Albany kosher cheese maker charged with defrauding investors


The owner of an Albany, New York kosher cheese business has been charged with fraud.

Lawrence Rosenbaum, 64, of Albany, was arraigned on Monday. He is accused of promising investors in Saratoga Cheese Corporation, his kosher and halal cheese business, high returns and shares of stock in his corporation. He never developed the production lines or facilities for which he solicited the money, the local ABC affiliate reported.

Rosenbaum also is accused of writing checks to himself from the business accounts and using some of the investment funds to pay for an apartment with his mistress in Costa Rica. He also did not file his personal income taxes for several years.

 

He is charged on 27 counts including grand larceny, securities fraud and tax fraud.

Rosenbaum looked for investors for a plant to process the cheese and also to create alternative bio-energies from the manure from his milk-producing cows. The $40 million cheese factory announced in 2008 was slated to be built in the Cayuga County Industrial Development Agency industrial park, which was predicted to be an economic boon to the area. He ran his business from the porch of his Albany home.

In 2009, he spoke to Chabad.org of his plans to headquarter his cheese business in rural Cayuga County, and use it as a base to “found a yeshiva, revolutionize the national kosher and Halal cheese industry, and establish a Jewish community in the New York countryside.” In 2014, Rosenbaum told an interfaith gathering in Morristown, New Jersey that his production of cheeses for the Jewish and Muslim markets was part of an effort he called “Cheese for Peace.”

Rosenbaum pleaded not guilty to the charges. If convicted, Rosenbaum faces up to 15 years in state prison. He is currently being held on $200,000 bail.

Silver’s arrest a 2nd strike for N.Y. Orthodox power brokers


To critics of Albany’s culture of political corruption, the sight of the powerful longtime speaker of New York’s State Assembly, Sheldon Silver, getting arrested Thursday may have been a sign that even the state’s most powerful politicians are not immune from the long hand of the law.

For New York Jews, the arrest marked the second time in less than 18 months that one of the state’s most visible and well-connected Orthodox Jews was taken into custody on corruption charges.

In fact, the two figures are deeply connected.

The first, William Rapfogel, the longtime CEO of New York’s Metropolitan Council on Jewish Poverty, was arrested in September 2013 for involvement in a kickbacks scheme. He pleaded guilty to helping fleece more than $9 million from the charity, including $1 million that he pocketed himself, and was sentenced last July to 3 ½ years in prison and ordered to pay $3 million in restitution.

Rapfogel’s wife, Judy Rapfogel, is Silver’s chief of staff. After her husband’s arrest, Judy Rapfogel claimed she had no knowledge of her husband’s criminal malfeasance, and she remained on Silver’s staff.

Silver and William Rapfogel lived in the same neighborhood and went to the same shul, the Bialystoker Synagogue on Manhattan’s Lower East Side. The two men often sat together in the sanctuary on Shabbat morning, though in recent years Silver began going to the early minyan on Saturday mornings, a neighborhood insider who declined to be identified told JTA.

Rapfogel’s eldest son, Michael Rapfogel, works for real estate developer Bruce Ratner, who has been on the receiving end of numerous favorable decisions by the Public Authorities Control Board, over which Silver has significant control. In 2006, Silver’s intervention helped secure a lucrative tax break for Ratner’s Atlantic Yards project in Brooklyn, even though that tax break actually was being phased out, The New York Times reported.

The criminal complaint filed this week against Silver by the U.S. Attorney’s Office alleges that Silver was “on retainer to a mammoth real estate developer” while his office was passing legislation affecting that developer’s business, meeting with lobbyists paid for by the developer and “deliberately keeping secret from the public any information about this lucrative side-deal, in violation of the law.” The complaint does not identify the real estate developer by name.

The heart of the charge against Silver is that he received nearly $4 million in bribes and kickbacks in exchange for his official acts – especially in matters relating to real estate and health care funding — and that he hid the money by disguising it as income from a law practice focused on personal injury matters.

Silver amassed a tremendous personal fortune through the abuse of political power, Preet Bharara, the U.S. attorney for the Southern District of New York, said in a statement.

“As today’s charges make clear, the show-me-the-money culture of Albany has been perpetuated and promoted at the very top of the political food chain,” Bharara said.

“And as the charges also show, the greedy art of secret self-reward was practiced with particular cleverness and cynicism by the speaker himself,” he said. “Politicians are supposed to be on the people’s payroll, not on secret retainer to wealthy special interests they do favors for.”

Silver, 70, faces two counts of honest services fraud, one count of conspiracy to commit honest services fraud, one count of extortion under color of official right and one count of conspiracy to commit extortion under color of official right. Each of the five counts carry a maximum penalty of 20 years in prison. Honest services fraud refers to the failure to provide the public with honest services, usually due to bribes or kickbacks.

Silver denied the allegations, saying, “I hope I’ll be vindicated,” before surrendering to authorities Thursday morning, according to The New York Times. His lawyers called the criminal charges “meritless.”

Silver has been honored by Jewish federations, the Council of Jewish Organizations and a host of organizations associated with various ethnic groups in New York City, hospitals and lower Manhattan, where Silver lives. Silver also received an honorary doctorate from Yeshiva University, from which he graduated college in 1965.

Silver also was a mainstay of New York legislative missions to Israel. The Facebook page of the National Association of Jewish Legislators features of a photo from last August of Silver flanked by Gov. Andrew Cuomo in front of Jerusalem’s Big Apple Pizza shop. In the shot, the salt-and-pepper-haired Silver wears a big smile. Around New York, the speaker is better known for his heavy jowls, deep baritone, laconic speech and hard stares.

This is not the first time Silver has found himself caught up in a scandal. But, as with the Rapfogel scheme, Silver has been more of a peripheral figure to scandal rather than the main act.

Twice, Silver came under heavy fire for mishandling of allegations of sexual misbehavior against associates.

In 2012, Silver paid more than $100,000 to settle with two women who claimed they were sexually harassed by State Assemblyman Vito Lopez of Brooklyn. Silver never disclosed the payments or the allegations to the assembly’s ethics committee. Then, later that year, two additional women came forward with public allegations that Lopez groped, intimidated and manipulated them. That prompted disclosures about Silver’s secret settlement with the first two women.

Silver stripped Lopez of several senior positions and acknowledged that “mistakes were made” in failing to disclose the initial allegations to the ethics committee, but, as he had many times over the years, ignored calls that he step down. Lopez resigned the following year.

In 2001, one of Silver’s staffers, Elizabeth Crothers, came to him claiming that she had been raped by Silver’s top legal aide, Michael Boxley. Silver’s response was to put out a statement support Boxley. Crothers never filed a criminal charge, and internal assembly investigation was inconclusive. But in 2003 Boxley was charged with rape by another female staffer, and eventually pleaded guilty to a sexual misdemeanor charge. And in 2006, Silver and assembly leaders paid $500,000 to settle a lawsuit brought by an unnamed woman who accused Silver of bungling the Crothers allegations and abiding a culture of sexual harassment in the assembly.

After Silver apologized for making mistakes in the Lopez case, Crothers told the N.Y. Daily News that Silver needed to do more than apologize.

“People are saying he apologized and admitted he made a mistake,” Crothers said to the newspaper in May 2013. “How many times do you get to do it? When is the tipping point? We all make mistakes and there are consequences to them. Silver hasn’t gotten any of the consequences.”

Fraud, mismanagement class action lawsuit against philanthropist Shlomo Rechnitz


A class action lawsuit filed Oct. 7 against against local businessman and philanthropist Shlomo Rechnitz claims that his healthcare company, Brius Management, which owns 57 nursing homes in California, has misrepresented the quality of its care, routinely violated industry regulations and committed fraud. 

In response, Rechnitz’s high-profile attorney, Patricia Glaser of law firm Glaser Weil, said the lawsuit is baseless and lacking in evidence. A statement released by Brius said it is “a case in point of how anyone can say anything in a lawsuit” and that the plaintiff’s lawyer, Stephen Garcia, a partner in the Long Beach law firm Garcia, Artigliere & Medby, made the filing after Rechnitz denied him a “lucrative consulting contract.” 

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CORRECTION: This article previously incorrectly stated that Goldstar Healthcare of Santa Monica is owned by Shlomo Rechnitz. It is not and never has been.

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The 175-page class action lawsuit does not state how many nursing home residents are involved, and a spokesperson for Garcia, Artigliere & Medby wrote in an email that the plaintiffs “don’t want to be subjected to retaliation” and so are not revealing their names for the time being. Still, according to the lawsuit, the plaintiffs’ class includes anyone who lived at one of Rechnitz’s California nursing homes at any point in the past four years. 

Rechnitz, the suit claims, has a history of failing to comply with regulations enforced by the California Department of Health Care Services (DHCS) and the federal Centers for Medicare and Medicaid Services (CMS). 

It references an enforcement order by DHCS against two of Rechnitz’s nursing homes — the agency withheld all Medi-Cal payments from his Highland Park and Brighton Place Spring Valley nursing homes from Oct. 10, 2013, until Oct. 7, 2014, when he submitted required audit materials to the agency. The lawsuit also noted that DHCS recently threatened to withhold Medi-Cal payments from all of Rechnitz’s nursing homes in California. 

A DHCS spokeswoman wrote in an email that the agency had indicated it would withhold an additional 20 percent of Medi-Cal payments from all of Rechnitz’s nursing homes in the state if he did not submit “certain home office cost reports sought by the department” by Sept. 22. 

“DHCS subsequently received the reports and has not implemented the withhold, pending the outcome of the review,” the spokeswoman said. 

The lawsuit claims that Rechnitz “chronically understaffed” his facilities, purposely withheld that information from residents, reduced their level of care below an acceptable level and violated their rights as laid out in the state’s health and safety code. 

Garcia pointed to a suit filed by his office on Oct. 9 on behalf of Raymond Foreman, a former resident at Inglewood’s Centinela Skilled Nursing & Wellness Centre West and the only defendant named in the class action. Foreman's personal injury complaint says he suffered a broken leg when a nurse’s assistant fell on him and that he did not receive adequate care from the nursing home due in part to “understaffing, lack of training, [and] failure to allot sufficient economic resources.” 

A CMS inspection of Centinela, the results of which are available at medicare.gov, grades both the facility and its registered nurse staffing at one out of five stars, or “much below average.” 

Garcia also pointed to a March complaint issued by DHCS and California Department of Public Health (CDPH) in bankruptcy court that attempts to disqualify Rechnitz from purchasing 19 financially beleaguered nursing homes, citing the Medi-Cal withholds and his failure to promptly file home office cost reports. That case is still working its way through court. 

“They are painting this beautiful picture that does not match the reality of the situation, and their residents are having poor outcomes because of it,” Garcia said. 

Nowhere in the lengthy lawsuit, however, are any specific examples of damages caused to anyone in the plaintiff’s class, and only one plaintiff, Foreman, is named. 

Glaser disputed Garcia’s allegation that Rechnitz’s nursing facilities are understaffed, saying, “We have always met and frequently exceeded the nurse-to-patient ratio that is required under the law,” referring to a CDPH requirement that nursing homes provide 3.2 “nursing hours per patient day,” a metric that helps quantify the amount of time each nurse can spend with each resident. 

Glaser accused Garcia of burdening “responsible runners of nursing homes with this kind of huge [legal] expense” and of inaccurately painting Rechnitz as an irresponsible nursing home operator. 

“Shlomo Rechnitz is not one of those people,” Glaser said. 

Rechnitz made headlines twice last year for much different reasons. In April 2013, he bought Doheny Glatt Kosher Meat Market, the scandal-ridden Los Angeles meat distributor and retailer that closed its doors last year, before arranging to transfer it to a third party. One month later, he donated $250,000 to help restore the badly vandalized Mount Zion Cemetery in East Los Angeles. 

Glaser accused Garcia of filing a baseless suit and pointed to a 2012 lawsuit in which Goldstar Healthcare Center of Santa Monica sued Garcia for attempted extortion. (That case was dismissed last year after being settled out of court.)

Firing back, Garcia said that an aide to Rechnitz threatened him with a counter-lawsuit if he does not drop the case.

