Rabbi and banker plead guilty in tax-evasion scam

They used an elaborate money transfer network in Israel, New York and Los Angeles' downtown Jewelry District to defraud the U.S. government of millions.

Los Angeles Times/June 28, 2008

Federal prosecutors secured guilty pleas Friday from a Tel Aviv-based banker and a New York-based rabbi for their involvement in a decade-long international tax-evasion scam centered around an Orthodox Jewish sect that defrauded the U.S. government of millions in tax revenue.

Joseph Roth, 66, an account manager for Israel-based United Mizrahi Bank, and Rabbi Moshe Zigelman, 60, admitted to their parts in a scheme in which people made bogus tax-exempt donations to charitable organizations related to Spinka, an Orthodox Jewish sect.

Most of that money was shuttled back to donors through an elaborate underground money transfer network in Israel, New York and Los Angeles' downtown Jewelry District. Those involved in the scheme received cash kickbacks, prosecutors said.

Roth pleaded guilty to a federal conspiracy charge in a district court Friday and Zigelman agreed to plead guilty at a hearing scheduled for Tuesday, federal prosecutors said. New York-based Zigelman was executive assistant to Grand Rabbi Naftali Tzi Weisz, the sect's leader, who was arrested last year in relation to the scheme and is scheduled to stand trial in September.

In a plea agreement filed Friday, Zigelman admitted to soliciting donations by promising to refund 80% to 95% of the sum. Zigelman and Weisz collected almost $8.5 million in contributions in 2006 and returned $7.7 million of that to the donors, and Spinka got a profit of more than $740,000 from those transactions, according to the plea agreement.

Roth admitted in court Friday that he established secret overseas bank accounts and bogus loans to facilitate the transfer of funds and charged fees to repatriate the money into the U.S., prosecutors said.

Zigelman's attorney, Michael Proctor, said his client was "atoning for his own wrongdoing" and would not testify against the other defendants. Zigelman faces a maximum sentence of 33 months in prison, Proctor said.

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