SAN DIEGO — The brother of former Chabad of Poway Rabbi Yisroel Goldstein pleaded guilty in federal court Monday to evading taxes by hiding $700,000 in a bank account controlled by the organization, a sign that the stunning fraud case unveiled in July against the religious leader is not over.
Mendel Goldstein, 63, owner of a videography business in Brooklyn, pleaded guilty to tax evasion charges. He entered his plea in front of U.S. District Judge Cynthia Bashant in San Diego Monday afternoon.
Prosecutors said he worked with his brother from 2012 to 2018 to conceal more than $700,000 in income from the IRS and avoid paying $155,881 in taxes.
Rabbi Yisroel Goldstein pleaded guilty July 14 to federal wire fraud and conspiracy charges stemming from a yearslong multi-million dollar series of schemes that included tax evasion, ripping off government emergency relief programs and defrauding grant programs.
Mendel Goldstein admitted to hiding $700,000 in income by depositing funds from his business in a Chabad account. The money was then kicked back by his brother — less the 10% fee — in the form of checks made out to bogus names like “Mr. Fish,” “Mr. Green” or “Mr. Gold,” according to prosecutors.
Depositing the money into the Chabad account allowed Mendel Goldstein to avoid reporting all of his income, thus lessening his tax burden.
Mendel Goldstein is scheduled to be sentenced In December. The charge he pleaded guilty to, conspiracy to defraud the government and commit wire fraud, carries a maximum term of five years in prison. His attorney did not respond to a request for comment late Monday afternoon.
The main fraud that Rabbi Goldstein admitted to directing was called the 90-10 fraud by prosecutors. Donors made large contributions to Chabad of Poway but then secretly got most of the money back. Typically, Goldstein would keep 10%, then funnel the remaining 90% back to the donor along with a receipt on Chabad letterhead.
That allowed the donors to claim a large charitable contribution on their taxes — even though they were only out a fraction of the claimed donation. At least 20 others were involved in that scheme over the years, federal authorities have said, resulting in a total tax loss to the government of at least $1.5 million.
As part of his plea agreement Rabbi Goldstein agreed to cooperate with federal investigators against as many as two dozen others possibly implicated in the frauds. In return the government has agreed he will not be sent to prison and will pay $2.5 million in restitution and forfeit $1 million.
The rabbi had been under investigation for more than a year when, on April 27, 2019, a lone gunman rushed into the synagogue at the Poway chabad that Goldstein had founded, and opened fire. He killed one congregant, Lori Gilbert-Kaye, and wounded three others — including Goldstein, who lost his right index finger.
Goldstein’s call for calm and peace after the shooting propelled him to international fame for months, when he met President Donald Trump, Vice President Mike Pence and even spoke at the United Nations. All the while he knew he was under investigation, as agents had raided his home and offices at the synagogue in October 2018.
In the weeks after that raid Rabbi Goldstein warned several others involved in the schemes that he was under investigation — including his brother. Court records say that in December 2018 Goldstein warned his brother about the investigation and urged him to hide his tax fraud by filing amended income tax returns.
The rabbi’s cooperation helped investigators untangle what was a vast array of frauds and identify those who benefited from and participated in them, federal prosecutors have said. So far five others have also pleaded guilty to their roles in the schemes.
©2020 The San Diego Union-Tribune