RABBI PLEADS GUILTY TO TAX FRAUD
Goldstein, who was injured in shooting, had role in schemes
Rabbi Yisroel Goldstein, who one year ago had part of his hand shot off in a lethal attack by a gunman at the Poway synagogue he founded and received an outpouring of support that included meeting President Donald Trump, pleaded guilty to federal charges of tax fraud and wire fraud Tuesday.
Goldstein, 58, pleaded guilty to his role in several long-running, multimillion-dollar schemes involving tax, real estate, insurance and grant frauds, some of which stretched back to the 1980s.
Omar Meisel, the acting head of the FBI in San Diego, said the investigation uncovered $18 million in “complex financial schemes” by Goldstein and co-defendants, with the rabbi “at the center of illegal activity” that went on for years.
One such scheme, known as the “9010” fraud, had donors make large contributions to Chabad of Poway but then secretly get most of the money back. Typi
cally, Goldstein would keep 10 percent — then funnel the remaining 90 percent back to the donor, according to a charging document unsealed in San Diego federal court Tuesday.
With a charitable giving receipt on Chabad letterhead, the donor could then claim a large charitable contribution on their taxes, though he or she had only put out a fraction of the claimed amount. The conspiracy netted at least $6.2 million in fraudulent donations from 12 taxpayers, resulting in tax losses to the IRS of at least $1.5 million, according to prosecutors.
Prosecutors say the charitable tax scheme was only one part of a more widespread effort to use the synagogue and its many connected nonprofits to illicitly raise funds and hide money, according to court documents. Goldstein personally benefited by pocketing $620,000 over the years. Prosecutors said the congregation did not benefit from the years of illegal activity by Goldstein.
The frauds targeted an array of public agencies like the Federal Emergency Management Agency, the state Office of Emergency Services and a private foundation in Beverly Hills.
At least three Fortune 500 companies were defrauded when they were tricked into giving matching contributions to the synagogue. Prosecutors said Goldstein fabricated fake donation receipts for company employees, then collected matching funds from the companies. The employees claimed deductions, and Goldstein kept the matching funds, Brewer said.
Five other people involved pleaded guilty Tuesday, and prosecutors said the investigation is continuing. One of those co-defendants, 74-year-old Bruce Baker of La Jolla, pleaded guilty to tax fraud and said he had been defrauding the IRS with Goldstein since the 1980s. Over the years he made $2.6 million in “donations” to Chabad of Poway, and got back $2.4 million of that, according to prosecutors. Neither Goldstein nor his attorneys made any comments to a reporter after the hearing in U.S. District Court. At the brief court hearing a masked and subdued Goldstein answered a few routine questions from U.S. Magistrate Judge Karen S. Crawford. He raised his right hand — the one missing an index finger shot off during the attack on the synagogue last year — to swear to tell the truth when it came time to plead guilty.
He is scheduled to be sentenced in October and faces a maximum of five years in prison. He has agreed to pay $2.5 million in restitution. U.S. Attorney Robert Brewer said at an afternoon news conference that the government will recommend probation when Goldstein is sentenced, based largely on his continuing cooperation, his contributions to the Jewish community and his “exemplary” role in advocating for peace after the deadly shooting.
Goldstein has already forfeited $1 million in gold — part of an illicit charitable transaction.
Rabbi in national spotlight
The investigation into Chabad of Poway began about four years ago, involved both the FBI and IRS, and included the FBI taking the rare step of sending an undercover agent to meet with a religious leader. Authorities served a search warrant on the synagogue and on Goldstein’s home on Oct. 17, 2018 — almost six months before the congregation was thrust into the national spotlight when a gunman burst into a Passover service and opened fire.
In the weeks and months that followed, Goldstein was celebrated in the news and in person, meeting Trump days after the shooting in the Rose Garden at the White House at the National Day of Prayer. He spoke at the United Nations, at gatherings in Brazil and Poland, and locally at University of San Diego as the keynote speaker at a forum on the rise of hate. He delivered a message of hope and optimism and became a global symbol against antisemitism and hatred.
Vice President Mike Pence and his wife made an unscheduled stop at the synagogue when he visited in July, and the couple was photographed in the synagogue with the rabbi.
When Trump visited San Diego in September, Goldstein was one of a handful of people who got the prestigious position of greeting the president as he stepped off Air Force One on the tarmac.
All that time he knew he was under investigation by authorities, and had agreed to cooperate with them, Brewer said. At the news conference Brewer sought to draw a sharp distinction between Goldstein’s years of fraud, and his conduct after the shooting.
Brewer said he commended Goldstein for his leadership after the shooting and said that work was a “mitigating factor” that was weighed into the final plea agreement and sentencing recommendation. But, Brewer said, authorities could not discount the rabbi’s years of scheming either.
“Sadly, the facts of this case show a willful effort to deceive on the part of a trusted community leader,” Brewer said.