Orthodox educator Rabbi Elimelech Meisels sued for sexual assault


Rabbi Elimelech Meisels, who runs four religious seminaries in Israel for young Orthodox women, is being sued for sexual assault and fraud.

The civil suit was filed Monday with the U.S. District Court for the Northern District of Illinois on behalf of four parents with daughters signed up for Meisels’ haredi Orthodox seminaries for the 2014-2015 school year. The parents are seeking to recover their tuition deposits.

The suit alleges that Meisels would lure girls under his charge “into late night coffee meetings and other private settings and then sexually assault them.” It says he threatened to ruin girls’ marriage prospects if they told and would “intimidate his victims by telling them that no one would believe that a rabbi and author with his reputation would have done such a thing.”

Meisels denies the allegations.

“The allegations are completely false,” Meisels told JTA in a phone interview from Israel. “My attorney has advised me to pursue legal action against all those who are wronging myself and the seminaries.”

The seminaries named in the suit are Peninim, Binas Bais Yaakov, Chedvas Bais Yaakov and Keser Chaya.

The complaint said that seminary attendance has had negative impacts on the marriage prospects of the Orthodox women who have gone there. The parents involved in the lawsuit allege that Meisels is committing fraud by misrepresenting the seminaries as institutions that help Orthodox girls become upstanding Jewish women. Aside from Meisels, other administrators at the seminaries are named in the suit.

The matter was initially brought to the attention of the Chicago Beit Din, a Jewish religious court, which concluded that “students in these seminaries are at risk of harm and it does not recommend that prospective students attend these seminaries at this time,” according to the lawsuit. Following the Beit Din determination, two institutions that offered college credits to students attending Meisels’ seminaries suspended their affiliation with them.

Though Meisels claimed to have sold his seminaries following the Beit Din ruling, the Beit Din did not accept the sales as legitimate, according to the complaint.

Though the schools are based in Israel, Meisels and the other defendants named in the suit are U.S. citizens, and the non-profit organization that processes funds for the seminaries — Peninim of America — is a nonprofit charity in the United States, according to the complaint.

Considering future, Claims Conference weighs shutting down vs. Holocaust education


A special panel tasked with examining the governance and strategic vision of the Claims Conference is recommending that the organization shift its long-term focus to Holocaust education and remembrance, JTA has learned.

The panel was appointed last year following a scandal involving the Claims Conference’s failure to detect a $57 million fraud scheme there that persisted until 2009. It also recommended cutting in half the size of the board’s executive committee and the number of special board committees.

The special panel did not, however, recommend any changes to the composition of the Claims Conference’s board, which critics have complained is unrepresentative because it does not include enough Israeli or survivor groups and includes too many once-robust Jewish organizations that are quite small today.

The new recommendations, outlined in two hefty documents sent to Claims Conference board members last week and this week and obtained by JTA, will go to a vote when the board holds its annual meeting in New York on July 8.

Consisting of board members and outside experts and guided by Accenture consultants, the special panel was charged with reviewing the administration, management and governance structure of the Claims Conference, which obtains Holocaust restitution and compensation from Germany and Austria. The central question the panel examined was what the Claims Conference should do after the last of the survivors dies.

Three possible courses of action were given serious consideration: shutting down; funding education and remembrance projects; or shifting its focus to general Jewish educational programming, helping victims of other genocides obtain restitution or preserving Jewish cultural sites in the former Soviet Union.

Given the Claims Conference’s successes at convincing Germany to increase its funding for survivors, the panel concluded that “to close down without attempting to leverage its position and significant experience in the service of Holocaust education and remembrance would be to miss a major opportunity.”

In an interview with JTA, the Claims Conference’s chief executive, Greg Schneider, emphasized that Holocaust education isn’t new to the Claims Conference: The organization currently funds education and remembrance to the tune of $18 million per year with money obtained from the sale of unclaimed Jewish properties in the former East Germany.

“The Claims Conference has always dealt with the consequences of the Shoah,” Schneider said of the board’s mandate for the organization. “When that meant direct payments to survivors, we did that. When that meant rebuilding communities, we did that. When that meant home care [for elderly survivors], we did that. Educating people about the Shoah and confronting Holocaust denial all deal with consequences of the Shoah. To be faithful to our mandate, we should continue to do that. And we are uniquely qualified to do so.”

The new vision for the Claims Conference hinges on the organization’s ability to get material support for it from the perpetrators of the Holocaust — namely Germany, but also Austria and companies complicit in the Nazi genocide. If that funding cannot be secured, the Claims Conference should go out of business once there are no survivors left, Schneider said.

“If we’re unable to get money from perpetrator governments, and the survivors have all died, we should close down,” he said. “We should not try to reinvent ourselves into something else.”

Stuart Eizenstat, a lead Claims Conference negotiator and special assistant to Secretary of State John Kerry on Holocaust issues, said he’s optimistic about getting Germany to support the proposed new focus, noting that the country already does so through mandatory Holocaust education in German schools.

“There’s every reason to think that they would be supportive of this,” Eizenstat said. “After all the survivors are gone this is the right thing to do.”

Though survivors are dying, their overall need for aid actually is rising because of their growing infirmity and relative poverty. The Claims Conference estimates that survivor needs will peak in about two or three years, followed by a progressive decline.

Globally there are an estimated 500,000 living Nazi victims — a category that includes not just survivors of concentration camps, ghettos and slave labor camps but also those forced to flee the Nazi onslaught, compelled to go into hiding or who endured certain others forms of persecution. About half are expected to die in the next seven or eight years, according to a new demographic assessment that was part of the special panel’s work, and survivors of some kind or another are expected to be around for another 20-25 years.

The debate about what to do about the Claims Conference once the last of the survivors dies is not new. Established in 1951 to secure compensation and restitution from Germany, the Claims Conference has negotiated successfully for an estimated $70 billion for survivors and survivor needs over the course of its existence.

Most of that money has come directly from Germany in the form of pensions and compensation payments, with the Claims Conference acting only as the processor of payments and verifier of claims (this latter area is where the $57 million fraud occurred). As each survivor dies, these payments cease.

The Claims Conference also has a bucket of discretionary funding: billions generated from the sale of heirless Jewish property from the former East Germany. But that bucket, known as the Successor Organization, is expected to run dry by 2020 at its current annual allocation rate of about $118 million to groups that aid survivors and $18 million to Holocaust education and remembrance.

In 2004, the Claims Conference managed to get Germany to begin to fund a new area: home care for survivors, including food, transportation and medical care. Berlin has steadily increased the amount of money it provides the program, from $42 million in 2009 to $190 million in 2013. Last year Germany agreed to another $800 million in funding through 2017.

If the Claims Conference board adopts the new plan next month, the question for Claims Conference negotiators is whether they’ll be able to get Germany to move into another new area — one that, unlike aid to aging survivors, has no particular expiration date.

“I believe the good will is there,” said Julius Berman, the Claims Conference’s chairman. “Their issue is more in terms of budget rather than concept. If we do a correct job to explain the need, I think we’ll have a receptive audience on the other side.”

The mandate for reexamining the Claims Conference’s future and governance grew out of a public storm a year ago over the discovery that the organization had conducted two investigations in 2001 into questionable conduct that failed to uncover a massive fraud scheme being perpetrated by a senior Claims Conference official. The fraud continued unabated until Claims Conference leaders discovered it in late 2009. In all, 31 people pleaded guilty or were found guilty in connection with the scheme, which resulted in $57 million in illegitimate payouts by Germany.

A Claims Conference probe last year into the bungled 2001 investigations proved highly controversial when it was disavowed by two of its four committee members and then rebutted in a 21-page missive by Schneider. In the end, the Claims Conference board elected to end its reexamination of the 2001 episode and rebuffed proposals to open up to any additional outside oversight.

The committees that oversaw this most recent Claims Conference reexamination process were, however, led by outsiders. The strategic vision committee was chaired by Jeffrey Solomon, president of the Charles and Andrea Bronfman Philanthropies, and the governance committee was chaired by Michael Miller, CEO of the Jewish Community Relations Council of New York. The committees themselves included outsiders as well as Claims Conference board members.

 

Avigdor Lieberman cleared of corruption charges


This story orignally appeared on themedialine.org.

Former Israeli Foreign Minister Avigdor Lieberman was acquitted of charges of fraud and breach of trust in a verdict that paves the way for his return to the foreign ministry, and sets him up as a possible successor to Prime Minister Benjamin Netanyahu.

The decision came as US Secretary of State John Kerry met the Israeli and Palestinian leaders in attempt to nudge negotiations forward. His arrival coincided with reports of an “explosion” in the talks, and Palestinian threats to quit the Kerry-brokered process unless Israel promises to stop all construction in post-1967 areas, a demand that Israel says is unacceptable.

Speaking after meeting Palestinian Authority President Mahmoud Abbas, Kerry said Washington is not giving up on a peace deal.

“As in any negotiation there will be moments of up and moments of down, and it goes back and forth,” Kerry said. “But I can tell you that President Obama and I are determined, and neither of us will stop in our efforts to pursue the possibility (of peace).”

Israeli analysts played down the reports of a collapse saying both sides are trying to win concessions from the Americans. In fact, speaking in Bethlehem, Kerry announced a gift of $75 million to the Palestinian Authority earmarked for jobs and upgrade for its infrastructure.

“I don’t think they’re on the verge of collapse,” Jonathan Rynhold, a professor of political science at Israel’s Bar Ilan University told The Media Line. “If you follow the history of the negotiations, every time the Americans come there’s a crisis.”

He said that both the Israeli and the Palestinian leaders are negotiating seriously. Their representatives have met 17 times since negotiations restarted in July after a three-year hiatus. At the same time, there is a sense that the gap between the minimum each side is willing to accept is growing, and the talks seem unlikely to produce a real agreement.

“They have to show the Americans that they’re negotiating seriously,” Rynhold said. “But they’re also preparing for the day when the negotiations will collapse, and they’re getting into position to blame the other side.”

The new tensions came as Moldavian-immigrant Avigdor Lieberman celebrated his acquittal on all counts after a 17-year-investigation and legal proceedings. Lieberman, the founder of Yisrael Beytenu [Israel is our home] – a party considered to be hard-line and right wing that is supported by many of Israel’s one million Russian immigrants, celebrated with a visit to Judaism’s holiest site, the Western Wall.

“This chapter is behind me,” a smiling Lieberman said after the verdict. “I’m focusing on the challenges that await us – and there are plenty of challenges.”

Israeli politicians rushed to congratulate Lieberman, including Prime Minister Binyamin Netanyahu, who has been filling in as foreign minister while Lieberman’s legal woes lingered on. Lieberman is widely expected to return to the foreign ministry, although that must be approved by the cabinet and the parliament.

“I am happy to welcome him back to the government,” Orit Struck, a parliament member from the right-wing Bayit Hayehudi [Jewish Home] party told The Media Line. “Lieberman is right-wing and he knows how to use his political power to support the state of Israel.”

Struck lives in the West Bank city of Hebron, which has been a flashpoint for violence between Israelis and Palestinians. Earlier this week, a bus she was traveling on between Jerusalem and Hebron was firebombed, although she was not injured.

On the other side of the political spectrum, Israeli Arab Knesset member Haneen Zoabi said Lieberman will strengthen Israel’s “racist” policies.

“Unfortunately being racist is not a criminal violation in Israel,” Zoabi told The Media Line. “He is powerful and he was cleverer than the investigators.”

Lieberman has angered Israeli’s Arab citizens, who make up one-fifth of the population, by calling for a loyalty oath before they will be allowed to vote. He has also called on redrawing Israel’s borders to allow the annexation of parts of the West Bank in exchange for ceding land heavily populated by Israel’s Arab citizens.

Even if Lieberman returns to the foreign ministry, he is unlikely to have a major effect on Israel’s policies, at least in the short-term. Netanyahu has made it clear that he is the one in charge of the talks with the Palestinians. He has also steered Israel’s relationship with the US, keeping Lieberman in Israel during most of his trips to Washington.

Israel does not have term limits, and Netanyahu can run for prime minister as many times as he wants. Yet, if the PM does try to push through a peace deal, Lieberman could become the leader of the opposition to any deal.

