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In Wake of Arrests, Sephardic Group Touts Voluntary Reforms for Charities

In response to the July corruption arrests that swept up a number of rabbis on money-laundering charges, the Sephardic Community Federation is launching a program aimed at making religious charities more accountable and transparent.

The goals are lofty, and leaders of the effort say they’re being well received in the Syrian Jewish community that was the epicenter of the FBI’s sting operation. But whether religious leaders will submit to the sort of scrutiny applied to other non-profits remains to be seen.

“Once we set the standard, we believe donors will demand the standard,” said David Greenfield, executive vice president of the Sephardic Community Federation, an umbrella public policy group. “At the end of the day, all these organizations run on contributions.”

At least one former white-collar criminal who grew up in the Syrian Jewish community has his doubts.

“Auditing these charities? Eh, I don’t know. It’s a very good idea, but I’m skeptical,” said Sam Antar, former chief financial officer of Crazy Eddie Inc., who became the government’s chief witness in the 1993 securities fraud case against his cousin and uncle — which, until this summer, had been the most high-profile example of white-collar crime among Syrian Jews. Antar pleaded guilty to securities fraud, mail fraud and obstructing justice, and now advises government and corporate groups on how to avoid and detect white-collar crime.

Antar said he told the FBI about money laundering through Jewish charities back in the early 1990s, when the Crazy Eddie case was prosecuted, but the authorities lacked an inside informant to pursue the information. Religious charities can be an inviting haven for illicit activity, simply because their reporting and oversight standards are so much lower than other non-profits. They don’t have to file tax returns, and it’s much harder for the IRS to audit them. In the recent New Jersey and New York arrests, the FBI relied on Solomon Dwek, the son of a prominent Syrian rabbi, whose role as a “cooperating witness” led to charges against 44 people, including five rabbis in Brooklyn and Deal, N.J. Three of the rabbis were from the Syrian Jewish community.

That’s just the beginning, Antar said.

“Of those 44 people, a substantial amount of them will flip, meaning they will become government witnesses,” he said. The accused will implicate others, Antar predicted: “Ultimately in this case you’re going to have hundreds of arrests. It might be in six months, maybe a year and a half, but there will be more arrests.”

Then, he said, changes will come.

“There’s plenty of nervousness out there, let me tell you,” Antar said, remembering the stress of a federal investigation closing in on him. “A lot of people are not having good summers this year. The sad part of it is you have these allegations against rabbis who have no business being mixed up in this. It’s very sad to see this happen.”

The Syrian Jewish community is renowned for both its insularity and its strong, cradle-to-grave network of social services, supported by wealthy donors and religious charities as the ones targeted in the money-laundering probe. But according to the criminal complaints filed in U.S. District Court, the accused rabbis ran their charities as their own personal slush funds. Allegedly, they would accept large checks from people involved in criminal schemes, cash the checks and return most of the money in cash to the “donor,” while keeping a percentage for themselves.

The Sephardic Community Federation’s initiative aims to help rehabilitate the tarnished image of religious charities, by offering a voluntary certification that

would serve as a sort of financial seal of approval.

The Federation announced on August 18 that certification standards will include:

• Annual audits by an independent public accounting firm

• Adoption of a “conflict of interest” policy for directors, officers and employees

• Adoption of standard procedures for accepting and distributing money

• Annual affidavits from the organization’s president and treasurer detailing compliance with applicable laws.

The certification committee has not yet determined whether the audits, affidavits and new policies will be made public; or whether it will simply publish a list of charities that have met its standards. Nevertheless, “Because of recent events, the community decided it wanted to be proactive and show, not just externally but internally, that it’s taking these allegations very seriously,” Greenfield said.

Eli Greenberg, an attorney who specializes in non-profit governance, is leading the certification committee.

The guidelines aren’t breaking new ground for non-profits, said Mark Charendoff, president of the Jewish Funders Network, but they’re a good start. “If the Federation is successful at getting charities to adhere to these guidelines, that will certainly be welcome news in the donor community,” he said.

The Jewish Funders Network represents about 900 members worldwide, both individuals and foundations, that give away at least $25,000 yearly in philanthropy. So far, Charendoff said, the money-laundering arrests in the Jewish community have not chilled donations, but he said his members are looking more closely at governance of religious charities.

“I’m certainly hearing from the donors that they want to see far more accountability,” Charendoff said. “In the past, religious organizations could say, ‘We don’t need to provide [documentation], because the law doesn’t demand it.’ That is no longer an acceptable response.”

One Syrian rabbi, who spoke only on the condition that his name be withheld, said the pressure for more accountability is coming from donors who are cringing at the unwanted attention that the arrests have brought upon the community.

“Those people are very disgraced and very embarrassed. They’re just not going to contribute [without stricter controls], and if they don’t contribute, that would be the end,” the rabbi said.

No rabbis were involved with developing the guidelines for the Sephardic Community Federation’s new certification standards. And none would speak on the record to the Forward about the proposed standards. But Greenfield promised that rabbinical groups and lay leaders would be publicly endorsing the effort in the coming weeks.

Contact Rebecca Dube at [email protected]

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