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The Kabbalah Centre in Los Angeles is the focus of an IRS investigation into tax evasion

Two charities linked to Madonna are also being scrutinized. The center has attracted A-list celebrities such as Ashton Kutcher and Gwyneth Paltrow.

May 06, 2011|By Harriet Ryan, Los Angeles Times
  • Madonna with her adopted daughter, Mercy James, during a brick-laying ceremony in 2010 for Raising Malawi Girls Academy.
Madonna with her adopted daughter, Mercy James, during a brick-laying… (Mike Hutchings, Reuters )

The Kabbalah Centre, the Los Angeles-based spiritual organization that mingles ancient Jewish mysticism with the glamour of its celebrity devotees, is the focus of a federal tax evasion investigation probing, among other things, the finances of two charities connected to Madonna, the center's most famous adherent.

Sources familiar with the investigation said the criminal division of the IRS is looking into whether nonprofit funds were used for the personal enrichment of the Berg family, which has controlled the Kabbalah Centre for more than four decades, a period in which it expanded from one school of a little-known strain of Judaism to a global brand with A-list followers like Ashton Kutcher and Gwyneth Paltrow and assets that may top $260 million.

Those cooperating with the IRS include representatives of one of Madonna's charities, Raising Malawi. The nonprofit is named in subpoenas as a subject of the grand jury probe alongside the Bergs and Kabbalah Centre organizations despite having cut its ties with the center this spring.

"We have tried to provide as much information as we can as quickly as possible to the people who are investigating and are very actively cooperating in every way we can," said Trevor Neilson of Global Philanthropy Group, a consulting firm now managing Raising Malawi.

In a statement in response to questions about the probe, the Kabbalah Centre acknowledged that it and one of its charities, Spirituality for Kids, "have received subpoenas from the government concerning tax-related issues."

"The Centre and SFK intend to work closely with the IRS and the government, and are in the process of providing responsive information to the subpoenas," according to the statement.

The IRS and the U.S. Attorney's office in New York declined to comment. People with knowledge of the investigation said it began last year and is playing out on two coasts. A federal grand jury in Manhattan, where the Kabbalah Centre has a large branch and real estate holdings, is gathering evidence there, according to the subpoenas. Meanwhile, in Los Angeles, where the center is headquartered on Robertson Boulevard, a team of IRS agents dispatched from the agency's New York criminal division is interviewing people connected to the organization, said individuals familiar with the agents' activities.

Among the items that investigators have reviewed, according to one source, is an August 2010 email in which a former chief financial officer of the center complained that he had been fired for pointing out financial improprieties and warned that the center was in danger of "committing suicide."

"I recently uncovered instances of income tax fraud at the Kabbalah Centre — instances which could bankrupt several of the directors involved … this is very serious business," the former CFO, Nicholas Vakkur, wrote in an email that circulated among high-level officials at the center. "I have little choice but to cooperate with the IRS and bring down the entire Kabbalah Centre," Vakkur wrote, adding a plea that "someone in authority" try to "reason" with center Chief Executive Karen Berg.

Berg's husband, Philip, 81, was appointed the head rabbi or rav in 1969, but since he suffered a debilitating stroke in 2004, his wife, 68, has run the Kabbalah Centre with the help of the couple's two sons, Michael, 37, and Yehuda, 38. The family has close ties with Madonna, whose decision to study at the center in 1996 put kabbalah and its distinctive red-string bracelets on the pop culture map and led to a period of enormous growth. In addition to individual members of the Berg family, subpoenas reviewed by The Times list various charities and for-profit businesses overseen by them as subjects of the investigation. The subpoenas do not indicate that Madonna personally is being investigated but do name two nonprofits she has championed: Spirituality for Kids and Raising Malawi.

The singer served as chairwoman of the board for Spirituality for Kids, an educational program founded by Karen Berg, and donated more than $600,000 to the cause, according to tax filings. Raising Malawi was an outgrowth of Spirituality for Kids that the singer cofounded with Michael Berg. The charity announced this spring that it was scrapping its plan to build a girls' school in Malawi, a venture in which it had already invested $3.8 million, according to Neilson. The decision received wide media coverage and criticism in Malawi. Madonna, who Global Philanthropy Group said put about $11 million of her own money into the charity, replaced Michael Berg as CEO and moved Raising Malawi's offices out of the Kabbalah Centre in March.

Madonna's publicist did not return messages seeking comment. Neilson said Raising Malawi had retained legal counsel separate from the Kabbalah Centre to represent the organization in the IRS investigation.

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