The numbers in the public benefits fraud scam in the Orthodox enclave of Lakewood, New Jersey, are stunning.
Fourteen arrests so far, and counting. More than $2 million in fraudulently obtained government funds. Hundreds of others scrambling to avoid prosecution for similar crimes.
Law enforcement sources say that the schemes are both “widespread” and some of the “most sophisticated financial fraud” cases authorities have seen in recent years, according to the Asbury Park Press.
But it’s still unclear how the alleged scam artists were tied together, if at all.
Officials say all the alleged fraudsters are also suspected of using a local business to transfer money. The owner of that store recently pleaded guilty to transmitting cash without a license.
So how was the scheme so successful for so long, and how did it involve so many people in such a relatively small town?
The Asbury Park Press investigation, based on publicly available information on four of the 14 suspects, revealed a web of “hidden income, fake applications and phony company owners” that were the central cogs in the fraud. Defense lawyers deny the charges.
In the case of Shimi and Yocheved Nussbaum, they set up limited liability companies — an otherwise legitimate enterprise meant to hide their ownership — with relatives as straw owners, funneling personal income into corporate accounts.
Starting in 2006, “relatives of the Nussbaums were registered as agents and sole members of a clothing company, daycare, real estate company and nonprofit corporation ‘with a listed purpose of providing therapeutic services to children with autism,’” according to the federal complaint against the couple. Meanwhile, the couple controlled the company’s finances.
As they raked in profits from those companies, they allegedly used income from the three companies and the not-for-profit for personal expenses, including attorney fees, school tuition for their children, life insurance policies and credit card bills. Meanwhile, they were drastically underreporting their income; “in 2011 and 2012, Yocheved Nussbaum reported only $1,100 in monthly income from the daycare company when applying for public assistance,” according to the APP.
Authorities say the Nussbaums underreported their income by $100,000 per year in some cases.
In New Jersey, a family of four making less than $44,94 would most likely be eligible for food stamps, and less than $75,468 would qualify a family of eight. The Nussbaums’ income was $265,492 in 2011, $198,535 in 2012 and $1.8 million in 2013. In total, they illegally collected $178,762 in government assistance.
Rachel and Mordechai Sorotzkin’s alleged scheme was much simpler. They reported their combined income as around $3,000 per month in 2011, and then $3,800 in 2012. Meanwhile, Rachel Sorotzkin allegedly neglected to report over $45,000 in profits from her family’s limited liability company, along with “two other payments $1.5 million she received in 2013,” the paper said.
As for the 10 other suspects currently being held on similar allegations, the specifics of their fraud remain unclear.
One thing is for sure: Many people in Lakewood were aware of the scams, if not of the specifics. In 2015, the Ocean County Prosecutor’s Office met with Lakewood residents to discourage government assistance fraud.
Flyers warning about the practice were also posted at a local synagogue.
“Those who choose to ignore those warnings by seeking to illegally profit on the backs of taxpayers will pay the punitive price of their actions,” Ocean County Prosecutor Joseph Coronato said in a statement at the time.
Since news of the arrests spread, there have been ominous signs that even more people could be involved. Hundreds of people have called local officials, inquiring if there would be amnesty for those who admit lying about their incomes, and the APP reported that Ocean County authorities have been swamped with calls from public assistance beneficiaries seeking to stop receiving benefits.