A Hasidic school in Brooklyn, New York, has agreed to pay $5 million in penalties to resolve an investigation into its allegedly fraudulent conduct, including the illegal use of millions of dollars of government funding for “entirely fictitious” programs, according to the Department of Justice.
The school agreed to the terms of a three-year deferred prosecution agreement with the government on Monday after it admitted to being involved in “several overlapping frauds, including a multi-million dollar scheme to wrongfully obtain funds designated to feed needy schoolchildren,” prosecutors said.
‘Almost Entirely Fictitious’
However, the program was “almost entirely fictitious,” prosecutors said, and instead of using the funds to feed the children, the school allegedly utilized it for other things, including holding parties for adults. According to the DOJ, the school fabricated records and lied to government agencies to cover up the alleged scam.Additionally, law enforcement officers who were investigating the allegedly fraudulent conduct also discovered that the school and its employees had utilized a number of other payroll practices to help them commit benefit and tax fraud.
Prosecutors claim the school “grossly underrepresented” employees’ income, thus enabling them to claim public health benefits such as health care and childcare that they were not entitled to, and thus commit welfare and other benefits fraud.
This was done by paying workers in cash and handing them “coupons” that could be redeemed at local stores, according to the DOJ. The stores would then redeem the coupons with the school to receive payment, thus creating a secret “underground economy in which employees obtained usable income unknown to the government.”
Additionally, the school allegedly provided no-show jobs that allowed some individuals to fraudulently claim tax exemptions and also obtained technology funding but used the money for something other than the children’s educational purposes, prosecutors said.
They also allegedly provided childcare services without proper licenses.
‘Path Forward to Repay and Repair Damage Done’
Her assistant, Joel Lowy, also pleaded guilty and was sentenced to five years probation, 1,000 hours of community service, and $98,407.21 in restitution in April 2022.The DOJ said that the school has undertaken “remedial efforts” and “significant structural changes” over the past several years, including applying a zero-tolerance policy to such behavior cited by prosecutors, replacing its executive management team, developing and implementing a set of financial and procedural controls, and creating an oversight board.
It has also conducted audits to ensure it remains compliant. As part of Monday’s agreement, an independent monitor will assess the school’s compliance for a period of three years while also ensuring it continues to follow its legal and ethical obligations, the DOJ said.
“The misconduct at CUTA was systemic and wide-ranging, including stealing over $3 million allocated for schoolchildren in need of meals,” said Breon Peace, U.S. Attorney for the Eastern District of New York on Monday. “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.”
The Central United Talmudical Academy could not be reached for comment.
