Thursday, April 24, 2014
Religious charity in Solomon Dwek corruption sting focus of new charges
The head of a religious charity linked to the biggest federal money laundering and corruption sting in New Jersey history pleaded guilty yesterday to illegally operating a bank, sheltering millions in deposits from regulatory oversight.
Federal prosecutors said the operation allowed some clients of the charity — known as Gemach Shefa Chaim — to use their accounts to "engage in suspicious and, at times, illegal activities," including evading federal taxes and money laundering.
In a plea proceeding in federal court in Newark, Moshe "David" Schwartz, 33, of Union City, admitted operating an unchartered bank and filing a false tax return. Schwartz, who headed the fund out of his office and synagogue, was not charged with money laundering.
The government seized more than $500,000 in accounts from the charity after the sting came to light back in July 2009.
A gemach or gmach, an acronym of Hebrew letters that translates to "acts of kindness," is essentially a free-loan society that serves many Orthodox Jewish communities and may be formed for any number of charitable services — from interest-free loans to the lending of bride’s dresses.
But according to federal prosecutors, Gemach Shefa Chaim was also used to launder hundreds of thousands of dollars in checks into cash at the behest of Solomon Dwek, a failed real estate investor who had agreed to work as an undercover informant for the FBI after being charged in a $50 million bank fraud.
The charitable fund first appeared on the radar of the U.S. Attorney’s office after Dwek set up a meeting to discuss laundering funds out of his bankrupt business with Moshe Altman, a real estate developer from Monsey, N.Y., and Itzhak Friedlander, a business partner and member of the ultra-Orthodox Hasidic community in Union City.
During that March 2007 meeting, secretly recorded by Dwek in Altman’s Union City office, Shimon Haber — another developer who had worked with Dwek in the past — said Altman "has washing machines," according to transcripts of the surveillance tape.
The washing machines, federal authorities say, referred to the gemach, to which Altman had access.
Altman, Friedlander and Haber were later among 46 people arrested in the wide-ranging corruption and money-laundering sting, all tied together by Dwek. Among those arrested were mayors, legislators, political operatives, five Orthodox rabbis, and one man who arranged black market kidney transplants.
When Altman’s office was searched after the arrests, FBI agents seized eight bundles of blank checks from Gmach Shefa Chaim accounts, as well as four hard drives and a laptop computer that officials said contained the organization’s books and records.
Altman pleaded guilty in December 2010 to money laundering charges and was sentenced to 41 months in prison. Friedlander pleaded guilty in April 2010 to conspiracy and was sentenced to 24 months in prison. Haber also pleaded guilty to conspiracy charges and was sent to prison for five months in prison.
Of those arrested, 33 have pleaded guilty, four were convicted at trial, two were acquitted, charges were dismissed against four others, and one died. One of the last remaining individuals charged in the case — Lavern Webb-Washington — is due in court on Monday for an expected plea. A final defendant, Yolie Gertner, was never arrested and apparently fled the country, according to court documents. He remains a fugitive.
The charges against Schwartz, who was not arrested or charged when the sting operation became public, comes nearly five years after the initial arrests. In his guilty plea before U.S. District Judge Jose Linares in Newark, Schwartz admitted he accepted deposits and credited client accounts, and conducted wire transfers, and also commingled funds at other financial institutions, effectively concealing the source of the funds.
In questioning by assistant U.S. attorney Maureen Nakly, Schwartz admitted the purpose of Gemach Shefa Chaim was to provide interest-free loans to needy members of the Sanz Hasidic community in Union City, but operated for all practical purposes as an unlicensed bank with more than 350 accounts. A bank operating in the United States is required to obtain a charter from federal regulators or the state in which the bank does business.
Schwartz also pleaded guilty to income tax fraud, falsely under-reporting his income and using his own account at the gemach to conceal his income and assets from the IRS.
An attorney for Schwartz did not return calls to his office.