Lieberman’s expected return comes as Israel’s image abroad is taking a beating. There are growing calls in Europe to boycott Israeli-made goods, and to bring Israel’s military officials to trial in the International Criminal Court (ICC).

Expressing a fear held by some of Israel’s advocates, Rynhold opined that “Lieberman’s return will have a negative impact on Israel’s image in Europe and especially among liberal American Jews. In Europe, many people don’t like Israel anyway. But in America, they do like us, and he could alienate our liberal supporters.”

Top Claims Conference officials carried out own botched probe of 2001 fraud


A document obtained by JTA shows that top officials of the Claims Conference were sufficiently concerned by allegations of fraudulent restitution claims that they launched their own probe in 2001, nearly eight years before the $57 million scheme was finally detected.

The Claims Conference has said in recent days that failure to heed early warnings of the fraud lies with a now-dead regional director. But the new document shows that two senior officials — the organization’s chief professional at the time, Gideon Taylor, and its counsel, Julius Berman — conducted their own investigation which failed to uncover the extent of the scheme.

The probe resulted in an eight-page report that raised questions about the handling of several fraudulent cases by Semen Domnitser, a Claims Conference employee who was found guilty on May 8 of orchestrating the $57 million scheme.

The revelation of the report leaves unanswered the question of whether Claims Conference leaders showed gross negligence in failing to detect that Domnitser was orchestrating a widespread fraud, as some critics contend, or whether Domnitser, who was questioned in the two 2001 probes, was such a shrewd operator that Claims Conference officials couldn’t help but be fooled.

The first probe was sparked by an anonymous letter in June 2001 alleging that five fraudulent claims had been approved for restitution payments. The letter reached the director of the Claims Conference office in Germany, Karl Brozik, who conducted an assessment that included questioning Domnitser about his handling of the claims.

Domnitser responded to Brozik by fax, acknowledging some inadvertent errors but lying about other facts to cover up his criminality. Brozik shared Domnitser’s responses with the staffer he had assigned to look into the matter, who marked them up with many question marks. But there is no evidence in the public record indicating that the inquiry was taken further, and last week Claims Conference spokeswoman Hillary Kessler-Godin blamed Brozik, who died in 2004, for failing to pursue the matter.

However, it turns out that the Claims Conference’s top leaders launched a second probe of their own.

The investigation was assigned to a paralegal at Berman’s law office, Kaye Scholer LLP, who went to the Claims Conference office in New York on Aug. 27, 2001 to review the five fraudulent claims and question Domnitser.

The paralegal, Ryan Tan, produced a report that Berman sent to Taylor on Sept. 5, 2001. The report, a copy of which was obtained by JTA, raised questions about Domnitser’s handling of the fraudulent cases but did not suggest Domnitser was a party to fraud.

“A majority of the claims made by the person who wrote the anonymous letter were refuted by Mr. Domnitser,” the report said. “However, the accusations did raise further questions about the way the cases were handled by the Conference.”

In reference to one case, Tan wrote, “Mr. Domnitser has indicated that a caseworker named Voskreskney also handled the case, but no signature or stamp bearing that person’s name appear on the file. Further inquiry is needed in this case. An interview with [Claims Conference caseworker] Krylyak may clarify some of the discrepancies in this matter.”

Another case involved Mariya Fortel, the sister of Polina Berenson, a Claims Conference employee who pleaded guilty in March to participating in the fraud. After noting that Fortel received payment from two separate restitution funds in violation of the rules, Tan wrote, “Because the Conference does not allow the applicants to receive both funds, Mr. Domnitser explained during the interview that Fortel had to forfeit the DM 5,000 that she obtained from the Hardship Fund. Unfortunately, the file does not contain a record that this money was ever given back or deducted.”

The report contains no smoking gun fingering Domnitser as perpetrating the fraud, and it’s not clear how common allegations of fraud were at the Claims Conference. However, the report demonstrates that the organization’s top leaders considered the matter sufficiently alarming that they had someone outside the organization conduct a separate probe even after an internal inquiry had been conducted two months earlier.

After Berman and Taylor received the Kaye Scholer report, Domnitser and his cronies managed to fleece the Claims Conference of millions more for another eight years.

In an email to JTA, Taylor blamed Brozik for dropping the ball, saying Brozik oversaw the review of the allegations in the 2001 letter and was sent the Kaye Scholer report.

“The report indicated that there should be specific follow up on allegations about the improper processing of five cases involving Claims Conference staff members,” Taylor wrote. “Karl Brozik subsequently indicated to me that no further action regarding the New York staff was required concerning the issues in the report.”

In all, at least six senior Claims Conference figures were made aware in 2001 of the allegations involving fraud, though some were not privy to all the details: Domnitser, who perpetrated the fraud; Brozik, who is dead; Taylor, who left the conference in mid-2009 and now works in real estate; former Claims Conference chief Saul Kagan, who is in his 90s and retired; Berman; and Greg Schneider, then assistant executive vice president and director of allocations and now the Claims Conference’s chief executive.

Of the six, only Berman and Schneider still play prominent roles at the organization.

Berman, who is also a member of JTA’s board, was traveling as of press time and could not be reached for comment. But the Claims Conference released a statement to JTA attributed to Berman in which he cites recent error-laden news reports about the 2001 episode and notes that he has appointed a committee to “review all of the materials and recommend a course of action.”

“In deference to the work of that committee,” Berman said, “the Claims Conference will not publicly comment on any aspect of events that fall within the purview of the Committee until after the committee has concluded its work.”

In an interview with JTA in late 2011, Berman, who had been chairman of the Claims Conference for about 10 years, rejected the notion that he bore any responsibility for failing to detect the fraud over the years.

“I feel no fault at all,” Berman said in the interview, excerpts of which were published in a 2012 JTA profile of Schneider. “No one has ever suggested that I should resign.”

Calling the controls in place at the Claims Conference to prevent fraud “reasonably adequate,” Berman said the deception was as impossible to anticipate as the attacks of 9/11.

“Until it happens once,” he added. “Then you’re on notice that something you never foresaw can happen.”

Schneider declined to comment to JTA, but last week Kessler-Godin told JTA that Schneider is not to blame because he never saw the original anonymous letter and the others CC’d on the correspondence were senior to him. Therefore, Kessler-Godin said, Schneider reasonably assumed they were handling the matter.

Ultimately, it was Schneider who finally halted the massive fraud scheme when he and a colleague, Karen Heilig, came across a pair of suspicious claims approvals in November 2009 and began to investigate further. They quickly found hundreds more suspicious cases — what turned out to be the tip of the iceberg in a fraud scheme involving nearly 5,000 falsified claims.

Within hours, Schneider alerted Berman. They had the law firm of Proskauer Rose LLP do an initial investigation, and a few weeks later the conference alerted the FBI. Eventually, a total of 31 people were arrested in connection with the scheme. Twenty-eight pleaded guilty; the three who did not, including Domnitser, were found guilty at trial on May 8.

In all, there were at least 3,839 falsified applications to the Hardship Fund, an account established by the German government to provide one-time payments of approximately $3,360 to those who fled the Nazis as they moved east through Germany, and 1,112 false claims to the Article 2 Fund, through which the German government gives pension payments of approximately $411 per month to needy Nazi victims who spent significant time in a concentration camp, in a Jewish ghetto in hiding or living under a false identity to avoid the Nazis.

Domnitser oversaw the two funds.

The September 2001 Kaye Scholer report was unearthed at the Claims Conference’s Germany office in 2010 by those working on rooting out the fraud, Kessler-Godin told JTA, and the report subsequently was passed along to the FBI. The prosecution did not use the material during the fraud trial and thus it did not appear in the trial’s public record.

However, the original 2001 anonymous letter did, and the prosecution cited it as evidence of Domnitser’s shrewdness at misleading his superiors. The Forward was the first news outlet to report the letter’s existence.

Claims Conference Brouhaha


Who knew what, and when?

Those are the questions critics are asking following the disclosure that the Claims Conference received an anonymous letter in 2001 identifying several fraudulent Holocaust-era restitution claims — nearly a decade before the organization halted a massive fraud scheme.

By 2009, when the magnitude of the scheme was discovered, the fraud had been running for 15 years and managed to extract more than $57 million in illegitimate payouts.

On May 17, World Jewish Congress President Ronald Lauder sent a letter to the Claims Conference’s chairman, Julius Berman, and executive vice president, Greg Schneider, demanding answers to whether the 2001 episode was ever disclosed to Claims Conference board members.

“We have received numerous inquiries of concern in the wake of news stories in the Forward, the New York Jewish Week and JTA regarding the existence of an anonymous letter dated June 6, 2001 that apparently raised questions with respect to the fraud being perpetrated against the Claims Conference,” Lauder wrote.

In a separate letter, Lauder referred to allegations of a cover-up, calling them a “long-term issue with potentially serious implications,” and announcing that the WJC, which has a seat on the Claims Conference board, was forming a task force to investigate, The Jerusalem Post reported.

On May 19, Berman e-mailed the Claims Conference board to say that he had asked the chairman of the board’s executive, former Israeli diplomat Reuven Merhav, to “head a Select Leadership Committee of the board to formulate an appropriate course of action for the Conference with respect to the issues surrounding the 2001 letter.”

The brouhaha was sparked by a May 14 story in the Forward newspaper about the existence of the 2001 letter.

Although the Forward reported it first, the discovery of the letter was no journalistic scoop: The letter had been introduced as evidence in the corruption trial of the ringleader of the fraud, Semen Domnitser, and was discussed at length during the courtroom proceedings.

Domnitser was queried in 2001 about the allegations in the anonymous letter, and the prosecution used the episode to show how Domnitser in his response shrewdly managed to keep his superiors from discovering that he was perpetrating an ongoing fraud.

The trial, which concluded this month, resulted in the conviction of Domnitser and two other defendants on all counts, bringing guilty pleas or verdicts to all 31 people arrested in connection with the fraud.

The original Forward story appears to have gotten some key facts wrong: It said the current chief of the Claims Conference, Schneider, had received a copy of the anonymous letter in 2001, and the letter subsequently sent to Domnitser questioning him about the allegations. But there is no evidence that Schneider saw either of the letters. Rather, Schneider was one of several people that Domnitser CC’d on his 2001 responses, the Claims Conference says. (The Forward story was later changed online, but failed to note that corrections had been made.)

The way the anonymous letter was handled in 2001 and during the run-up to the recent trial is important to understanding whether there was an attempt to cover up the 2001 episode and who ultimately is to blame for bungling the early warning of the fraud.

Critics of the Claims Conference, such as longtime gadfly Isi Leibler, a former Jewish organizational official from Australia who now lives in Israel and writes a column for The Jerusalem Post, called the mishandling of the 2001 episode evidence of “gross negligence” at the Holocaust restitution organization. Leibler alleged that Berman and Schneider engaged in “systematic and deliberate efforts to conceal the incompetence and breakdown of their management and leadership which enabled this fraud to occur under their very noses.”

Berman could not be reached for comment, and Schneider declined to speak to JTA on the record.

The Claims Conference, which controls the distribution of hundreds of millions of dollars per year, is a frequent target of critics who disagree with the group’s allocations and see its leaders as a club of insiders that is unresponsive to outsiders. The critics say the fact that the fraud was able to run undetected from 1993 to 2009 and run up a bill — ultimately paid by Germany — of more than $57 million in false claims is evidence that Claims Conference leaders are not doing an adequate job.

“It was outrageous that the management responsible for overseeing these funds failed to accept any responsibility or accountability,” Leibler wrote in his column.

The fraud involved falsifying applications to the Hardship Fund, an account established by the German government to provide one-time payments of approximately $3,360 to those who fled the Nazis as they moved east through Germany, and the Article 2 Fund, through which the German government gives pension payments of approximately $411 per month to needy Nazi victims who spent significant time in a concentration camp, in a Jewish ghetto in hiding or living under a false identity to avoid the Nazis. Domnitser oversaw the two funds.

Though $57 million was stolen in the scheme, no genuine Holocaust survivors were deprived of any money. Germany has borne the cost of the fraudulent payouts, and several million dollars of the stolen money has been recouped.

