LOS ANGELES, June 28 (UPI) — An Israeli banker has pleaded guilty to a tax fraud conspiracy charge in Los Angeles and a New York rabbi is to follow suit, federal prosecutors said.
Joseph Roth, 66, of Tel Aviv, who worked for United Mizrahi Bank, pleaded guilty Friday to the federal conspiracy charge, admitting he was part of a scheme to defraud the U.S. government out of millions of dollars in tax revenues by setting up secret bank accounts in Israel for bogus trusts, prosecutors said.
Rabbi Moshe E. Zigelman, 60, of New York has agreed to plead guilty to conspiracy at a hearing set for Tuesday. Under the deal announced Friday, Zigelman acknowledges his role in the decade-long scheme.
The accounts involved “charitable contributions” to organizations set up under Spinka, an orthodox Jewish group that refunded most of the money back to “contributors,” authorities said. The contributions to Spinka-related entities totaled $8.5 million in 2006 alone, of which $7.75 million was returned to contributors.
Roth is one of several defendants named in a 37-count federal grand jury indictment alleging that Naftali Tzi Weisz, the 59-year-old Grand Rabbi of Spinka, promised to secretly refund between 80 percent and 95 percent of millions of dollars of contributions to several Spinka charities.
The contributors could claim the full amount for tax deductions, even though they gave as little as 5 percent of the amount declared on federal income tax returns, prosecutors said.
The secret refunds, or kickbacks — as prosecutors have called them — allegedly were laundered through third parties.
Spinka is the name of a Hasidic sect within Orthodox Judaism. The group is named for the European town where it originated along the border of Hungary and Romania.
Trial is set for Sept. 9.
After Friday’s hearing, Roth smiled and shook the hand of the case’s lead prosecutor, Assistant U.S. Attorney Daniel O’Brien.
Roger J. Rosen, one of Roth’s attorneys, told reporters he was pleased with how the case has been resolved, but he had no comment on whether Roth was cooperating with the U.S. Attorney’s Office.
Roth — who has been in federal custody since late last year because he was deemed a flight risk — helped American contributors get loans from Mizrahi Tefahot Bank, so the money could be used in the United States, prosecutors said.
The contributors also could hire Spinka to help secretly repatriate the money into the United States in exchange for an additional money-laundering fee after the money was placed in secret accounts at the bank, prosecutors allege.
In addition to Roth’s guilty plea, another prominent defendant in the case, Weisz’s personal assistant, Gabbai Moshe Zigelman, 60, of Brooklyn, N.Y., has agreed to plead guilty to one count of conspiracy to commit tax fraud, according to court documents.
Zigelman is alleged to have played an integral role in the scheme, paying kickbacks and laundering large amounts of contributions from “R.K.” — a participant in the scheme who turned into a government informant once he ran into problems with federal authorities.
One method Weisz and Zigelman allegedly used to issue the secret refunds was by an underground money transfer network involving other parties, including businesses in and around downtown Los Angeles’ jewelry district.
One business was run by 60-year-old Los Angeles resident Moshe Arie Lazar.
Other defendants in the case include Yaacov Zeivald, 43, of Valley Village, Los Angeles residents Yosef Nachum Naiman, 55, and 43-year-old Alan Jay Friedman and Tel Aviv attorney Jacob Ivan Kantor.
Five Spinka charities were also named as defendants: Yeshiva Imrei Yosef, Yeshivath Spinka, Central Rabbinical Seminary, Machne Sva Rotzohn and Mesivta Imrei Yosef Spinka. The charities are alleged to have used fraudulent receipts for bogus charitable contributions and benefited from fees charged for transfers of funds as part of the money laundering conspiracy.
