SAN DIEGO–Rabbi Yisroel Goldstein, a former director at Chabad of Poway, and five of his associates pleaded guilty in federal court Tuesday and Monday to fraud charges, admitting that they participated in a complex, years-long, multi-million dollar tax-evasion scheme and other financial deceptions involving theft of public money.
According to his plea agreement, while Rabbi Goldstein was director of the Poway synagogue, he received at least $6.2 million in phony contributions to the Chabad and affiliated charities and secretly refunded up to 90 percent of the donations to the “donors.” After Rabbi Goldstein provided these donors with fake receipts, they illegally claimed huge tax deductions for these nonexistent donations, and the rabbi kept about 10 percent – more than half a million dollars over the course of the fraud – for himself. Tax losses to the IRS were more than $1.5 million. At least 20 taxpayers were involved in this and related tax-evasion schemes.
This case was under investigation for more than two years before Rabbi Goldstein was shot and wounded during the April 27, 2019 attack on worshippers at the Chabad. In that case, federal civil rights and hate crimes charges are pending against John Earnest of Rancho Peñasquitos.
The rabbi was aware of the investigation at the time of the shooting. FBI and IRS agents had searched his home in October of 2018, and he began cooperating with the investigation shortly after that time.
According to his plea agreement, Rabbi Goldstein has agreed to cooperate with ongoing investigations of uncharged co-conspirators and to forfeit $1 million in proceeds and pay restitution of $2.5 million.
“This case has brought us all a great deal of anguish because of the attack on Chabad of Poway,” said U.S. Attorney Robert Brewer. “But whatever a defendant’s dire personal circumstances, or stature in the community, we will always seek justice, first and foremost. We cannot, and will not, sweep serious criminal conduct under the rug. We cannot look the other way because a perpetrator of crime has suddenly become a victim of crime.”
“This case shows the FBI’s dedication to untangling the web of fraud in a complex, multi-million dollar charitable donation scheme that violated the trust of the Chabad of Poway and defrauded the United States government,” said FBI San Diego Acting Special Agent-in-Charge Omer Meisel. “The FBI is committed to holding those accountable who use their position and stature in the community as a disguise to commit fraud. All the defendants in this case, including Rabbi Yisroel Goldstein, have admitted their guilt in these fraudulent schemes and will no longer be able to use deceit and lies to cheat those who were intended to receive charitable funds and taxpayer dollars.”
Five others who participated in the scheme with Rabbi Goldstein also entered guilty pleas in federal court this week, admitting that they knowingly participated by concealing their donations through the Chabad and making false deductions on their tax forms, or by recruiting new taxpayers to participate in the scheme. One taxpayer, defendant Bruce Baker, admitted that he began participating in this scheme with Rabbi Goldstein in the 1980s, and made millions of dollars in fictitious donations over the years.
Rabbi Goldstein admitted that in one instance in late 2017, he attempted to disguise the source of more than $1.1 million in fraudulent donations by purchasing gold coins worth approximately $1 million. He then delivered the gold to the phony donor.
There were many schemes within the broader tax-fraud and kickback scheme, dating back to 2010 or earlier and continuing through 2018.
Rabbi Goldstein admitted he defrauded three different Fortune 500 companies by tricking them into matching supposed charitable donations of their employees. Working with the employees, Rabbi Goldstein fabricated fake receipts and then secretly returned their fake “donations.” This allowed the employees to claim tax deductions for the completely fabricated donations and allowed Rabbi Goldstein to collect the companies’ matching funds—including some that matched double their employees’ donations. Rabbi Goldstein helped to orchestrate this scheme with at least six taxpayer-employees and two other associates who helped recruit new donors or conceal the true recipient of the funds. In total, Rabbi Goldstein defrauded the companies out of at least $134,000 and helped the taxpayer-employees to claim nearly as much in fictitious tax-deductible charitable contributions to the IRS.
Rabbi Goldstein admitted that he also helped an individual conceal more than $700,000 in income by allowing the individual to use Chabad bank accounts to deposit his income, thereby hiding it from the IRS. As his cut, Rabbi Goldstein kept 10 percent of this individual’s income—more than $70,000.
Separate and apart from the tax evasion scheme, Rabbi Goldstein and defendant Alexander Avergoon, who also pleaded guilty today, used false information and fabricated invoices and other records to pretend to be eligible for emergency funds, grants or donations, and private loans. These frauds on the Federal Emergency Management Agency (FEMA), the California Governor’s Office of Emergency Services (Cal OES), and private foundations resulted in losses to these programs of at least $875,000. Rabbi Goldstein and Avergoon have agreed to pay restitution to recoup these losses and reimburse these programs.
The rabbi also admitted in his plea agreement that he defrauded San Diego County courts by falsely certifying that co-conspirators and associates had performed volunteer work at the Chabad or its affiliated entities so that those associates could submit fake reports to the courts that they had fulfilled sentencing requirements for criminal offenses showing dozens or even hundreds of community service hours. Finally, Rabbi Goldstein admitted that, along with Avergoon, he fraudulently obtained loans from banks and mortgage lending businesses by submitting false information in loan applications that they verified for one another.
“Sadly, the facts of this case show a willful, devious effort to deceive on the part of a trusted community leader,” Brewer said. “Evading taxes causes harm not just to the government, but also to one’s fellow citizens, who are forced to bear a heavier burden. Members of the Chabad of Poway are also victims of this crime, for those fake donations certainly did not benefit their congregation.
“There is no doubt that Rabbi Goldstein was the victim of a heinous hate crime that terrorized him and Chabad congregants,” Brewer said. “This is a mitigating factor, but this is no excuse. We acknowledge the rabbi’s cooperation and his community leadership in the wake of the shooting. But this illegal conduct had been going on for many years, and it cannot be ignored.”
U.S. Magistrate Judge Karen Crawford presided over Tuesday’s arraignment and guilty plea. Rabbi Goldstein is next scheduled to appear at a sentencing hearing on October 19 before U.S. District Judge Cynthia Bashant.