On the question of who ultimately is responsible for bungling the 2001 episode, Claims Conference spokeswoman Hillary Kessler-Godin pointed to Karl Brozik, the head of the Claims Conference office in Frankfurt, Germany, which received the anonymous letter. Brozik, who died in 2004, handled the review of the letter’s allegations.

When the letter was brought to his attention in 2001, Brozik had a Claims Conference caseworker, Julia Gafsi, assess whether there was any merit to the allegations, according to Claims Conference documentation. Gafsi found numerous questionable elements.

Brozik then queried Domnitser, who was responsible for approving the claims in New York. In his response to Brozik, Domnitser acknowledged some inadvertent errors but lied about other facts in a bid to deflect attention from his fraud scheme.

Among those who were cc’d on Domnitser’s responses to Brozik were former Claims Conference head Saul Kagan; its chief at the time, Gideon Taylor; and Schneider, who in 2001 was assistant executive vice president and director of allocations.

Domnitser’s feint apparently was successful. Brozik forwarded Domnitser’s responses to the caseworker who had conducted the review, and though the caseworker said there still were elements of the story that seemed strange, Brozik appears to have let the matter end there. 

As the only senior official of all those involved in the episode who still works at the Claims Conference, Schneider’s role in the episode has come under great scrutiny.

The Claims Conference spokeswoman, Kessler-Godin, says Schneider is not to blame because he never saw the original letter, the other people cc’d on the correspondence were senior to Schneider and Brozik ultimately was responsible.

She also noted that it was Schneider and colleague Karen Heilig who discovered the fraud in November 2009 and subsequently alerted the FBI to the scheme. After he found the documentation from 2001, Schneider was the one who brought it to the attention of the FBI, Kessler-Godin said.

But Claims Conference officials have yet to answer Lauder’s question about whether the 2001 episode was shared with the organization’s board and, if not, why. 

John Farahi sentenced to 10 years for Ponzi scheme


John Farahi, a popular Iranian-Jewish radio talk-show host and investment adviser, was sentenced in U.S. District Court on March 18 in downtown Los Angeles to 10 years in federal prison for operating a multi-million-dollar Ponzi scheme against local Iranian-Americans. Farahi, 56, also was ordered by the court to pay more than $24 million in restitution to close to 60 victims.

Last June, Farahi pleaded guilty to felony charges of mail fraud, loan fraud, selling unregistered securities and conspiring with David Tamman, his attorney at the time, to obstruct the U.S. Securities and Exchange Commission (SEC) investigation into his case. 

According to an SEC press release, the statutory maximum penalty for the four charges to which Farahi pleaded guilty is 75 years in federal prison; however, under the terms of Farahi’s plea agreement, the government agreed to recommend a sentence of no more than 10 years in prison.

The SEC indicted Farahi in 2010, alleging that through his Beverly Hills firm, NewPoint Financial Services Inc., he defrauded Iranian-American investors of millions of dollars. It was alleged that he misled investors by telling them their funds were being invested in unsecured corporate bonds, FDIC-insured certificates of deposit, government bonds and corporate bonds issued by companies backed by funds from the Troubled Asset Relief Program (TARP). 

According to the indictment, Farahi had instead transferred his investors’ money directly into his own personal accounts to pay for building his mansion in Beverly Hills and purchasing a yacht, as well as into risky stock-market options that resulted in more than $18 million in losses for investors. 

The 2010 suit also stated that since 2003, Farahi used his radio program, “The Economy Today,” featured on the L.A.-based Farsi-language Radio Iran KIRN-AM (670), to target members of L.A.’s Iranian-American community, recommending they make appointments at his firm.

Iranian-Jewish community leaders and creditors have kept quiet about Farahi and other Iranian-Jewish investors charged in recent years with running Ponzi schemes, in keeping with a long-standing community taboo against publicly discussing potentially embarrassing incidents. Iranian-Jewish community leaders at the Beverly Hills-based Nessah Synagogue and West Hollywood-based Iranian American Jewish Federation did not return calls seeking comment. 

But this isn’t the only time the community has been targeted by a Ponzi scheme. Ezri Namvar, 62, a longtime leading Iranian-Jewish businessman and philanthropist in Los Angeles, was sentenced in October 2011 to seven years in federal prison for stealing $21 million from four clients. Namvar also was ordered by the court to pay back $21 million in restitution to his victims, yet he is believed to have allegedly bilked investors — who put money into his $2.5 billion real estate portfolio before the 2008 market crash — out of hundreds of millions of dollars. 

Israeli judge who fled extradited from Peru


An Israeli judge who fled to Peru eight years ago following allegations of bribery and fraud was extradited to Israel.

Dan Cohen arrived in Israel on Sunday morning after he was arrested by Peruvian police and placed directly on an airplane leaving for Israel.

He has been fighting the extradition, which was approved in secret by the Peruvian government to prevent Cohen from going into hiding. The two countries do not have a signed extradition treaty.

Cohen is charged with of bribery, fraud, breach of trust, obstruction of justice and failure to report earnings.

Lieberman at opening of fraud trial pleads not guilty


Former Israeli Foreign Minister Avigdor Lieberman at the opening of his trial for fraud and breach of trust pleaded not guilty on all counts.

The trial opened Sunday afternoon in front of a three-judge panel in Jerusalem District Court.

Witnesses will begin testifying after the Passover holiday, in late April. The timing of the trial means Liberman cannot be appointed as a minister in the new government being formed by Prime Minister Benjamin Netanyahu. Lieberman, head of the Yisrael Beiteinu Party, ran second in last month's national elections to Netanyahu.

Lieberman resigned as foreign minister at the end of December, shortly before his indictment for fraud and breach of trust for allegedly advancing the position of Zeev Ben Aryeh, Israel's former ambassador to Belarus, in exchange for information on an investigation against Lieberman. The charges came after Attorney General Yehuda Weinstein closed a 12-year probe of Lieberman in other cases.

Lieberman has said he would resign from politics if he were convicted. If he were convicted and his actions were determined to involve moral turpitude, Lieberman would be forced to resign from the Knesset and to stay out of politics for at least seven years.

Deputy Foreign Minister Danny Ayalon reportedly is the state's key witness in the Ben Aryeh case and reportedly will testify against Lieberman during the trial. Shortly before the indictment was formally issued, Lieberman announced that Ayalon would not be included on the Yisrael Beiteinu Knesset list for the national elections.

Ayalon stayed on at the Foreign Ministry despite Lieberman stepping down.

Avigdor Lieberman fraud trial set for next month


Former Israeli Foreign Minister Avigdor Lieberman will go on trial next month for fraud and breach of trust.

The Jerusalem Magistrate's Court ruled Sunday that the trial of the Yisrael Beiteinu party leader will begin on Feb. 17.

A three-judge panel will hear the case rather than the typical one judge. The decision to have a larger judicial panel was because of the public nature of the case, according to reports.

Lieberman resigned at the end of December as foreign minister shortly before his indictment on the charges of fraud and breach of trust for allegedly advancing the position of Zeev Ben Aryeh, Israel's former ambassador to Belarus, in exchange for information on an investigation against him. The charges came after Attorney General Yehuda Weinstein on Dec. 13 closed a 12-year probe of Liberman in other cases.

Lieberman, who is No. 2 on the combined Knesset list of his party and Likud behind Prime Minister Benjamin Netanyahu, said earlier this month in an Army Radio interview that he would resign from politics if he is convicted.

Deputy Foreign Minister Danny Ayalon is reportedly the state's key witness in the Ben Aryeh case and reportedly will testify against Liberman during the trial. Shortly before the indictment was formally issued, Lieberman announced that Ayalon would not be included on the Yisrael Beiteinu Knesset list for the recent national elections.

Ayalon stayed on at the Foreign Ministry despite Liberman stepping down.

Ex-Israeli Foreign Minister Avigdor Lieberman indicted for fraud


Former Israeli Foreign Minister Avigdor Lieberman was indicted on charges of fraud and breach of trust.

Attorney General Yehuda Weinstein submitted the indictment Thursday against Lieberman for allegedly advancing the position of Zeev Ben Aryeh, Israel's former ambassador to Belarus, in exchange for information on an investigation against him. The indictment followed more questioning this week of members of a Foreign Ministry appointments panel as well as further questioning of Lieberman.
Lieberman resigned last week as foreign minister, although he remains a member of the Knesset and the head of the Yisrael Beiteinu party.

His resignation came days after Weinstein on Dec. 13 closed a 12-year investigation of Lieberman, dismissing most of the charges but saying he would file the indictment for fraud and breach of trust. Last spring, Ben Aryeh confessed that he had received and passed documents to Lieberman in 2008.

The filing of the indictment had been postponed following a report on Israel's Channel 10 news that several members of a Foreign Ministry appointments panel were not questioned in the Ben Aryeh case and that their knowledge could lead to more serious charges against Lieberman.

New evidence includes a conversation between Deputy Foreign Minister Danny Ayalon that reportedly shows Lieberman actively lobbying for Ben Aryeh's appointment as ambassador to Belarus.

Lieberman announced recently that Ayalon would not be included on the Yisrael Beiteinu Knesset list for the Jan. 22 elections. The party is running on a joint candidates' list with the ruling Likud Party. Ayalon has stayed on at the Foreign Ministry despite Lieberman stepping down.

Moral turpitude was not added to the charges, though it had been expected. Those convicted of moral turpitude cannot seek public office for at least seven years.

Lieberman questioned again in ambassador affair


Former Israeli foreign minister Avigdor Lieberman was questioned again regarding allegations that he advanced an envoy's position in exchange for information on an investigation against him.

Lieberman was questioned under caution late on Tuesday night, hours after launching his party's campaign for the Jan. 22 election.

Lieberman resigned last week as foreign minister, although he remains a member of the Knesset and the head of the Yisrael Beiteinu Party.

His resignation came days after Israeli Attorney General Yehuda Weinstein on Dec. 13 closed a 12-year investigation of Lieberman, dismissing most of the charges. But Weinstein said he would file an indictment of Lieberman for fraud and breach of trust for advancing former ambassador to Belarus Ze'ev Ben Aryeh's position in the Foreign Ministry allegedly in exchange for information about an investigation against Lieberman being conducted in Belarus. Last spring, Ben Aryeh confessed that he had received and passed documents to Liberman in 2008.

The further questioning could result in prosecutors adding a charge of moral turpitude to the indictment. If found guilty of moral turpitude, Liberman could not hold public office for at least seven years.

New testimony by several members of the Foreign Ministry appointments panel, which approved Ben Aryeh's appointment as Israel's ambassador to Latvia, has strengthened the case against Lieberman, Israeli media reported. One member of the panel who recently was deposed is Deputy Foreign Minister Danny Ayalon, who Liberman recently announced would not be included on the Yisrael Beiteinu Knesset list.

The further questioning and hearings mean that it is unlikely that the case will go to trial before a new government is formed after the Jan. 22 elections. Lieberman's Yisrael Beiteinu Party is running on a joint candidates' list with the ruling Likud Party.

Israeli foreign minister Lieberman resigns following indictment


Avigdor Lieberman has resigned as Israel’s foreign minister following his indictment for fraud and breach of trust.

“I have committed no offense but I wish to put behind me this issue, which is what remains of many years of investigation,” Lieberman said in a statement Friday.

Lieberman said he would also step down as vice prime minister and lift his immunity from prosecution, to which he is entitled as a member of Knesset.

On Dec. 13, Israeli Attorney General Yehuda Weinstein closed a 12-year investigation on Lieberman, dismissing most of the charges. But he indicted Lieberman for fraud and breach of trust for advancing former ambassador to Belarus Ze'ev Ben Aryeh's position in the Foreign Ministry allegedly in exchange for information about an investigation against Lieberman being conducted in Belarus. Last spring, Ben Aryeh confessed that he had received and passed documents to Lieberman in 2008.

In his statement, Lieberman added: “I am stepping down also because I believe the citizens of Israel deserve to go to the ballot box with this thing already settled, so I can resume serving the state of Israel and its citizens.”

According to Ynet, Lieberman does not plan to resign as number two of Halikud Beiteinu — the merger of Prime Minister Benjamin Netanyahu’s Likud and the movement headed by Lieberman, Yisrael Beiteinu.