When he returns for sentencing in July, Schwartz faces up to five years in prison and a $250,000 fine.
http://www.nj.com/news/index.ssf/2014/04/religious_charity_in_solomon_dwek_corruption_sting_focus_of_new_charges.html
Federal prosecutors said the operation allowed some clients of the charity — known as Gemach Shefa Chaim — to use their accounts to "engage in suspicious and, at times, illegal activities," including evading federal taxes and money laundering.
In a plea proceeding in federal court in Newark, Moshe "David" Schwartz, 33, of Union City, admitted operating an unchartered bank and filing a false tax return. Schwartz, who headed the fund out of his office and synagogue, was not charged with money laundering.
The government seized more than $500,000 in accounts from the charity after the sting came to light back in July 2009.
A gemach or gmach, an acronym of Hebrew letters that translates to "acts of kindness," is essentially a free-loan society that serves many Orthodox Jewish communities and may be formed for any number of charitable services — from interest-free loans to the lending of bride’s dresses.
But according to federal prosecutors, Gemach Shefa Chaim was also used to launder hundreds of thousands of dollars in checks into cash at the behest of Solomon Dwek, a failed real estate investor who had agreed to work as an undercover informant for the FBI after being charged in a $50 million bank fraud.
The charitable fund first appeared on the radar of the U.S. Attorney’s office after Dwek set up a meeting to discuss laundering funds out of his bankrupt business with Moshe Altman, a real estate developer from Monsey, N.Y., and Itzhak Friedlander, a business partner and member of the ultra-Orthodox Hasidic community in Union City.
During that March 2007 meeting, secretly recorded by Dwek in Altman’s Union City office, Shimon Haber — another developer who had worked with Dwek in the past — said Altman "has washing machines," according to transcripts of the surveillance tape.
The washing machines, federal authorities say, referred to the gemach, to which Altman had access.
Altman, Friedlander and Haber were later among 46 people arrested in the wide-ranging corruption and money-laundering sting, all tied together by Dwek. Among those arrested were mayors, legislators, political operatives, five Orthodox rabbis, and one man who arranged black market kidney transplants.
When Altman’s office was searched after the arrests, FBI agents seized eight bundles of blank checks from Gmach Shefa Chaim accounts, as well as four hard drives and a laptop computer that officials said contained the organization’s books and records.
Altman pleaded guilty in December 2010 to money laundering charges and was sentenced to 41 months in prison. Friedlander pleaded guilty in April 2010 to conspiracy and was sentenced to 24 months in prison. Haber also pleaded guilty to conspiracy charges and was sent to prison for five months in prison.
Of those arrested, 33 have pleaded guilty, four were convicted at trial, two were acquitted, charges were dismissed against four others, and one died. One of the last remaining individuals charged in the case — Lavern Webb-Washington — is due in court on Monday for an expected plea. A final defendant, Yolie Gertner, was never arrested and apparently fled the country, according to court documents. He remains a fugitive.
The charges against Schwartz, who was not arrested or charged when the sting operation became public, comes nearly five years after the initial arrests. In his guilty plea before U.S. District Judge Jose Linares in Newark, Schwartz admitted he accepted deposits and credited client accounts, and conducted wire transfers, and also commingled funds at other financial institutions, effectively concealing the source of the funds.
In questioning by assistant U.S. attorney Maureen Nakly, Schwartz admitted the purpose of Gemach Shefa Chaim was to provide interest-free loans to needy members of the Sanz Hasidic community in Union City, but operated for all practical purposes as an unlicensed bank with more than 350 accounts. A bank operating in the United States is required to obtain a charter from federal regulators or the state in which the bank does business.
Schwartz also pleaded guilty to income tax fraud, falsely under-reporting his income and using his own account at the gemach to conceal his income and assets from the IRS.
An attorney for Schwartz did not return calls to his office.
When he returns for sentencing in July, Schwartz faces up to five years in prison and a $250,000 fine.
http://www.nj.com/news/index.ssf/2014/04/religious_charity_in_solomon_dwek_corruption_sting_focus_of_new_charges.html
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