-Caveat Lector-
Sect Members Pocketed Funds Stolen cash paid for personal expenses
By GREG B. SMITH
New York Daily News
Staff Writer
The four New Square felons granted clemency by former President
Bill Clinton argued they had never benefited personally from the
$40 million they stole in government funds.
But a detailed examination of the case by the Daily News shows
that they used millions in taxpayer dollars to pay for a wide
range of personal expenses — from rent to diapers to car repairs
— for themselves and other members of their Rockland County
Hasidic sect.
The four men — Kalmen Stern, David Goldstein, Jacob Elbaum and
Benjamin Berger — were convicted in January 1999 of stealing
millions worth of student Pell grants, housing subsidies and
small-business loans.
As part of their sentences, they were ordered to make full
restitution of the stolen funds.
But, The News has learned, it is highly unlikely that any of the
$40 million will ever be repaid.
Last week, as he left office, Clinton significantly reduced the
prison sentences of the four New Square felons — weeks after
supporters met privately at the White House with the outgoing
President and First Lady.
Hillary Rodham Clinton, who also met with New Square Hasidic
leaders in August, during her Senate campaign, has denied taking
a position on the sentence commutation. In the November
election, the New Square community voted overwhelmingly for her.
In requesting clemency, the felons argued that their crimes were
more technical than evil. They also contended they had not
gained personally from their fraud, merely using federal funds
meant for one good cause to fund other altruistic causes.
"The crimes here essentially involved the diversion of funds to
other community needs, no personal enrichment," said lawyer
Samuel Rosenthal, who handled the commutation application. "Not
one of the four had an excessive or elaborate lifestyle, but
instead had always lived in the most modest conditions."
But the prosecutors who brought the federal case, and evidence
produced at trial, indicate otherwise.
Elbaum was convicted of illegally pocketing $26,000, Berger
$22,000 and Stern $16,464 in housing subsidies. Evidence showed
that they lied about their amount of taxable income to qualify
for the Department of Housing and Urban Development rent grants.
At trial, Assistant U.S. Attorney Deborah Landis told the jury
some of the money went for "everything from diapers to car
repairs." For example, she said, Goldstein leased an expensive
black Acura.
Claiming poverty on behalf of Elbaum, lawyer Charles Stillman
told The News his client will never be able to repay the HUD
subsidies — or the $11 million he owes the Department of
Education for his role in the Pell grant scam.
"My client is as poor as a church mouse," said Stillman. "He is
the father of eight children who lives in the most humble of
surroundings. He has no money, he has no savings."
Most of the government money stolen in the New Square scheme was
funneled through Toldos Yakof Yosef — a fictitious yeshiva that
Assistant U.S. Attorney Joanna Hendon described at trial as "the
perfect Pell grant machine."
Evidence shows that the phony religious school existed only as an
address — on Heyward St. in Brooklyn. The New Square community,
according to the evidence, illegally used Pell grant funds to buy
the building.
"Each of the men in this courtroom knowingly and repeatedly, and
for profit, affiliated themselves with a monstrous fraud," Hendon
said during the two-month trial that ended in January 1999.
According to testimony, the four defendants also paid New Square
residents to become "students" so they could apply for Pell
grants. One "philosophy" student did not speak English or know
what a term paper was.
The four felons also used some of the government funds to pay
themselves salaries as "mentors" and "administrators" in the
nonexistent program.
At trial, prosecutors Landis and Hendon introduced evidence that
the scheme went well beyond Toldos Yakof Yosef.
Some of the fake students also supposedly attended other yeshivas
in Rockland County and Brooklyn.
Also, the four were convicted of setting up a shell corporation
to net $100,000 in small-business loans. That money was doled
out to various community concerns.
Goldstein was convicted of collecting $146,000 in Social Security
benefits for a retired couple living in Israel and unaware of the
scheme.
In a separate case, another New Square leader, Samuel Weissmandl,
was convicted of stealing more than $750,000 in federal housing
funds — from the same pile of federal funds.
Among other things, Weissmandl used the money for landscaping
services at his and his relatives' homes. He was convicted and
is serving prison time. Clinton did not commute his sentence.
Original Publication Date: 1/26/01
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