Lieberman has said he wished for a “quick trial” but it is not known whether this could be concluded ahead of Israel’s general elections scheduled for January 22.

A statement by the Prime Minister’s Office said Netanyahu spoke with Lieberman “and wished he [Lieberman] would soon prove his innocence in the sole remaining issue at hand and return before long to take up a senior cabinet post.”

Labor Chairwoman Shelly Yachimovich said in a statement that Netanyahu’s words “left a bad taste” and reflected “poor judgement.” She called Netanyahu’s statement “an ignominious blessing.”

‘Jewish Indiana Jones’ sentenced to federal prison term


Rabbi Menachem Youlus, once dubbed the “Jewish Indiana Jones” for his remarkable tales of rescuing Holocaust-era Torah scrolls, was sentenced to more than four years in prison for fraud. 

Youlus was sentenced last week to 51 months by Judge Colleen McMahon of the U.S. District Court of Southern New York. He will surrender himself on Dec. 17.

Youlus had pleaded guilty in Manhattan federal court on Feb. 2 to having defrauded more than 50 victims, misappropriating some of the donations and secretly depositing them into the bank account of his Wheaton, Md., store, called the Jewish Bookstore. Youlus also defrauded his charity, Save a Torah, Inc. and its donors of $862,000, according to prosecutors.

His dramatic accounts of rescuing Torahs turned out to be contradicted by historical evidence, witness accounts and records showing that he simply passed off used Torahs sold by local dealers who made no claims as to the scrolls’ provenance. The U.S. Attorney›s office said that during many of the years in which Youlus claimed to be personally rescuing Torahs overseas, the Baltimore resident had not even traveled internationally.

“This is extremely important because it sends a message that Holocaust deniers and Holocaust memory exploiters are not part of accepted society,” Menachem Rosensaft, vice president of the American Gathering of Jewish Holocaust Survivors and Their Descendants, said. “There is very little if any difference between a Holocaust denier and someone like Youlus, who exploits Holocaust memories in order to enrich himself.”

California man linked to anti-Islam film in custody, court spokesman says


A California man linked to an anti-Islam film that stoked violent protests across the Muslim world was in custody on Thursday, a court spokesman said ahead of bail hearing in Los Angeles.

Nakoula Basseley Nakoula, 55, has been under investigation by probation officials looking into whether he violated the terms of his 2011 release from prison on a bank fraud conviction while making the film.

As a condition of his release, he was barred from accessing the Internet or using aliases without the permission of a probation officer, court records show.

Reporting by Dan Whitcomb; Writing by Cynthia Johnston; Editing by Paul Thomasch

Israeli businessman sentenced to 22 years for fraud


An Israeli businessman convicted of a $30 million investment fraud was sentenced to 22 years in prison.

The U.S. District Court in San Francisco also ordered Samuel Cohen, 53, to repay the millions he had stolen. Cohen was convicted last November on charges of fraud, money laundering and tax evasion.

His scheme caused the collapse of the Vanguard Public Foundation, a charity with ties to actors Danny Glover and Harry Belafonte.

Cohen reportedly told investors that his company, Ecast, which provided digital music, games and interactive ads to bars and nightclubs, was about to be acquired by Microsoft Corp. The scheme was discovered in 2008.

He gave some of his money to Jewish charitable funds including the European Center for Jewish Students; a Jewish orphanage in Odessa; the tomb of the second Lubavitcher rebbe in Ukraine; and to build a museum in Hebron to preserve Chabad history.

Cohen’s attorneys said they would appeal the conviction.

‘Jewish Indiana Jones’ pleads guilty in Torah fraud case


Rabbi Menachem Youlus, who was dubbed the “Jewish Indiana Jones” for his remarkable tales of rescuing Holocaust-era Torah scrolls, pleaded guilty to fraud.

Youlus’ accounts turned out to be contradicted by historical evidence, witness accounts and records showing that he simply passed off used Torahs sold by local dealers who made no claims as to the scrolls’ provenance.

“I know what I did was wrong, and I deeply regret my conduct,” said Youlus, who pleaded guilty in Manhattan federal court on Thursday.

In court, the 50-year-old Baltimore resident admitted to having defrauded more than 50 victims, misappropriating some of the donations and secretly depositing them into the bank account of his Wheaton store, called the Jewish Bookstore. Youlus defrauded his charity, Save A Torah, Inc. and its donors of $862,000, according to prosecutors.

“Menachem Youlus concocted an elaborate tale of dramatic Torah rescues undertaken by a latter day movie hero that exploited the profound emotions attached to one of the most painful chapters in world history—the Holocaust—in order to make a profit. Today’s guilty plea is a fitting conclusion to his story and he will now be punished for his brazen fraud,” Preet Bharara, the United States Attorney for the Southern District of New York, said Thursday.

A January 31, 2010 Washington Post investigative report brought to light questions about Youlus’ claims.

Author charged in Jewish online dating service scam


American author Mitchell Gross was indicted for allegedly scamming women he met on an online Jewish dating service.

Gross, 61, of Marietta, Ga., pleaded not guilty to fraud and money laundering charges when he was arraigned late last week in federal court in Atlanta, according to reports.

He has written novels under the pen name Mitchell Graham that include a trilogy of fantasy fiction books, “The Fifth Ring,” “The Emerald Cavern” and “The Ancient Legacy.”

In 2006, according to the indictment, Gross met two women on an unnamed online Jewish dating service and bilked them out of $4.4 million, convincing them to invest in a fake company he set up.

Iranian Jewish investor guilty of fraud


An Iranian Jewish real estate investor in Los Angeles was found guilty of fraud after he was accused of stealing $21 million from clients.

Ezri Namvar, 59, was convicted May 19 in Los Angeles federal court on four counts of wire fraud and faces up to 80 years in prison. Sentencing is scheduled for August.

Namvar is accused of misusing $21 million of the $25 million garnered from the real estate transactions of four clients of his Namco Financial Exchange Corp. The clients had deposited the money with the company until it could be reinvested.

Members of the Persian Jewish community in Los Angeles also are suing Namvar for hundreds of millions of dollars that he was supposed to invest. They say Namvar took the money and created a Ponzi scheme in order to use the funds for personal expenses, including his brother’s wedding.

Rubashkin appeal seeks new trial


Lawyers for convicted former Agriprocessors executive Sholom Rubashkin have appealed a judge’s decision denying their bid for a new trial.

In a brief filed Monday with the U.S. Court of Appeals in St. Louis, Mo., lawyers for Rubashkin made four arguments on his behalf, chief among them that the presiding judge in his case, Linda Reade, should have recused herself. Reade had rejected that argument in October.

Rubashkin was convicted in 2009 on 86 counts of fraud related to his management of the Agriprocessors meatpacking plant in Postville, Iowa, and later was sentenced to 27 years in federal prison.

According to the brief, government documents that surfaced after Rubashkin’s conviction and not made available to the defense showed that Reade was involved in the planning for a major federal immigration raid of the Postville plant in May 2008. Reade’s “excessive coziness” with prosecutors planning the raid raised doubts about her impartiality in the case, the brief claims, and as a result Rubashkin is entitled to a new trial or, at a minimum, an evidentiary hearing.

The 2008 raid at the time was the largest immigration enforcement action in American history and led to a string of accusations against Rubashkin, among them charges of identity theft and child labor violations. The bulk of those charges subsequently were dismissed.

Still, the trial was widely criticized, particularly in the Orthodox community, for the alleged zealousness with which federal prosecutors pursued the case.

Fresh scrutiny of Claims Conference allocations


As the Conference on Jewish Material Claims Against Germany seeks to root out additional cases of fraud, the $42.5 million scandal that has rocked the organization has rekindled dissatisfaction with the group’s annual allocation of tens of millions of dollars.

To address those growing complaints, Claims Conference Chairman Julius Berman told The Jewish Week that he plans to announce “in a couple of days” appointments to a long-delayed special committee that is to review past and future disbursements.

Moshe Zanbar, a former chairman of the Claim Conference’s executive committee, complained last week to The Jewish Week that the Claims Conference board authorized the committee in July “and this is now November and we have heard nothing.”

Berman said the new Allocations Policy Review Committee “would be broadly represented” by Israeli and American Holocaust survivors, and would “review where the money has gone over the last few years” and discuss future allocations.

Read more here.

$7 million fraud at Claims Conference raises questions


After discovering $7 million in fraudulent payments, the Claims Conference is facing questions about whether it will recover the money and how extensive the fraud actually was.

Officials at the Claims Conference, which acts as a pass-through to distribute more than $400 million per year from Eastern European governments directly to survivors, discovered last last year that it had paid out at least $7 million in pension payments dating back as far as 1980 to 202 imposters who used fraudulent documents to file claims for payments.

The Claims Conference notified the recipients earlier this month that their payments were being suspended and that they had 90 days either to return all the money they had received or appeal the suspension. Soome 40 people have responded, with about half saying they wanted to return the money and half asking for appeals, according to the Claims Conference.

It is not clear what, if any, criminal charges they will face.

“Criminal activity is not a matter for the Claims Conference,” Gregory Schneider, its executive vice president, told JTA. “We reserve the right go after them in civil court for the return of money.”

Claims Conference officials first noticed last November that several claimants had falsified information to receive payments from the Hardship Fund, an account established by the German government to give one-time payments of roughly $3,000 to those who fled the Nazis as they moved east through Germany. A further internal investigation revealed that more fraudulent claimants received payments from the organization’s Article 2 fund, through which the German government gives pension payments of roughly $375 per month to those who spent either six months minimum in a concentration camp or at least 18 months in a Jewish ghetto in hiding or living under a false identity to avoid the Nazis.

Conference officials said they immediately notified the FBI and the U.S. Attorney’s Office, and discussed the matter in meetings with the German government. The Federal Bureau of Investigation and the Claims Conference are continuing to investigate the matter.

“We are determined to get to the bottom of this,” Schneider said. “We have worked very closely with law enforcement, and on a regular basis they are in touch with us.”

In total, the Claims Conference has made pension payments to more than 160,000 people in 78 countries on behalf of the Germans since the start of the Hardship Fund in 1980 and the Article 2 fund in 1995. The organization now is reviewing each of the recipients, comparing the information it has from the fraudulent claims, such as where the claims were made, to all other claims, going case by case through all their case histories.

The 202 suspects come from reviewing “thousands” of recipients, according to a Claims Conference official, but it expects to find more as the organization reviews the entire caseload.

Payments are made from Claims Conference’s offices in Frankfurt, Tel Aviv and New York, but thus far all the suspected fraud was processed through the New York office. The discovery led to the firing of two case workers and one supervisor in that office. Schneider would not comment on whether the employees were under criminal investigation.

The fraud was reported in the New York Jewish Week just before the Claims Conference board of directors held their annual meetings in New York two weeks ago.

At the meetings, the board approved a $500,000 reserve fund “as a contingency to cover potential expenses associated with investigating the fraud and recovering the funds,” according to a spokesperson for the Claims Conference.

The board also has spent some money on public relations services from the high-profile firm Howard Rubenstein; Claims Conference Chairman Julius Berman described the sum as “minimal.”

The Claims Conference makes several kinds of payments. Most of the money it handles are pass-through payments from the German government to Nazi victims. The organization handled about $418 million in such payouts in 2009, and some $4 billion since 1980 from agreements negotiated between the German government and the Claims Conference acting as the representative of Nazi victims and the Jewish people. This is where the $7 million fraud was discovered.

In addition, the Claims Conference decides on how to distribute money each year from the sale of heirless Jewish property in the former East Germany. That money is distributed using a formula in which 80 percent goes to organizations that aid survivors and 20 percent to programs involved in Holocaust education, documentation and commemoration.

Over the past few years, however, as the Claims Conference upped the payouts from this fund—in 2010, the organization is set to distribute $136 million—the Holocaust education portion was capped at $18 million. The Claims Conference has about $1.16 billion from this fund earmarked for future payments.

The organization also distributes other monies negotiated from European governments for such issues as home care for needy, ailing survivors. The Claims Conference will distribute about $80 million in such funds this year, officials said.

