Rabbi Sentenced Two Years for Tax Fraud

"My remorse is deep and heartfelt.''

The head of an Orthodox Jewish group was handed a  two-year prison sentence today in Los Angeles for his part in what prosecutors said was a decade-long tax fraud and money laundering scheme.

The 61-year-old rabbi, Naftali Tzi Weisz, pleaded guilty last August to  criminal conspiracy charges before U.S. District Judge John F. Walter.

"I'm embarrassed beyond words,'' Weisz told the judge. "My remorse is  deep and heartfelt.''

Prosecutors said Weisz and other sect members helped donors avoid paying  federal income taxes by having them make contributions to charitable groups  run by Spinka, a Brooklyn, N.Y.-based Orthodox Jewish group led by the rabbi.

An assistant, Gabbai Moshe Zigelman, 62, pleaded guilty last year to  conspiracy and was also sentenced to a two-year federal prison term.

The operation, according to the government, had two goals: to obstruct  the Internal Revenue Service and to further an unlicensed money-transmitting  business.

Although Weisz had faced up to five years in federal prison, Walter  imposed the lesser penalty, determining that the rabbi did not undertake the  fraud to enrich himself.

"I'm convinced he never took a penny for himself,'' the judge said.

Weisz, several associates and five charitable organizations associated  with Spinka were indicted by a federal grand jury in late 2007.

According to court documents, Weisz and Zigelman secretly refunded up to  95 percent of the charitable contributions through several methods.

In some cases, the contributors received cash payments through an  underground money transfer network involving various participants, some of whom  owned businesses in downtown Los Angeles' jewelry district.

A second method involved wire transfers from Spinka-controlled entities  into accounts secretly held at a bank in Israel, prosecutors said.

The accounts were established with the assistance of an international  accounts manager at the bank, Joseph Roth, who previously pleaded guilty in the  scheme, court documents show.

Roth, 66, of Tel Aviv, admitted helping contributors in the United  States obtain loans from the Los Angeles branch of the Israeli bank that were  secured by the funds in the secret bank accounts in Israel.

The contributors could then use the funds in the United States.

After their money was placed in the secret accounts at the Israeli bank,  contributors also could hire Spinka to help secretly repatriate the money  into the United States in exchange for an additional money laundering fee,  according to the indictment.

In his plea agreement, Weisz admitted he learned from Zigelman that the  Spinka charitable organizations had received $8,493,659 in 2006 and that Spinka  had "profits'' of $744,596, after deducting the amounts paid back to the  various contributors.

Prosecutors have said they are investigating more than 100 others who  were contributors to Spinka organizations.

In sentencing one donor earlier this year, Walter rejected a bid for  probation and imposed a six-month prison sentence, saying the crime reflected  "arrogance'' and warning that other contributors who do not come forward to  authorities could face "significantly higher'' sentences.

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