On Monday, prosecutors announced that the leaders of a Hasidic school in Brooklyn, New York, admitted to federal fraud as millions of dollars were stolen from government programs, including a “multimillion-dollar scheme to wrongfully obtain funds designated to feed needy schoolchildren,” according to a news release from the U.S. Department of Justice.
To avoid prosecution, Central United Talmudic Academy operators have decided to pay $8 million in fines and restitution.
Elozer Porges, former executive director of CUTA, and Joel Lowy, Porges’ assistant, both admitted to their roles in a conspiracy to defraud the government in March of 2018.
The misconduct at CUTA was systemic and wide-ranging, including stealing over $3 million allocated for schoolchildren in need of meals, said United States Attorney for the Eastern District of New York Breon Peace. Todays resolution accounts for CUTAs 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.
Michael J. Driscoll, assistant director in charge of the FBI’s New York Field Office, described the leaders’ actions as “pervasive” and greedy, which may be representative of the school’s culture.
“We expect schools to be places where students are taught how to do things properly,” he said. “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.”
As explained in the prosecution agreement, the school partook in an “extensive” scheme aiming to thieve millions of dollars in federal funding to benefit its employees.
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Between 2014 and 2016, the school was provided more than $3 million in reimbursement to feed its students. Instead, the school fabricated records and allocated the money elsewhere.
Upon investigation, it was revealed that school employees were paid much more than their records indicated. This was achieved through several methods, according to the justice department. Beyond paying its employees in cash, the school gave its staff “coupons” that could be redeemed at local stores for a particular cash value. Employees would cash in these coupons to purchase items and the stores would redeem the coupons back to CUTA for payment.
“These ‘coupons’ thus facilitated the creation of an underground economy in which employees obtained usable income unknown to the government,” the news release reads. “The school provided additional ‘off the books’ income in other ways, such as through undisclosed investment accounts.”
The school has since undergone several structural changes, including replacing its executive management team. CUTA is subject to supervision over a three-year period by an independent monitor.
