Hasidic School to Pay $8 Million After Admitting to Widespread Fraud

Posted By on December 7, 2022

For years, the largest private Hasidic Jewish school in New York State illegally diverted millions of dollars from a variety of government programs, paid teachers off the books and requested reimbursements for meals for students that it never actually provided, the yeshivas operators admitted in federal court on Monday.

As part of the widespread fraud, school officials took money intended to feed children and used it to subsidize parties for adults, federal prosecutors said.

In order to avoid facing criminal charges, the school, the Central United Talmudical Academy in Williamsburg, Brooklyn, agreed to pay fines and restitution totaling more than $8 million, according to a deferred prosecution agreement filed Monday in Federal District Court in Brooklyn.

Todays admission makes clear there was a pervasive culture of fraud and greed in place at C.U.T.A., said Michael J. Driscoll, assistant director in charge of the F.B.I.s New York office, referring to the school by its initials in a statement. We expect schools to be places where students are taught how to do things properly. The leaders of C.U.T.A. went out of their way to do the opposite.

In court on Monday, a lawyer representing the yeshiva, Marc Mukasey, said school leaders would work collaboratively with the government to fulfill its obligations under the agreement, which has been in the works since 2019. After the hearing, Mr. Mukasey declined to comment further. School leaders did not respond to phone and email messages seeking comment.

The filing came six weeks after a New York Times investigation revealed that about 100 all-boys Hasidic schools across the state had received more than $1 billion in taxpayer funding in recent years while most were denying their students a basic secular education. The Central United Talmudical Academy figured prominently in that article.

Since then, Hasidic schools have come under intensifying government pressure on multiple fronts, with officials scrutinizing what the schools teach and how they manage their finances.

In September, the State Board of Regents approved a set of rules requiring all private schools, including yeshivas, to prove they are teaching nonreligious subjects like English and math or face a loss of funding.

The state education commissioner ruled this month that one Brooklyn boys yeshiva that had been the subject of a lawsuit was not complying with the state law requiring all private schools to provide a basic secular education. That school will have to work with the New York City Education Department to improve.

As part of the agreement filed in court on Monday, the Central United Talmudical Academy will be subject to an independent monitor for the next three years, after which prosecutors will dismiss the charges. The school will be able to submit a list of potential monitors for the government to approve.

The school has more than 2,000 male students enrolled at one location and 2,500 female students at separate buildings nearby. It is the flagship organization of a powerful faction of the Satmar group of Hasidic Judaism run by Grand Rabbi Aaron Teitelbaum. The faction operates several other schools in Brooklyn and the lower Hudson Valley.

The Williamsburg school received about $10 million in government funding in the year before the pandemic, according to a Times analysis of city, state and federal funding records.

During a hearing on Monday, U.S. District Judge Nicholas G. Garaufis said he was deeply concerned about the behavior the yeshiva admitted to engaging in. It is my hope that this is a new beginning, he added.

Judge Garaufis implored two school representatives, Cheskel Berkowitz and Yoel Weisz, to follow through on the promises the school had made to eliminate any financial impropriety, for the good of the community.

The federal investigation into the school, led by the U.S. attorneys office for the Eastern District of New York, stemmed from a criminal case against two of its former leaders, Elozer Porges and Joel Lowy. Both men pleaded guilty in March 2018 for their roles in a conspiracy to defraud the government through school nutrition programs.

During that case, the investigators found evidence of other fraud and broadened the scope of their inquiry, the federal authorities said.

The documents filed on Monday revealed that the school was at the center of a varied and wide-ranging fraud scheme.

For years, the documents showed, the school paid many of its teachers and other employees in part with cash, coupons and life insurance policies, making it seem as if the employees were earning less than they really were and allowing them to pay lower taxes and qualify for welfare.

From 2010 to 2015, the school paid employees with at least $12 million in coupons 17 percent of its total employee compensation which the workers could use as cash in Hasidic grocery stores and other shops, the investigators found.

The school also set up no-show jobs for friends of employees and other community members, the documents said.

The yeshiva also benefited from its fraudulent payment practices because many employees and other community members used their welfare status to receive New York City vouchers for child care and then used them to pay the school, according to the documents. The Times reported last month that a city voucher program sent nearly a third of its total funding to Hasidic neighborhoods last year.

The federal investigation found that the school defrauded government programs meant to provide meals to low-income children, receiving more than $3.2 million from 2014 to 2016 in reimbursement for what the authorities said was an almost entirely fictitious meal program.

The fraud included the fabrication of records and dozens of sworn misrepresentations to government agencies, the authorities noted.

In some cases, the court documents said, yeshiva officials claimed that they provided meals to children on days when the school was not in session.

In recent years, as the school has negotiated with the prosecutors, it has replaced its executive management team and developed a new set of controls, among other changes, the authorities said.

Todays resolution accounts for C.U.T.A.s involvement in those crimes and provides a path forward to repay and repair the damage done to the community, while also allowing C.U.T.A. to continue to provide education for children in the community, said Breon Peace, the U.S. attorney for the Eastern District of New York, in a statement.

The Times investigation found that the Central United Talmudical Academy, like other Hasidic schools, focused almost exclusively on providing religious education, with little instruction in English, reading and math and almost no classes in history, science or civics.

The Times also reported that Hasidic boys schools tend to score much lower on state standardized exams than other schools in New York.

In 2019, the Central United Talmudical Academy agreed to give state standardized tests in reading and math to more than 1,000 students, The Times found. Every one of them failed.

Rebecca Davis OBrien contributed reporting.

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Hasidic School to Pay $8 Million After Admitting to Widespread Fraud

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