Madonna's controversial Raising Malawi nonprofit group - the African all-girls school that was scrapped after wasting $3.8 million - wasn't the first school abandoned by Kabbalah leaders after untold sums of money went unaccounted for.
In 2004, Madonna reportedly donated millions to open the Kabbalist Grammar School for Children in Manhattan. But Kabbalah leader Karen Berg turned the "K School" project into a highly profitable real estate deal, The Daily has learned.
Other members of The Kabbalah Centre - an organization that offers a mystical brand of Judaism that Madonna has practiced for years - had been donating money to the school as early as 2001.
Kabbalah paid $5 million in cash for a six-story, modernistic building that had formerly been the clinic of the late diet guru Robert Atkins.
At the time, Rabbi Yehuda Berg, son of Kabbalah founders Karen and Phillip Berg, told the New York Times that the cash came from the charity Spirituality for Kids, which was partially funded by royalties from Madonna's children's books. He predicted it would be ready for students by the fall 2005 semester.
Architect Garth Hayden said he drew up plans in 2004 for a six-story school with 10 classrooms, a bookstore, library, cafeteria, teachers lounge and a courtyard.
But three weeks later, "Karen Berg, for some reason, she backed out of the deal," Hayden told The Daily.
Berg and her broker, Avi Voda, may have had their eyes on more lucrative opportunities in New York's real estate market.
Hayden remembered them asking whether the building could be turned into condos or a hotel - which would have been hugely profitable, since the Atkins building was prime real estate. Berg and Voda hired the luxury architect Karl Fischer in 2006 to file an application to double the building's height for apartments.
Voda told The Daily that Fischer's plans were rejected because there weren't two ways to exit the building, which is required for fire safety. But Hayden said the clinic already had two stairwells and exits.
The following year, Kabbalah's "Research Centre" subsidiary sold the building to hotelier Carvi Properties Inc for $9.3 million for a profit of $4.3 million. But neither the purchase nor the hugely profitable sale is listed on Research Centre's tax returns. It's unclear how the profits were used.
Voda, who credits the teachings of Kabbalah for his success as a real estate broker, orchestrated the sale. He also managed the sale of another townhouse the Kabbalah Centre had bought for a school in 2002 for $1.8 million, but made no attempt to convert, saying it was too small. He sold it for $3.15 million.
The Atkins building was converted into the boutique Carvi Hotel, where rooms rent for $229 and up.
But apparently, Karen Berg wasn't out of the picture yet.
Four months after Kabbalah sold the building, Karen Berg signed several permit applications during the hotel's construction as president of Carvi Properties Inc., using her name in a Carvi Properties email address and listing Kabbalah's Manhattan office as her contact phone number. Her signature, in blue ink, matches the one on the deed selling the building.
Carvi president Alfredo Pedro said he's never even met Berg. "It looks like I have a silent partner," he said in disbelief.
Whether Madonna was alarmed by the failed school is uncertain. The superstar already had redirected her attention to a bigger, better charity to build a $15 million boarding school for around 450 girls - the two most promising girls from each town- in the poor African country of Malawi, where she had adopted two children.
"They get [Madonna] to give by creating meaningful 'projects' that have specific budgets, and they ask for her support, and concurrently they work on her conscience, meaning they prepare her, and all students, to share and share big," said a source close to Madonna.
Despite a string of failed projects, Madonna, considered Kabbalah's most devout celebrity student, "has totally bought into this and believes wholeheartedly everything they sell," the source said.
"She has always suspected that the Kabbalah Centre was mismanaging projects, but she believes in the spiritual side. She thinks they represent the light of the creator, the emanation of the creator, and that anything that goes against the Centre would be darkness."
After last month's reports by The Daily and other outlets that several Kabbalah entities were being eyed by federal investigators, Karen Berg called the negative media attention "chaos and darkness" in an email to her followers, and reminded them "it is a test for you as well, of your certainty and conviction."
The Kaballah Centre and Madonna's publicist, Liz Rosenberg, declined to comment.