In November, citing exhaustion, Goldstein retired from the leadership of Chabad of Poway. One of his sons leads the congregation.
Reaction from congregation
A statement from Chabad-lubavitch World Headquarters in New York said news of the plea was “shocking and troubling.” It said when the organization learned he was under investigation late last year it moved to relieve him of all his duties.
“Rabbi Yisroel Goldstein’s actions broke the law, breached the trust vested by the United States in its stewards of charitable organizations, and violated everything that Judaism and our movement stand for,” the statement read.
In a statement Tuesday, Chabad of Poway said an internal review was launched when it learned “some months ago” of the allegations against Goldstein. The synagogue said it was unable to disclose the allegations at the time so as not to interfere with the federal investigation.
“This is a very painful time for our congregation,” the synagogue’s leadership said in the statement. “Following the attack on our synagogue last year, when we were frozen with shock and fear, Rabbi Yisroel Goldstein brought us together and inspired our community. That was the Rabbi Goldstein we knew. That was the Rabbi Goldstein the world came to know.
“Yet, we’ve since learned that Rabbi Goldstein violated the law, contradicted what our synagogue stands for, and transgressed the very moral and ethical rules of the Torah he taught.”
‘Non-functioning’ entities
Authorities say Goldstein established several nonprofits since Chabad of Poway’s opening in 1986, including Friendship Circle of San Diego, an active charity that supports people with special needs and their families. While prosecutors said some of the nonprofits provided legitimate services to the community, “others were non-functioning shell entities that existed primarily on paper or simply as bank account holders,” according to the charging document.
Goldstein, the government said, “used bank accounts held by these entities to conceal his illegal financial transactions and avoid detection by other Chabad officials, from the IRS, and from law enforcement.”
Investigators became suspicious of Goldstein as they were probing a separate $12 million Ponzi scheme run by real estate agent Alex Avergoon. The financial ties between the two men led agents to look more deeply into Goldstein, and the trail of emails, bank activity, tax statements and witness accounts exposed the scope of the fraud.
Avergoon was one of Goldstein’s partners in fraudulently obtaining more than $937,000 in grant funds from FEMA, state emergency agencies and a private foundation.
With Avergoon and others, Goldstein would submit inflated or false claims, supported by fake invoices and backdated checks, asking for money to upgrade security, to repair 2007 wildfire damage that didn’t exist, to implement special Chabad programming and to upgrade Goldstein’s living quarters, prosecutors said. The grant funds were pocketed instead.
Avergoon also used Goldstein to falsely certify that his associates had performed court-ordered volunteer work at the synagogue or its linked nonprofits when in fact they hadn’t, according to court documents.
Avergoon had been under investigation for separate investment schemes that began around 2010.
He was arrested in Latvia in October and brought back to San Diego to face charges in a separate prosecution. He pleaded guilty in that case Tuesday in a separate courtroom via teleconference to wire fraud, aggravated identity theft and money laundering. He has agreed to forfeit profits of more than $5 million as part of his guilty plea.
Goldstein learned he was under investigation when the FBI and IRS served the search warrants in October 2018. At the time, Goldstein had been communicating with an undercover FBI agent and had accepted $100,000 in cash, giving most of it back in currency in exchange for a fee. Part of the currency was given back in gold coins.
The exchange was similar to that of a co-defendant, who “donated” $1.1 million to Chabad in 2017 and got back from Goldstein approximately $1 million in gold — about 246 Suisse Fortuna 1-ounce gold rectangular ingots, 246 Canadian Maple Leaf 1-ounce coins and 246 American Eagle 1ounce coins. Goldstein kept another $160,000 for himself as a fee, according to the court documents.
Shortly after the searches, Goldstein reportedly warned the co-conspirator, who then returned all of the gold to the rabbi the following day, authorities said.
One killed in shooting
A shooter attacked the synagogue on April 27, 2019. One congregant, Lori Gilbert-kaye, was killed and three others were injured in the anti-semitic attack. Among them was Goldstein, who lost his right index finger when hit by one of the rounds fired by the gunman.
John Earnest has been charged in the attack both in state and federal court.
San Diego County District Attorney Summer Stephan has decided to seek the death penalty against Earnest, a former student at Cal State San Marcos. A spokesman for the office said it could not comment on any aspect of the criminal case.
Federal prosecutors have also charged Earnest with hate crimes and obstructing free exercise of religious beliefs charges, which also make him eligible for the death penalty in federal court. The Department of Justice has not made a decision about what penalty to seek if Earnest is convicted.
In addition to Goldstein, Avergoon and Baker, others pleading guilty were Bijan Moossazadeh, 63, of San Diego; Yousef Shemirani, 74, of Poway; and Boris Shkoller, 83, of Del Mar. Each pleaded guilty to filing a false tax return.