Brooklyn yeshiva admits to benefit fraud conspiracy

CUTA has entered into a three-year deferred prosecution agreement with the government in connection with a criminal information filed today in the Eastern District of New York charging the school with conspiring to commit wire fraud. As part of this agreement, the School has agreed to pay $5 million in penalties, in addition to more than $3 million in restitution it has already paid, to resolve the investigation into the school's fraudulent conduct.

Elozer Porges, the former executive director of CUTA, and Joel Lowy, Porges's assistant, both pleaded guilty in March 2018 (http://www.doj.gov/usao-edny/pr/former-officials-central-united-talmudic-academy-brooklyn-plead-guilty-3-million-fraud) for their roles in the conspiracy to defraud the government. Porges was sentenced to two-years' imprisonment in October 2019, while Lowy was sentenced to five-years' probation, 1000 hours of community service and $98,407.21 in restitution in April 2022.

Breon Peace, United States Attorney for the Eastern District of New York, Michael J. Driscoll, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), Bethanne M. Dinkins, Special Agent-in-Charge, United States Department of Agriculture, Office of Inspector General (USDA-OIG), and Jocelyn E. Strauber, Commissioner, New York City Department of Investigation (DOI), announced the agreement.

"The misconduct at CUTA was systemic and wide ranging, including stealing over $3 million allocated for schoolchildren in need of meals," stated United States Attorney Peace. "Today's resolution accounts for CUTA's involvement in those crimes and provides a path forward to repay and repair the damage done to the community, while also allowing CUTA to continue to provide education for children in the community."

"Today's admission makes clear there was a pervasive culture of fraud and greed in place at CUTA. We expect schools to be places where students are taught how to do things properly. The leaders of CUTA went out of their way to do the opposite, creating multiple systems of fraud in order to cheat the government. The FBI and our law enforcement partners will continue to investigate these types of frauds and schemes to ensure government programs benefit those they were designed to help without being exploited," stated Assistant Director-in-Charge Driscoll.

DOI Commissioner Jocelyn E. Strauber said, "As detailed in the prosecution agreement, CUTA engaged in an extensive scheme to steal millions of dollars in public funds, diverting money intended to feed schoolchildren and facilitating tax and benefit fraud by its employees. DOI and its law enforcement partners in the United States Attorney's Office for the Eastern District of New York, the FBI and the USDA are committed to the prevention of fraud that undermines public assistance programs. With this resolution, which includes a $5 million penalty, CUTA has acknowledged and will be held accountable for its misconduct."

"USDA Office of Inspector General, Special Agent-in-Charge Bethanne M. Dinkins stated: The Child and Adult Care Food Program (CACFP) was created to provide food and nutrition to those who truly need this assistance. Those who are involved in fraud and abuse of USDA feeding programs will be investigated by our office to the fullest extent. Our joint investigation with the Federal Bureau of Investigation and the New York City Department of Investigation identified those who sought to profit from the CACFP through illegal schemes. The USDA Office of Inspector General will continue to dedicate investigative resources, working with our law enforcement and prosecutorial partners, in order to protect the integrity of these programs and bring to justice those who commit fraud."

According to admissions in the statement of facts and other public documents, between 2014 and 2016, CUTA received more than $3.2 million in reimbursement for a meal program that purported to feed students of the yeshiva. The program was almost entirely fictitious. Rather than feed its children, the School diverted the funding, including to subsidize parties for adults. To commit the crime, the School fabricated records and made dozens of sworn misrepresentations to government agencies.

During the investigation into the fictitious meal program, the investigative team uncovered evidence of other fraudulent conduct by the School and its employees. In addition to the program fraud noted above, this included various payroll practices that enabled the School's employees to commit benefit and tax fraud.

For example, the School paid its employees in a manner that grossly underrepresented their employees' "on the books" income. The School accomplished this in several ways. In addition to paying its employees in cash, the School provided its employees with "coupons" that were redeemable at local stores for a specific cash value. Employees could use these coupons to make purchases, and the stores would then redeem the coupons back to the school for payment. These "coupons" thus facilitated the creation of an underground economy, in which employees obtained usable income unknown to the government. The school provided additional "off the books" income in other ways, such as through undisclosed investment accounts.

The investigation determined that the School engaged in these practices, in part, to facilitate additional frauds committed by its employees. By underrepresenting its employees' income, CUTA enabled its employees to obtain various public benefits-including health care and childcare-that would not have been available if the employees honestly reported their income. The School further supported these efforts by providing letters to government agencies falsely stating that their employees only earned the "on the books" amount the School disclosed to the taxing authorities, thus enabling their employees to commit welfare and other benefits fraud. The School, in turn, also benefited from its employees misrepresentations, as it then accepted and cashed child care vouchers provided to its employees' by the State, which its employees only qualified for as a result of the School's own misrepresentations. Defendant Joel Lowy was among the many CUTA employees to avail themselves of this scheme.

In addition to the payroll fraud described above, the School also provided no-show jobs to non-employees, facilitated "parsonage" tax exemptions for individuals who did not provide parsonage services, sought and obtained technology funding for uses unrelated to the school's educational purposes and provided child care services without proper licenses.

As outlined in the agreement, the Office reached this resolution with the School, in part, due to the School's remedial efforts, many of which have been in effect for several years. In addition to recognizing and applying a zero-tolerance policy to the conduct described above, the School engaged in a series of significant structural changes. Among other things, it replaced its executive management team; developed a set of financial and procedural controls; instituted a compliance manual to guide ethical decision-making; created an oversight committee to oversee the implementation of the new standards; and conducted audits to ensure ongoing compliance.

In addition to the fine and restitution referenced above, the School will be subject to the supervision of an independent Monitor for a three-year period. The Monitor will assess the School's compliance with the deferred prosecution agreement and ensure that the School continues to follow its legal and ethical obligations.

The agreement announced today is part of an investigation led by the U.S. Attorney's Office for the Eastern District of New York, the FBI's New York Field Office, USDA Office of Inspector General's Office of Investigations' Northeast Regional Office and the New York City Department of Investigation. The case is being handled by the Office's Public Integrity Section. Assistant U.S. Attorney Erik Paulsen is in charge of the prosecution.

The Defendant:

CENTRAL UNITED TALMUDIC ACADEMY

Brooklyn, New York

E.D.N.Y. Docket No. 22-CR-378 (NGG)

Contact:

John Marzulli Danielle Blustein Hass United States Attorney's Office (718) 254-6323

Updated October 24, 2022