NEW YORK (1010 WINS) — A Brooklyn yeshiva will have to pay $5 million to the federal government after admitting to a multi-million dollar scheme to obtain funds for a phony school food program for needy children, among several other frauds, authorities said Monday.
The Central United Talmudic Academy in Williamsburg, under the guidance of the former executive director Elozer Porges and his assistant Joel Lowy, received more than $3.2 million in reimbursement for a food service to allegedly feed students at the school between 2014 and 2016.
“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 Breon 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.”
An investigation revealed that program did not actually exist, rather, the school used the money to subsidize parties for adults. But the fraud went deeper than that. After finding out the food program was fake, investigators found that the school had also fabricated records and made dozens of sworn misrepresentations to government agencies to get money and commit benefit and tax fraud.
The yeshiva had shady payroll practices to allow for tax breaks and employees to fraudulently receive government benefits. The school routinely paid employees in cash and misrepresented their on-the-books income so they’d qualify for subsidy programs.
Along with cash payroll, the school also provided employees with “coupons” redeemable at local stores for various cash values. When the employees used a coupon at a store, the store would redeem the coupons back to the school for payment, creating an underground economy of sorts, free from the reportable government income. Off the books income also came from undisclosed investment accounts provided by the school.
Having the low reported incomes allowed for employees to commit additional fraud by qualifying for various public benefits including health care and childcare. The yeshiva supported the employee’s lies by providing letters to government agencies claiming that their staff members earned the lower incomes.
Employees who fraudulently obtained childcare vouchers were also able to use them at the school. The yeshiva received state money from vouchers obtained by their own misrepresentations. Lowy was one of the CUTA employees who took advantage of this scheme.
CUTA also provided no-show jobs to non-employees as well as facilitated “parsonage” tax exemptions for people who did not provide parsonage services and received funding for technology but used it on items unrelated to educational purposes. They provided child care services without proper licenses as well.
“Today’s admission makes clear there was a pervasive culture of fraud and greed in place at CUTA,” said Assistant Director-in-Charge Michael J. Driscoll. “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.”
In 2018, Porges and Lowy both pleaded guilty to their roles in the conspiracies to defraud the government. Porges was sentenced to two years in prison in October 2019 and Lowy was sentenced to five years probation, 1,000 hours of community service and ordered to pay $98,407.21 in restitution in April 2022.
Under an agreement with authorities, CUTA will pay $5 million in penalties on top of the $3 million in restitution they already paid. The school was also required to make several changes including now having a zero-tolerance policy for all of the conduct they were under fire for and undergoing a series of structural changes. The yeshiva 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.
A monitor will also be supervising the school for a three-year period, assessing CUTA’s compliance with the agreement and ensuring they continue to follow legal and ethical obligations.
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