NEW YORK — A major Jewish day school in New York City on Monday admitted in US federal court it had defrauded the government of millions of dollars, including by misappropriating funds designated to feed needy children.
The Central United Talmudical Academy in Brooklyn agreed to pay $5 million in penalties, in addition to over $3 million in restitution it has paid already.
The resolution will allow the school to avoid criminal charges and close a federal investigation that began in 2018.
The announcement came as New York’s yeshiva system has come increasingly under scrutiny for its lack of secular education and receipt of public funding. The criticism and efforts to better enforce state education guidelines have sparked fierce backlash in the Haredi community.
CUTA is New York’s largest Hasidic yeshiva and is located in the Williamsburg neighborhood of Brooklyn, the home base of the Satmar movement. The not-for-profit school serves over 5,000 students, from preschool to high school, out of three buildings. The boys’ school serves around 2,500 students, court documents said.
The school came to an agreement with prosecutors over charges of conspiring to commit wire fraud in New York’s federal Eastern District court. It will be allowed to continue operations after the resolution, the Justice Department said.
Elozer Porges, the school’s former director, and his assistant, Joel Lowy, pleaded guilty to fraud in 2018. Porges was sentenced to two years in prison, and Lowy got probation, community service and $98,000 in restitution penalties.
US Attorney Breon Peace on Monday called the school’s misconduct “systemic and wide ranging, including stealing over $3 million allocated for schoolchildren in need of meals.”
The school also engaged in tax and benefit fraud by employees, a city investigator said.
The FBI said the school had carried out “multiple systems of fraud in order to cheat the government.”
The Justice Department said the school had received over $3.2 million in funding for federal meal reimbursement programs to feed students in 2014 and 2015. The program was almost all fabricated, however, and the school diverted the funding for other uses, including to hold parties for adults. The school fabricated records and lied to government agencies as part of the scam.
While looking into the meal plan, investigators found evidence of other fraud at the school, including manipulating its payroll to commit benefit and tax fraud. The school employs 700 to 800 teachers and dozens of other staff.
For example, the school hid employee income by paying workers in cash and providing them with coupons. The employees would use the coupons at local stores, which would then redeem the coupons with the school to receive payment, creating an underground economy hidden from the government. The school also provided off-the-books payments to employees in undisclosed investment accounts.
The employees were then able to claim benefits and welfare, especially child care vouchers, that would not have been available to them at their actual income level.
The school provided letters to government agencies stating the employees’ underrepresented income so the workers could receive benefits, and the employees would then cash in some of the benefits with the school itself. Some of these scams had started by at least 2010 and went on until around 2016.
Other schemes by the school included contriving tax exemptions; setting up fake no-show jobs for spouses, relatives of friends of employees; receiving technology funding for purposes unrelated to education; and providing child care without licenses.
In addition to the financial penalties, the school has put in place a zero tolerance policy for fraud; replaced its management; set up new financial and procedural controls; and created an oversight committee, among other steps. Some of the measures have been in place for several years, which the Justice Department credited with helping reach a resolution in the case. An independent monitor will assess compliance for three years.
The Justice Department announced the Monday resolution in Yiddish. The US Attorney’s Office for the Eastern District of New York regularly publishes material in languages besides English if a case concerns a community that uses another language.
New York’s massive yeshiva system has repeatedly come under fire in recent weeks, mostly over secular education requirements, setting off backlash from its supporters.
State authorities have sought a balance between religious beliefs and values and secular education requirements in non-public schools. New York yeshivas have long been required to provide secular education that is “substantially equivalent” to lessons at nearby public schools, but the law has not been effectively enforced.
Critics of yeshiva education say many of the schools fail to provide adequate instruction in secular subjects, including English and math, leaving graduates unprepared to enter the workforce or mainstream society.
Proponents of the system argue that government meddling is an infringement on religious protections. They say the schools are the foundations of successful communities, and that students are well educated, pointing to the fact that students are in class longer than their public school peers each day.
The debate has mostly focused on ultra-Orthodox yeshivas, not on Modern Orthodox schools, which provide more secular education.
The Haredi community has fiercely resisted interference in the schools’ curriculum and critics have said public officials were reluctant to wade into the issue due to the potential political blowback.
Earlier this month, New York State officials for the first time ruled that a yeshiva, also in Williamsburg, was violating the law by not providing sufficient secular education.
Last month, The New York Times published an investigation in both English and Yiddish detailing dismal secular education in many yeshivas, which have legally received hundreds of millions of dollars in public funding in recent years. The funding for yeshivas is minor compared to sums allotted to public schools, and the yeshivas’ shortcomings in secular studies have been debated for years.
Last month, state education officials finalized rules that will boost oversight at yeshivas and other non-public schools and require them to provide a minimum level of secular education in four core areas.
A group of yeshivas and supporting organizations have filed a lawsuit against the state seeking to overturn the new rules.
As of 2020, there were around 160,000 students studying at about 450 yeshivas in New York State. Yaffed, an organization pushing for reforms in the system, has projected that by 2030, 30 percent of Brooklyn schoolchildren will be ultra-Orthodox, nearly all of whom study in yeshivas or related religious schools.