IRS and with money laundering. They also face 19 counts of mail fraud, 11 counts of international money laundering and one count of operating an illegal money-remitting business. Zigelman is also accused of helping to prepare fraudulent income tax returns. Six associates were also charged. Four of them were arrested in California, and the two others are believed to be in Israel.
Samuel Heilman, a professor at the City University of New York and an expert on the ultra-Orthodox, charged that the incident reflects a disregard for secular law.
“There is a great temptation among these rabbis, who come from a culture that often views the ‘government’ as in the hands of enemies, to believe that for ‘higher’ motives is acceptable,” Heilman said. “In fact, often their temptations are driven by more venal and selfish aims than they might acknowledge.”