“The Claims Conference has a 59-year history of working with the German government,” Schneider said. “During this time, the Claims Conference has continuously negotiated for the rights of Holocaust victims, establishing compensation funds and obtaining expansions of existing programs.”

He added, “While all understand that money can never truly compensate Holocaust victims for their suffering, the German government has assumed responsibility throughout the decades and acknowledged its obligation to survivors. The Claims Conference believes that the German government will continue to honor this obligation as long as Nazi victims remain alive.”

Madoff


I wish Jews believed in hell, because then I could take comfort that Bernard Madoff will go there.

Madoff ran the New York-based firm, Bernard L. Madoff Investment Securities, which was reported last week to have been a $50 billion fraud, a Ponzi scheme that paid investors with other investors’ money.

“It’s all a big lie,” Madoff reportedly confessed to his sons last Thursday, before they turned him in to authorities.

While most of Madoff’s victims were on the East Coast and in Europe, he burned through Los Angeles, as well. As we report online, millions of dollars of charitable donations and millions in personal wealth in this town have vanished for good.

“This is one of the biggest catastrophes ever to strike the American Jewish community,” a major donor and activist told me Monday.

The damage is not just monetary.

Madoff destroyed lives: charities that provide hot meals, mental health counseling, free loans, support for immigrants and money for Jewish education have all been hit and will all have to cut back or fold completely.

As our reporter Dean Rotbart discovered, Madoff even hurt hospitals and health care organizations, such as The Gift of Life, which matches Jewish bone marrow donors with patients who would otherwise die. It is conceivable that, thanks to Madoff, the sick will get sicker.

“A poor man is a dead man,” the Talmud teaches. Given the way the American health care system works, to rob people of their money may deny them treatment. I spoke with an elderly woman whose entire life savings, almost $1 million, was invested with Madoff. She has just enough to live on, she said, provided she doesn’t get really sick.

It really is a shame we Jews don’t believe in hell.

Madoff took in the Elie Wiesel Foundation for Humanity. Elie Wiesel! When I heard that news, I had to laugh so I wouldn’t cry. The man survives Auschwitz, lives to serve as the moral conscience of the world, then in the twilight of his noble life sees his charitable wealth destroyed by a fellow Jew. No one could plumb the darkness of a soul that could do such a thing, not even Wiesel.

He battered the foundations of the Jewish community. He attacked the lifeblood of community — nonprofit boards, clubs, friendship itself — using them to recruit clients and to recruit recruiters. People invested based on trust and got their friends to invest, as well. Into a venerated system of trust and mutual responsibility he injected the poison of betrayal and suspicion.

In doing all this, Madoff soiled the very word, “Jew.”

“The greatest American Jewish crime since the Rosenbergs,” said one local leader. An exaggeration? The Rosenbergs were traitors to the nation’s defense, Madoff to our financial system. But Madoff, with his posturing involvement in Yeshiva University, makes the Jewish claim to ethical standards look like a bad joke. The saving grace is that, as one victim told me, at least many of his victims are Jews.

Yes, there is a wider circle of responsibility here. The truth is, Madoff didn’t beg anyone to invest. People begged to get in.

That means when we examine our own values and leaders, we may find that Madoff was the greatest fraud among us, but not the only one.

There is a generation of Jews — at least one — raised on the idea that pushing paper creates real wealth. We are a generation of unbelievable materialism and indulgence, a generation that believes a 10 percent return is its birthright. We have rabbis who shut their mouths rather than risk alienating a potential donor. Sure they’ll preach tikkun olam and charity from the pulpit, but how often do they preach modesty, humility and moderation?

People are telling me the Madoff scandal all boiled down to one word — greed. But it’s not so simple. Madoff didn’t just want money, he wanted the immunity that being a big shot, a macher bestows upon all sorts of cheats, dimwits and blowhards in the Jewish community.

The questionable practices of some of our most admired charities grow out of this culture and leave me with a few unanswered questions. How is it that donor money found its way in the first place into nonguaranteed investments? What gives a 501(c)(3) the license to, in a word, gamble? Who was paying attention when chunks of charitable contributions ended up in the hands of a $50 billion firm whose auditors occupied an office smaller than mine? Why aren’t the names of every single investment vehicle in which nonprofits have significant money published online for donors to see?

Good questions, but I don’t want to spread the guilt too far just yet. I want to stay focused on the man who must take full responsibility for his crimes.

What kind of world is it where Jews can’t trust fellow Jews? Where worthwhile charities have to convince donors that their donations won’t be squandered? Where the bonds between friends and families mean nothing when it comes to money? Where Jews everywhere are suspect, because Jews somewhere behave like moral monsters? Where the poorest among us suffer because the richest cannot be satisfied until they are even richer?

There’s a name for that kind of world — hell.

Madoff scandal rocks Jewish philanthropic world


NEW YORK (JTA) — Tthe securities fraud of Bernard Madoff has rocked the Jewish nonprofit world — and the worst may be yet to come.

Madoff, the founder of Bernard L. Madoff Investment Securities LLC, was arrested Dec. 11 after admitting to his board that a hedge fund he ran was essentially a $50 billion Ponzi scheme.

At least two foundations have been forced to close because they had invested their funds with Madoff.

The Robert I. Lappin Foundation in Salem, Mass., announced Dec. 12 that it would shut down after losing $8 million — all of its money. And the Chais Family Foundation, which gives out some $12.5 million each year to Jewish causes in Israel, the former Soviet Union and Eastern Europe, announced its closing Dec. 14.

At least one nonprofit is calling out for help in the wake of Madoff’s collapse. The Gift of Life Foundation, a Jewish bone marrow registry that relied heavily on Madoff as a benefactor, announced on its Web site Sunday that it would immediately need to raise $1.8 million to make up for recent losses.

Sources close to Yeshiva University, where Madoff served as treasurer of the board of trustees and board chairman of the university’s Sy Syms School of Business until he resigned last week, said the school has lost at least $100 million. Y.U. officials declined to offer any specifics.

Just as the reverberations of the subprime mortgage collapse are still seen as contributing to the nation’s wider economic meltdown, philanthropic insiders say the fallout from Madoff’s scheme could be even greater. The insiders note that Madoff and others heavily invested in his fraudulent fund were major supporters of a plethora of nonprofit organizations, served on their boards or advised those organizations on how to invest their money — in some cases placing large sums of the groups’ capital in Madoff’s hands.

Reflecting this sense that the full extent of the damage is still unclear, the executive vice president and CEO of the UJA-Federation of New York said that even though its endowments were not exposed, the organization still could be hurt if donors lost money in the scheme.

“We do not yet know the full extent of the losses that supporters of UJA-Federation and other Jewish institutions have had,” John Ruskay said. “But we have already heard that many major institutions had substantial funds invested, as did foundations. Already in the context of a very challenging economic environment this will present another significant difficulty. We don’t know yet the extent of the wreckage.”

Reports are trickling out in the national media about prominent businessmen from across the country who lost money in Madoff’s scheme.

New York Mets owner Fred Wilpon, GMAC Financial Services chairman J. Ezra Merkin and former Philadelphia Eagles owner Norman Braman all were reported to have taken significant hits due to their dealings with Madoff, who reportedly would not accept any investment in his fund below $10 million.

Reports have surfaced also that media magnate Mortimer Zuckerman was significantly hurt by investing with Madoff.

In Los Angeles, the Jewish Community Foundation’s $238 million Common Investment Pool lost $18 million it had invested with Madoff, according to a letter sent out by the foundation.

Among other Jewish institutions and foundations believed to be hit by the Madoff scandal: the American Jewish Congress, the Technion-Israel Institute of Technology, Steven Spielberg’s Wunderkinder Foundation, Elie Wiesel’s Foundation for Humanity and Carl Shapiro’s charitable foundation.

But Merkin, who last week told investors in his hedge fund, Ascot Partners, that all of their money had been defrauded by Madoff, is of particular interest to the Jewish community. He has philanthropic ties to a number of Jewish organizations and institutions, serving as a volunteer investment adviser for many of them, including Yeshiva University. Among other causes with which he is said to be connected are the SAR Academy, a Jewish day school in the Bronx, as well as State of Israel Bonds, The Jewish Campus Life Fund, Elaine Kaufman Cultural Center, the Ramaz School, Congregation Kehilath Jeshurun and the Fifth Avenue Synagogue.

Sources say that several of these entities had money in Ascot, which they now stand to lose because of Merkin’s decision to invest so heavily in Madoff’s fund. According to Orthodox communal insiders, Ramaz and SAR lost millions between them.

A woman who answered the phone Sunday at one of Merkin’s listed numbers suggested that he could be reached in the office Monday.

An official at one major Jewish foundation told JTA that it had been advised to invest with Madoff, but decided against it after concluding that his return-on-investment forecasts seemed too good to be true.

Certainly the extent of the damage to the philanthropic world could become clearer as details emerge in coming days and weeks of just who was invested with Madoff.

One philanthropic official said there is a lesson to be learned here for the philanthropy world, where Jewish businessmen and philanthropists directed their own private funds and the funds of institutions that they help oversee toward Madoff.

“What really emerges out of this,” said Jeffrey Solomon, the president of the Andrea and Charles Bronfman Philanthropies, is that “people sometimes forget to conduct the due diligence when dealing with others with social prominence — and especially in the hedge-fund area where people think you have to be really smart to be in hedge funds. In many ways for all investments something like this is tragic, but for nonprofits where boards have the fiduciary responsibility of acting with great prudence, it is even more tragic.”

According to a fund-raiser who has been scouring recent 990 tax filings to see how this might affect his nonprofit, several other major philanthropists have put money in Madoff’s hands: As of the end of 2007, Sandy Gottesman had $20 million of his foundation’s $144 million invested with Madoff and Robert Beren had two foundations with more than that in endowments invested with Ascot. U.S. Sen. Frank Lautenberg (D-N.J.) says his foundation has about $15 million invested with Madoff.

Yeshiva University issued a statement via e-mail to JTA on Sunday.

“We are shocked at this revelation,” the university said. “Bernard Madoff has tendered his resignation from all positions affiliated with the university and involvement with the university. Our lawyers and accountants are investigating all aspects of his relationship to Yeshiva University. We reserve our comments until we complete our investigation.”

Spielberg’s Wunderkinder Foundation joins list of Madoff victims


Steven Spielberg suffered some losses in the Bernard Madoff fraud scandal, though apparently nowhere near a rumored $300 million.

However, the famed filmmaker’s private Wunderkinder Foundation had some investments with Madoff, though Spielberg spokesman Marvin Levy said he was unable to detail the assets or losses of the foundation.

The Wunderkinder Foundation (translated as child prodigies) is a relative modest one compared to Spielberg’s much better-known Shoah Foundation and Righteous Persons Foundation.

According to the latest available public filing with the IRS, the Wunderkinder Foundation’s 2006 statement, covering the previous tax year, showed assets of $12,573,018 and grant distributions of $5,215,016. Spielberg gave $2 million to the foundation and is listed as the only donor.

According to press reports, Madoff managed 70 percent of the foundation’s dividend and interest income in 2006.

The lion’s share of the foundation’s grants, according to the IRS filing, went to the Cedars-Sinai Medical Center, which received $3,338,000 for medical research.

The Ross School in New York City received $500,000 and the local Vista Del Mar Child and Family Services got $100,000.

Smaller grants went to some 55 diverse organizations and institutions, from the American Museum of Natural History to the Young Musicians Foundation.



From the Federation:

LOS ANGELES, Dec 15, 2008 (BUSINESS WIRE) — The Jewish Federation of Greater Los Angeles has been advised by The Jewish Community Foundation of Los Angeles that it, together with a number of other major philanthropic institutions, as well as individuals and for profit investment companies, is included among those which have been victimized by an alleged fraud perpetrated by the New York based firm, Bernard Madoff Investment Securities LLC.

The Jewish Federation, together with other local charitable bodies, has for decades participated in a Common Investment Pool (CIP) managed by the Jewish Community Foundation. The CIP invests, with the input of professional advisors, significant funds on behalf of the Federation’s United Jewish Fund Endowment Fund in a range of investment classes and vehicles. Among these has been Bernard Madoff Investment Securities LLC.

