Money Laundering at the Heart of NY/NJ Arrests

Four Rabbis, Three Mayors Among Those Arrested for Corruption, Other Crimes A little over one year after the scandalous resignation of ex-NY Governor Eliot Spitzer, money laundering again is at the heart of a major news story.

Federal authorities from the FBI and IRS arrested 44 people in New Jersey and New York on Thursday -- including three mayors and four rabbis -- in a case involving corruption, international money laundering and human organ trafficking.

The arrests were part of a continuing investigation called "Operation Bid Rig" that has already seen other New Jersey politicians convicted on bribery and corruption charges, says New Jersey Acting Attorney Ralph Marra. The FBI says the arrests were a result of a cooperating witness who had been charged in previous crimes. The informant is described as a real estate developer with New Jersey connections who has been working with law enforcement for three years.

"This investigation has once again identified a corrupt network of public officials who were all too willing to take cash in exchange for promised official action," Marra said at a press conference after the arrests. "It seemed that everyone wanted a piece of the action. The corruption was widespread and pervasive."

"Traditional money laundering used to be confined to narcotics traffickers and organized crime," said Julio La Rosa, acting special agent in charge of the IRS Criminal Investigation Division. "Based on the allegations contained in today's complaints, money laundering has no boundaries and impacts every segment of our society."

The Money Laundering Investigation
The money laundering conspiracy involves high-ranking religious figures and their associates in Brooklyn, NY and Deal, NJ. Among them was Eliahu Ben Haim, of Long Branch, NJ, the principal rabbi of Congregation Ohel Yaacob in Deal, NJ. Typically, according to the criminal complaints, Haim received bank checks in amounts ranging from tens of thousands of dollars up to $160,000 at a time made payable to a charitable, tax-exempt organization associated with Haim and his synagogue. To complete the money laundering cycle, Haim would return the amount of the check in cash to the cooperating witness, less a cut for Haim, typically 10 percent. Haim's source of cash for funding the money laundering was, according to the complaints, an Israeli whom Haim says he had worked with for years. For a fee, that source would make cash available through other individuals who ran cash houses in Brooklyn.

Hundreds of thousands of dollars were regularly available from the cash houses for Haim to return to his money-laundering clients, including the FBI's cooperating witness. Similar circles of money launderers in Brooklyn and Deal, NJ operated separately, but occasionally co-mingled activities and participants. In most cases, the rings were led by rabbis who used charitable, non-profit entities connected to their synagogues to "wash" money that they understood came from criminal activity such as bank fraud, counterfeit goods and other illegal sources, according to the criminal complaints. Since such large amounts of cash were being transacted, often multiple times in a week, the rabbis made significant sums in fees. The fees they charged typically ran between 5 and 10 percent per transaction.

One of the other money laundering operations was allegedly led by Saul Kassin, a leading Brooklyn rabbi, and another by Edmund Nahum, the leader of a synagogue in Deal. In one secretly recorded conversation, Nahum tells the cooperating witness that he should launder his money through a number of rabbis. "The more it's spread, the better," Nahum says.

Also arrested on Thursday was Levi Deutsch, an Israeli, according to law enforcement, was a high-level source of cash from overseas for funding the bank checks that passed through charitable entities. Another alleged money launderer was Moshe "Michael" Altman, a Hudson County real estate developer who, according to law enforcement, "washed" more than $600,000 in dirty checks to cash for the FBI's cooperating witness through charitable, non-profit entities. Altman is also the intermediary who introduced the cooperating witness to Jersey City building inspector John Guarini, who allegedly took $20,000 from the cooperating witness in July 2007, and $40,000 in total over time. That initial bribe is what gave rise to the public corruption portion of the investigation.

The wide-ranging investigation also charges Levy Izhak Rosenbaum, of Brooklyn, with "conspiring to broker the sale of a human kidney for a transplant, at a cost of $160,000 to the transplant recipient," says the FBI.

Money Laundering Expert Weighs In
When looking at the history of money laundering, there have been many cases where trusted community figures were charged with such crimes, says Ken Rijock, a financial crime consultant with World-Check, a global provider of highly structured risk intelligence for banks, institutional lenders, lawyers, accounting firms and other regulated financial services.

Rijock, a native New Yorker, notes that it's not likely that suspicions were raised. "Within a synagogue with very wealthy people, many of whom are substantial contributors to the synagogue, sometimes they don't ask a whole lot of questions about where the money comes from. The synagogue isn't exactly a non-bank financial institution."

This case only highlights, Rijock says, "There is no business or industry that you cannot take money from and not inquire as to where the source is from, and the identity of the person who is delivering the money."

Rijock questions where the financial professionals were during these alleged activities. "Where were the CPAs, the accountants for these synagogues, where were they in all of this? We just got through the nightmare of the tiny little CPA firm in New York City that was doing the books for Bernard Madoff, and the few people who made it over to there and looked at the books, walked (or ran) away quietly and didn't invest."

The scariest thing about the case it is it so widespread, he says. "It's not just one dirty rabbi or one dirty politician; it goes all the way up to the mayor's office (and to the Governor's office) in a number of different jurisdictions," he notes. "It's hard to point a finger at the third world countries and say they have a culture of corruption and money laundering when it's going on here in this country."

Banks' Compliance in Question
From a compliance standpoint, Rijock sees some gaping holes for the banks that were doing business with these synagogues. "When you are a compliance officer at a bank and you have a charity, non-profits or other charitable entities or trusts, you are held to even higher standard than if you're dealing with a commercial business," he explains. Any type of non-profit is more vulnerable to money laundering than a company that is out to make a profit, where there are always checks and balances.

"High risk people include religious figures that have control over charities," Rijock says. "The banks that were banking these synagogues need to take a long look at themselves in the mirror. There were signs of this money laundering, I'm sure. Money transactions, wires coming in from overseas, cash flows coming in from donations -- all the typical red flags of active money-laundering transaction were probably there."


About the Author

Linda McGlasson

Linda McGlasson

Managing Editor

Linda McGlasson is a seasoned writer and editor with 20 years of experience in writing for corporations, business publications and newspapers. She has worked in the Financial Services industry for more than 12 years. Most recently Linda headed information security awareness and training and the Computer Incident Response Team for Securities Industry Automation Corporation (SIAC), a subsidiary of the NYSE Group (NYX). As part of her role she developed infosec policy, developed new awareness testing and led the company's incident response team. In the last two years she's been involved with the Financial Services Information Sharing Analysis Center (FS-ISAC), editing its quarterly member newsletter and identifying speakers for member meetings.




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