Former Chabad of Poway head Rabbi Yisroel Goldstein was sentenced Tuesday to 14 months in prison and ordered to pay $2.8 million restitution for his role in a long-running fraud case.
Goldstein — wounded in a fatal April 2019 hate attack — had faced a maximum five-year prison sentence for tax-evasion and other financial crimes he pled guilty to in July 2020.
Judge Cynthia Bashant in San Diego federal court rejected Goldstein’s lawyers pleas for home detention, telling him: “You dragged down so many congregants … for your own greed.”
His attorneys requested that Bashant recommend he serve his sentence at FCI Otisville, a medium-security facility 2 hours north of New York City that Goldstein’s attorneys said was more accommodating for practicing Jews.
Goldstein, 60, appealed for leniency in a nearly four-minute appearance in downtown federal court, telling Bashant: “I stand here today my head bowed in shame, remorseful and disappointed in the crimes that I have committed to God and mankind.”
He said he nightly reads the Book of Psalms and King David’s prayer for forgiveness. He also recalled Lori Kaye, slain in the Passover attack of 2019: “Lori was like a sister to me. Fate had it that I would be the last person to see Lori smile.”
Goldstein said he’s repented to God.
“I beg for mercy. to allow me to right the wrongs and be able to live out the rest of my life with remorse and if, given a chance, to do whatever I can to help others to the best of my ability,” he said before sentencing in a 25-minute hearing.
Bashant ordered Goldstein to surrender by noon Feb. 23 for his incarceration, but a Goldstein attorney asked for a delay due to the COVID pandemic.
“If there is a big surge right around Feb. 23, or a week or 10 days beforehand, you can come and appeal for a continuation of that date,” Bashant replied.
Jeremy Delecino, one of Goldstein’s attorneys, argued for a sentence of home confinement, saying others in similar crimes got leniency for cooperation in government investigations. So did U.S. prosecutors — asking for eight months’ home detention and four years’ probation.
Delecino noted the “unthinkable tragedy” of the Poway attack for which shooter John Earnest will serve life sentences. And he noted Goldstein has done “a lot of good for the community before he fell down.”
The former New York native is a felon, the lawyer said.
“That will never change,” he said.
Bashant, who heard a probation officer describe a “criminal organization,” said Goldstein abused a position of trust and also obstructed justice early in the government’s probe by warning other people — whose donations went into Goldstein’s pocket.
She reduced the potential sentence for his accepting responsibility and having no prior criminal record.
“You did heroic things during that (shooting episode and afterward) …. I have to take into consideration the fact that, first of all, it seems to me that you dragged down so many congregants…. You took a lot of people with you,” Bashant said.
“And many of those individuals thought they were committing their offense to benefit Chabad, the academy or the synagogue … when in fact it was really just to benefit you. It was for your … own greed. And I can’t ignore that fact.”
Bashant said home confinement didn’t adequately reflect what he did.
“It doesn’t … reflect respect for the law and the severity of what you did,” she said. “I do think time in custody is important. … It’s important to send a message to the community and … to you.”
In what prosecutors have termed the “90/10” scheme, Goldstein accepted charitable donations, then would send about 90% of the funds back to the donors, while pocketing the remainder for himself.
Donors would then falsely claim on tax forms that 100% of their donations went to the Chabad, with Goldstein providing the false donors with fake receipts.
In addition to the money Goldstein returned to them, co-defendants whose employers took part in corporate donation matching programs also pocketed the matching donation amounts provided by the companies.
In a separate scheme, Goldstein also fraudulently obtained nearly $1 million in grant funding with the help of forged documents provided by ex-real estate agent Alexander Avergoon, who was sentenced Monday to more than five years in prison for defrauding investors.
Goldstein and Avergoon recruited at least nine taxpayers who paid more than $275,000 in fraudulent donations to chabad.
Goldstein pleaded guilty in 2020 to federal fraud charges and was subsequently removed from the chabad.
According to his plea agreement, Goldstein received at least $6.2 million in phony contributions to the Chabad and affiliated charities and secretly refunded up to 90% of the donations to the “donors.”
The government says that after Goldstein provided donors fake receipts, they illegally claimed huge tax deductions for these nonexistent donations, and the rabbi kept about 10% – 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, prosecutors said in a statement after sentencing, which added:
Goldstein also admitted that he defrauded three Fortune 500 companies by tricking them into matching supposed charitable donations of their employees. Working with the employees, Goldstein fabricated 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 $144,000, 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 his brother Mendel Goldstein conceal approximately $700,000 in income by allowing him 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.
“Yisroel Goldstein exploited his position and stature as a faith leader to commit well-planned and carefully executed crimes of greed,” said San Diego U.S. Attorney Randy Grossman. “As his serious criminal conduct was under investigation, the rabbi became a victim in a devastating attack on the synagogue he led.
“Today’s sentence accounts for these extraordinary circumstances and our office’s mission to always seek justice.”
Said FBI Special Agent in Charge Suzanne Turner:
“The defendant used the Chabad of Poway’s tax-exempt status as a religious organization to compile millions of dollars in fraudulent ‘donations.’ This scheme enabled Rabbi Goldstein to line his own pockets; reward his fake ‘donors’ with reimbursement for their contributions; and provided receipts enabling the ‘donations’ to be written off as charitable contributions, all in furtherance of the scheme.”
Special Agent in Charge Ryan L. Korner of IRS Criminal Investigation’s Los Angeles Field Office said:
“Rabbi Goldstein veiled over $2.8 million in fraud schemes he perpetrated with at least ten other co-conspirators by exploiting the non-profit statuses of the Chabad of Poway and the Friendship Circle of San Diego, organizations entrusted to him to serve the community.
“IRS Special Agents were proud to work alongside the FBI and the U.S. Attorney’s Office in this multimillion-dollar tax and grant fraud investigation that uncovered decades of illegal conduct. In addition to holding Rabbi Goldstein accountable for cheating U.S. taxpayers and businesses for personal gain, my fervent hope is that today’s sentencing brings closure and healing to all who were affected by his crimes.”
City News Service contributed to this report.
Story updated at 12:30 p.m. Jan. 4, 2022.