We have been informed by the Jewish Community Foundation that the Federation’s United Jewish Fund Endowment Fund may have sustained a loss of $6.4m as a result of the actions of Bernard Madoff Investment Securities LLC. This constitutes approximately 11% of Federation’s endowment funds as of December 2008.

Stanley Gold, Chairman of the Board of the Jewish Federation, stated, “We are both shocked and saddened to learn of this alleged fraud. The Jewish Federation is exploring various options to fully understand its exposure as well as how this occurred. We intend to aggressively protect and recover as much of Federation’s investment with Bernard Madoff Securities LLC, as possible. We will take all necessary actions to assure this type of action so hurtful to those who depend on our charitable organization never happens again.”

The Jewish Federation will continue to utilize the funds in the United Jewish Fund Endowment Fund to support its essential life saving work, at home and abroad, on behalf of the Los Angeles Jewish Community.

From The Jewish Community Foundation

LOS ANGELES (December 15, 2008)–The Jewish Community Foundation of Los Angeles (The Foundation) today issued the following letter to the public regarding the impact of the collapse of the Bernard Madoff investment funds. The Foundation, the largest manager of charitable gift assets for Los Angeles Jewish philanthropists, stated:

Dear Friends,

The Jewish Community Foundation of Los Angeles was shocked and outraged to learn that it is among the many victims of the massive fraud attributed to veteran Wall Street investment advisor Bernard Madoff.

The Foundation invested a total of $18 million with the Madoff firm, representing less than 5% (five percent) of the Foundation’s assets.

Donor Advised Funds were not affected by the Madoff fraud. Donor Advised Funds are held separately in Treasury notes and other government instruments.

The $18 million was part of The Foundation’s Common Investment Pool, set aside for long-term endowment-type uses.

The loss, while unprecedented in The Foundation’s 54-year history, does not threaten The Foundation’s stability, its existing commitments, or its ability to maintain its leading role in the Los Angeles philanthropic community.

Despite this loss, The Foundation has a long-term record of generating favorable returns from its investments. The Foundation’s emphasis on diversification, both of investments and of investment advisors, helped limit the impact of the Madoff collapse.

In light of the substantial recent declines in the stock market as well as the financial impact of the Madoff situation, The Foundation is re-evaluating its investment strategies and examining ways to respond to these changed market conditions. This process includes a full review of The Foundation’s policies, practices and due-diligence procedures.

The Foundation is aggressively pursuing every possible recovery and remedy related to the Madoff situation.

We are committed to a fully transparent sharing of information with our donors, supporters, grant recipients and the community, and will continue to report to The Foundation’s constituencies as we learn more. This will include updates to a dedicated page on The Foundation’s website at www.JewishFoundationLA.org.

Sincerely,

Cathy Siegel Weiss Marvin I. Schotland
Chair President and CEO

Is Bernie Madoff Jewish?  Very. Oy.



Bernard Madoff at a 2007 roundtable discussion with Justin Fox, Ailsa Roell, Robert A. Schwartz, Muriel Seibert, and Josh Stampfli.



“It’s all just one big lie.”

With those words Bernard Madoff confessed to senior executives of Bernard L. Madoff Investment Securities that the $17 billion hedge fund company  he  founded was nothing more than a Ponzi scheme.
 
According to Timeonline.com, Madoff is at the center of “the largest investor swindle ever blamed on a single individual.”
 
Madoff was arrested Thursday by Federal agents and charged with securities fraud.  In its complaint the Securities and Exchange Commission said Madoff was at the head of an “ongoing $50 billion swindle.”  He could face 25 years in prison.

The news that broke today on the front pages of the New York Times and the Wall Street Journal reverberated in Jewish communities across the world.

“A lot of Jewish charities had investments with him,” one prominent investor — who said he had no connection to Madoff — told The Jewish Journal. “So did a lot of Jews.”

The collapse of the Madoff business leaves a mess that is yet to be sorted out and whose victims are just coming to the fore.

But what’s already clear is that Madoff used his ties to the Jewish community to garner at least some of his ill-used funds.



UPDATE SUNDAY 1:41 p.m.:

By Sunday the initial casualty reports showed that Madoff’s crimes reached deep into the Los Angeles Jewish community. 

“It has come to our attention that the Jewish Community Foundation [Los Angeles] is included among a number of major institutions as well asindividuals who may have been victimized by an alleged fraud,” wrote Jewish Community Foundation Board Chair Cathy Siegel Weiss and President and CEO Marvin Schotland in a letter sent to board members.

Regretfully, the Foundation was one of those clients. Mr. Madoff was highly regarded and his firm has been one of the most prominent firms on Wall Street for decades. We were shocked to learn of this alleged fraud.

Some $18 million of the Foundation’s Common Investment Pool (currently valued at 11% of its assets) was invested with Madoff, according to the letter.The CIP represents endowments from a variety of long-established Jewish organizations. The Journal is investigating which participants were involved and how much they stand to lose, and whether officials can expect any sort of remediation.

Meanwhile, there are reports that many other local institutions and individuals have been hit by the scandal.  Senior Writer Brad Greenberg and blogger Dean Rotbart are investigating and verifying these reports and will have updates here.



Madoff is a trustee of the Yeshiva University and a long-time philanthropist in Jewish circles.
 
According to Yeshiva University, “Bernard L. Madoff, a member of the University’s Board of Trustees since 1996, was elected chairman of the Board of Directors of Sy Syms School of Business in 2000. Mr. Madoff is chairman of Bernard L. Madoff Investment Securities, one of the nation’s largest third-market dealers in New York Stock Exchange and over-the-counter securities.
A benefactor of the University, Mr. Madoff recently made a major gift to the Sy Syms School.”
 
The first known charity victim, according to JTA, is the The Robert I. Lappin Foundation in Salem, Mass. which gave away about $1.5 million to Jewish causes.
 
After Madoff’s arrest, The Robert I. Lappin Foundation in Salem laid off all of its employees and locked its doors on Friday after its benefactor’s assets were frozen because they were invested with Madoff.

“Mr. Lappin investments were frozen,” the foundation’s executive director of the foundation Deborah Coltin told JTA. “The assets are frozen. We have no money. The foundation cannot access its money.”

Lappin, who was reached by JTA Friday afternoon, said that he lost $8 million – the entirety of his foundation’s money – because it was invested with Madoff. Lappin, who had been involved financially with Madoff since 1991 also took a “significant” hit personally. He said that he knew nothing of Madoff’s fraudulent activities.

The foundation, which gave away about $1.5 million per year to Jewish causes, let go all of its workers, one fulltime employee and six part-time employees.
 
Forbes details the fall of Madoff
 
“Bernard Madoff is a longstanding leader in the financial services industry,” his lawyer Dan Horwitz told reporters outside a downtown Manhattan courtroom where he was charged. “We will fight to get through this unfortunate set of events.”
 
A shaken Madoff stared at the ground as reporters peppered him with questions. He was released after posting a $10 million bond secured by his Manhattan apartment.
 
The SEC filed separate civil charges.
 
“Our complaint alleges a stunning fraud — both in terms of scope and duration,” said Scott Friestad, the SEC’s deputy enforcer. “We are moving quickly and decisively to stop the scheme and protect the remaining assets for investors.”
 
The SEC said it appeared that virtually all of the assets of his hedge fund business were missing.
 
Madoff had long kept the financial statements for his hedge fund business under “lock and key,” according to prosecutors, and was “cryptic” about the firm.
 
And Reuters has the story here:

REUTERS – Edith Honan and Dan Wilchins:
 

NEW YORK (Reuters) – Bernard Madoff, a quiet force on Wall Street for decades, was arrested and charged on Thursday with allegedly running a $50 billion “Ponzi scheme” in what may rank among the biggest fraud cases ever.

The former chairman of the Nasdaq Stock Market is best known as the founder of Bernard L. Madoff Investment Securities LLC, the closely-held market-making firm he launched in 1960. But he also ran a hedge fund that U.S. prosecutors said racked up $50 billion of fraudulent losses.

Madoff told senior employees of his firm on Wednesday that “it’s all just one big lie” and that it was “basically, a giant Ponzi scheme”, with estimated investor losses of about $50 billion, according to the U.S. Attorney’s criminal complaint against him.

A Ponzi scheme is a swindle offering unusually high returns, with early investors paid off with money from later investors.

On Thursday, two agents for the U.S. Federal Bureau of Investigation entered Madoff’s New York apartment.

“There is no innocent explanation,” Madoff said, according to the criminal complaint. He told the agents that it was all his fault, and that he “paid investors with money that wasn’t there”, according to the complaint.

The $50 billion allegedly lost would make the hedge fund one of the biggest frauds in history. When former energy trading giant Enron filed for bankruptcy in 2001, one of the largest at the time, it had $63.4 billion in assets.
U.S. prosecutors charged Madoff, 70, with a single count of securities fraud.

They said he faces up to 20 years in prison and a fine of up to $5 million.
The Securities and Exchange Commission filed separate civil charges against Madoff.

“Our complaint alleges a stunning fraud — both in terms of scope and duration,” said Scott Friestad, the SEC’s deputy enforcer. “We are moving quickly and decisively to stop the scheme and protect the remaining assets for investors.”

Dan Horwitz, Madoff’s lawyer, told reporters outside a downtown Manhattan courtroom where he was charged, “Bernard Madoff is a longstanding leader in the financial services industry. We will fight to get through this unfortunate set of events.”

A shaken Madoff stared at the ground as reporters peppered him with questions. He was released after posting a $10 million bond secured by his Manhattan apartment.

Authorities, citing a document filed by Madoff with the U.S. Securities and Exchange Commission on Jan. 7, 2008, said Madoff’s investment advisory business served between 11 and 25 clients and had a total of about $17.1 billion in assets under management. Those clients may have included other funds that in turn had many investors.

The SEC said it appeared that virtually all of the assets of his hedge fund business were missing.

CONSISTENT RETURNS

An investor in the hedge fund said it generated consistent returns, which was part of the attraction. Since 2004, annual returns averaged around 8 percent and ranged from 7.3 percent to 9 percent, but last decade returns were typically in the low-double digits, the investor said.

The fund told investors it followed a “split strike conversion” strategy, which entailed owning stock and buying and selling options to limit downside risk, said the investor, who requested anonymity.

Jon Najarian, an acquaintance of Madoff who has traded options for decades, said “Many of us questioned how that strategy could generate those kinds of returns so consistently.”

Najarian, co-founder of optionmonster.com, once tried to buy what was then the Cincinnati Stock Exchange when Madoff was a major seatholder on the exchange. Najarian met with Madoff, who rejected his bid.

“He always seemed to be a straight shooter. I was shocked by this news,” Najarian said.

‘LOCK AND KEY’

Madoff had long kept the financial statements for his hedge fund business under “lock and key,” according to prosecutors, and was “cryptic” about the firm. The hedge fund business was located on a separate floor from the market-making business.

Madoff has been conducting a Ponzi scheme since at least 2005, the U.S. said. Around the first week of December, Madoff told a senior employee that hedge fund clients had requested about $7 billion of their money back, and that he was struggling to pay them.

Investors have been pulling money out of hedge funds, even those performing well, in an effort to reduce risk in their portfolios as the global economy weakens.

The fraud alleged here could further encourage investors to pull money from hedge funds.

“This is a major blow to confidence that is already shattered — anyone on the fence will probably try to take their money out,” said Doug Kass, president of hedge fund Seabreeze Partners Management. Kass noted that investors that put in requests to withdraw their money can subsequently decide to leave it in the fund if they wish.

Bernard L. Madoff Investment Securities has more than $700 million in capital, according to its website.

Madoff remains a member of Nasdaq OMX Group Inc’s nominating committee, and his firm is a market maker for about 350 Nasdaq stocks, including Apple, EBay and Dell according to the website.

The website also states that Madoff himself has “a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm’s hallmark.”

In the wake of the scandal, Internet message boards are alive with anti-Semitic vitriol.
 
