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Rabbi given two years in tax scheme

Naftali Tzi Weisz, head of Spinka sect, helped funnel charitable donations back to contributors via a jewelry district network.

December 22, 2009|By Victoria Kim

The head of an Orthodox Jewish sect was sentenced to two years in prison Monday for a tax evasion and money-laundering scheme that continued over a decade, spanned two continents, and cost taxpayers millions of dollars in lost revenue, authorities said.

Naftali Tzi Weisz, 61, the Brooklyn, N.Y.-based grand rabbi of the Spinka sect, pleaded guilty to conspiracy in August for his part in a scheme in which people made tax-exempt donations to charitable organizations and were later reimbursed for up to 95% of their contributions. The ruse allowed contributors to claim bogus tax deductions, even though most of their money was funneled back to them via international transfers, overseas accounts and an elaborate underground banking network that wound through Los Angeles' downtown jewelry district, according to authorities.

In addition to Weisz, other religious leaders and businessmen have been convicted of taking part in the scheme and sentenced to prison terms ranging from four months to two years. The plot was revealed through an informant, wiretaps and hidden cameras, prosecutors said.

Authorities say the return of laundered donations is rarely detected and difficult to prosecute because the groups involved are often secretive.

Before Monday's sentencing, about 270 letters were submitted to the court by Weisz's family and other supporters who wrote that the religious leader had devoted his life to the service of others and deserved leniency, according to his attorney, Brian Hennigan.

Hennigan, of the Irell & Manella law firm, asked that his client be sentenced to house arrest, saying the rabbi fully accepted his responsibility and made efforts to reach out to other religious communities after his 2007 arrest, encouraging them to comply with the law.

Although prosecutors said that Weisz's outreach had been "helpful and extraordinary," they insisted that the rabbi should receive a three-year sentence -- the maximum allowed by his plea agreement -- so that he would serve as a deterrent to others. Wiretap recordings showed that Weisz was "a very hands-on director of the scheme," they wrote in court papers.

The rabbi "may have intended to benefit his own community, but he did so at the expense of others," prosecutors wrote. "The entire nature of this criminal enterprise is that the U.S. taxpayer, made up of people from diverse communities and diverse faiths, subsidize the operations of the Spinka religious institutions."

Before handing down the sentence Monday, U.S. District Judge John F. Walter remarked on Weisz's work in his community and on the fact that he didn't commit the crimes for his own benefit, attorneys said.

Three people who made contributions and received bogus tax deductions have also pleaded guilty and received sentences ranging from three months to six months in prison.

Authorities have said they are still investigating more than 100 individuals who may have similarly benefited from the enterprise.

Weisz's assistant, Gabbai Moshe Zigelman, has also pleaded guilty and received a two-year sentence.

One Spinka-affiliated organization that took part in the scheme, Yeshiva Imrei Yosef, will probably be ordered in January to pay $1 million to $2 million in fines, prosecutor Daniel O'Brien said.

victoria.kim@latimes.com

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