The web site dealbreaker.com provides a list of Madoff’s victims supplied by CNBC’s  David Faber:

  • Fund of Funds
  • European banks
  • remont Advisers
  • “market confidence”
  • JEWS

The comments on that page reveal the kind of anti-Semitic writing that scandals involving Jewish financiers unleash with clockwork precision.
 
A sampling:

  • LOL Jews!…
  • Looks like a lot of Jews might be converting to Muslim soon….in prison….
  • Now that the JEW has been thrown down the well, is our country free?LETS THROW A BIG PARTY!!!

The message boards at the web site Stormfront, where neo-Nazis go to play, is rife with comments like, “One of satan’s children doing what comes naturally.”

Hey. If it’s small comfort the prosecutor in the case is Jewish, and it was Madoff’s sons who turned their crooked dad in.

Thousands of small Jewish investors who played by the rules and worked and saved are now financially ruined because of this man. For all but your garden variety bigots, one horrifically monstrously putrid apple doesn’t mean squat about the whole tree.

 

Agriprocessors closed — now where’s the beef?


NEW YORK (JTA)–A supermarket in New Jersey with a large kosher section has shelves nearly empty of kosher beef. In New York, a kosher steakhouse says its customers are canceling reservations because choice cuts aren’t always available. And the nation’s largest kosher meat producer, reportedly besieged by new orders, is turning away new customers.

The kosher meat market is in a tailspin as production at the Agriprocessors’ meatpacking plant in Postville, Iowa, which had been operating at a fraction of its normal capacity since May, finally ground to a halt this week. The company, whose meat was sold under the labels Rubashkin’s and Aaron’s Best, among others, filed for bankruptcy Nov. 4.

“What I’m hearing all over the country is that one day you can get poultry in some places, one day you can get brisket, the next day you can’t get pastrami,” said Menachem Lubinsky, the publisher of Kosher Today and a former consultant to Agriprocessors. “People are being very innovative in how they’re getting their products.”

Though Agriprocessors officials say they hope to reopen the plant later this week, trouble has long been brewing in Postville and savvy industry folks began looking for alternatives months ago.

In the wake of a federal immigration raid in Postville on May 12, meat buyers began shifting their purchases to other companies, which have struggled to meet the increased demand. Alle Processing, a New York City kosher meat supplier that has become the largest in the United States with the collapse of Agriprocessors, has had to place a moratorium on new customers, according to several industry insiders.

Retailers and restaurants who already had relationships with other suppliers have fared the best, though many report only a portion of their orders are being filled. Those who were more dependent on Agriprocessors are finding themselves in real trouble.

At Heinin’s, a specialty foods supermarket in the greater Cleveland area, the shelves have been without kosher meat for months. A buyer for the company told JTA his efforts to locate an alternative are not going well. An Albertson’s supermarket in the Dallas area also was bereft of beef on Monday.

“I just got back from the supermarket and there was absolutely none,” said kosher consumer Shalom Abrams. “Normally they have an 8-foot section of kosher meat.”

At the ShopRite in Livingston, N.J., on Sunday, the shelves were teeming with glatt kosher beef and lamb from Solomon’s and chicken from Empire Kosher Poultry, which announced this week it would be increasing production by 50 percent beginning Nov. 24. One town over, in West Orange, the situation was vastly different: The most plentiful item in the kosher beef display was the Rubashkin’s signage.

“Overall, it’s a lot less selection,” said Michelle Amin, shopping at the West Orange ShopRite. “For the community who’s here to have this kind of empty shelf, it’s crazy.”

Even large retailers with multiple supply options say their orders are not being fully filled.

Yakov Yarmove, who purchases kosher meat for the Supervalu chain, which operates more than 2,400 stores across the country, estimates he’s getting about 90 percent of what he needs. Several other large supermarket chains with reported supply disruptions did not respond to requests for comment.

Michael Schreiber, the owner of East Side Kosher Deli in Denver and a supplier of kosher meat to customers in seven Rocky Mountain states, told JTA he would have been “in deep trouble” if he had relied solely on Agriprocessors. As it is, he is struggling to keep up his stocks.

“I may order 500 pounds of a certain primal cut for my guys to then break and I may only get 300 pounds, but I am getting the product,” Schreiber said. “Are my stocks as deep as normal? No, not hardly. But I can keep customers in product.”

The decline of Agriprocessors placed fish and poultry center stage last week at Kosherfest, the annual kosher food trade show held Nov. 11-12 at the Meadowlands Exposition Center in New Jersey. While purveyors of kosher poultry and fish were abundant, including many first-time exhibitors from North America and abroad, there were only a handful of meat producers, and those few were besieged by buyers desperate for supplies. None of the major kosher meat producers were there: no Agriprocessors, no International Glatt, no Alle.

With their finances in ruins, Agriprocessors has been courting outside investors and rumors were rife at the show as to who might buy the company’s facility in Postville. Names floated most often were Empire and Alle, as well as the non-kosher giant ConAgra. Costco and Sam’s Club have both reportedly expressed interest.

Empire representatives say the company has investigated the possibility of entering the kosher beef market but has made no decisions. But Empire’s announcement that it plans to expand production of chicken is widely hoped to alleviate pressure on the kosher poultry supply at a crucial moment–the week of Thanksgiving.

“Empire is proud to be able to step up to the plate and be sure that consumers throughout the United States have easy access to kosher poultry at their local supermarkets and butcher shops,” Greg Rosenbaum, Empire’s chairman and CEO, said in a news release. “We are extremely grateful for the cooperation of our kosher certifying agencies, the OU, KAJ and Star-K, as well as the United Food and Commercial Workers Union, to make this rapid expansion possible.”

On Monday, Agriprocessors executives appeared in bankruptcy court in New York where they met their lender, First Bank Business Capital of St. Louis. First Bank initiated foreclosure proceedings against the company for defaulting on a $35 million loan.

According to a report in the Des Moines Register, First Bank had sought a total freeze on spending until Agriprocessors cleared up its debts. The company responded that a freeze would force it to cease all operations. A judge appointed a trustee to oversee the case, and a company spokesperson told the Register that the details would be worked out this week. The company hopes to resume poultry production on Thursday.

In an unrelated legal setback for Agriprocessors, the U.S. Supreme Court declined to hear its case against the National Labor Relations Board, according to a report in the industry publication Meatingplace. A lower court had rejected the company’s argument that a union vote at its Brooklyn warehouse was invalid because its workers were illegal immigrants and therefore not entitled to organize.

Agriprocessors did not respond to requests for comment.

For kosher beef, problems are likely to remain–a fact that has sparked interest from companies as far afield as Australia. Ephraim Nagar, the owner of Talia’s Steakhouse on Manhattan’s Upper West Side, told JTA he had received an e-mail from a company gauging interest in kosher meat exports from Down Under.

For Nagar, who used to get all his supply from Agriprocessors, any new product would be an enormous relief. Other suppliers have declined to deal with him because he was not a regular customer. To acquire beef, he has had to send drivers to outer borough warehouses, driving up his costs. Some customers are calling in advance to find out if the restaurant has the specialty items for which it is known.

“Assuming they made a reservation of, let’s say a table of 10,” Nagar said, “two or three people are eager to eat these bison buffalo or the baby lamb rack, and if we do not have that, they cancel the reservation.”

(JTA correspondent Sue Fishkoff contributed to this report.)



PETA hidden camera expose costs Agriprocessors support of key expert [VIDEO]


An undercover video shot last month at the Agriprocessors kosher meatpacking plant has raised new questions about the company’s slaughtering practices and cost it the support of one of the country’s leading experts on animal welfare.

Temple Grandin, an animal scientist who has served as consultant to scores of slaughterhouses across the country, said the practice shown in the video — in which two workers make “gouging,” saw-like cuts into the necks of animals immediately after the ritual cut performed by a rabbi — is inhumane.

Grandin said she hasn’t seen that type of second cut at any of the approximately 30 kosher slaughterhouses she has visited, nor did she see it when she toured the Agriprocessors plant in Postville, Iowa, in 2006, at which time she declared it satisfactory.

The practice also was not in evidence in a video released by a Long Island Jewish newspaper of a visit to Postville by 25 Orthodox rabbis on July 31. After visiting, the clergymen said the plant adhered to the highest standards of kosher practice.

The new video, shot Aug. 13 by People for the Ethical Treatment of Animals (PETA), has led Grandin to conclude that slaughterhouse visits are useless in determining whether animals are being treated properly. She has called for Agriprocessors to install round-the-clock video cameras on the kill floor that can be independently audited by a third party over the Internet.

“There’s no point,” Grandin said of the visits. “I’ve been in business 35 years, and I’m getting sick and tired of [it]. They act good when you’re there, and they don’t act good when your back is turned. They did the same thing for the rabbis they would do for me — put on a show.”

Agriprocessors did not respond to Grandin’s comments, but the company released a statement Sept. 5 after the PETA video was first reported by The New York Times.

“Agriprocessors fully complies with federal humane slaughter laws and is monitored by inspectors of the United States Department of Agriculture,” the statement said. “All kosher slaughter procedures are under the exclusive direction of the supervising agencies and rabbis who certify the kosher status of the animals, as is provided by law.”

Grandin’s criticism comes as Agriprocessors is working hard to revive its image, following a massive federal immigration raid in Postville on May 12 that led to the arrests of nearly 400 illegal workers.

Unlike other critics of Agriprocessors, which the company has sought to dismiss as “radical” or “fringe” groups pursuing narrow agendas, Grandin is a nationally renowned figure, whose judgments were previously touted when they were favorable to the company.

After PETA released a similar undercover video made in 2004, pressure mounted on Agriprocessors to have Grandin inspect its procedures, which she did two years later. Grandin concluded that the company had improved its procedures since the first video was shot, a fact publicized in news releases by both Agriprocessors and one of its supervising agencies, the Orthodox Union (OU).

“Temple is really important,” said Rabbi Menachem Genack, the OU’s head of kosher supervision. “She’s universally accepted. I think she’s a very honest person. Generally, Temple is someone who is accepted as an arbiter in terms of these issues of animal welfare. She doesn’t have an agenda against shechita [ritual slaughter] in any way.”

Grandin’s latest remarks strike at one of the central public relations vehicles the company has employed in its struggle to restore its flagging reputation: tours of the plant. The largest of these was the rabbinic visit on July 31, paid for by Agriprocessors and organized by the National Council of Young Israel, an Orthodox synagogue group. After a three-hour tour, the rabbis concluded that the company’s image as a chronic rule-breaker was inconsistent with reality.

“The current situation at the Agriprocessors plant is diametrically opposed to the rumors and innuendos that we had heard before we got here,” Rabbi Pesach Lerner, the council’s executive vice president, said following the visit. “We saw a state-of-the-art plant, a tremendous emphasis on safety and excellent standards of kashrut. While we have no personal knowledge of what may or may not have happened in the past, the Agriprocessors plant that we saw today is far different than what has been reported.”

Lerner declined to respond to Grandin’s comments. However, Genack said that the Orthodox Union had opted not to participate in the July trip for fear of being used as Grandin had — as a tool to buttress the company’s image.

“It was meant to give confidence on the public relations side,” Genack said of the rabbinic visit. “We didn’t want the OU to be either critic or apologist…. With all these issues remaining still unresolved, we didn’t attend because [we] wanted to be objective and separate from the story itself.”

Two OU rabbis accompanied the rabbis on their tour, but Genack said they were there solely to illustrate the plant’s kosher supervision, and he had specifically requested that they not be identified as members of the delegation.

After filming the controversial method on Aug. 13, PETA, which makes no secret of its opposition to all forms of animal slaughter, turned the footage over to the U.S. Department of Agriculture (USDA) and pressed for an investigation. According to the department, a so-called “second cut” is permissible only under direct rabbinic supervision.

USDA spokesperson Amanda Eamich said the department cited the company for a second-cut violation subsequent to Aug. 13 but added that the violation was “not egregious” and that the company was currently in compliance.

Agriprocessors has accused PETA of illegal conduct in producing the video, including breaking and entering, trespassing, industrial espionage and misrepresentation as an employee. PETA said the company is trying to deflect attention from its own misconduct.

“Our investigations are entirely lawful,” said Hannah Schein, a PETA investigations specialist. “Agriprocessors’ conduct is not.”