Brooklyn rabbi is charged with $4M hedge fund blackmail scheme
BY ALISON GENDAR • New York DAILY NEWS
A Brooklyn rabbi, accused seven years ago of stealing government grants, was busted Thursday for blackmailing a Connecticut hedge fund to give $4 million to two schools he works with, prosecutors said.
Rabbi Milton Balkany, 63, was charged with extortion, blackmail and making false statements as part of an elaborate scheme to shake down the hedge fund, prosecutors charged.
They say Balkany told the hedge fund the U.S. Attorney's Office and the FBI were trying to get a jailbird he knew to give up information about illegal insider trades made by the financial firm.
There were no insider trades.
Balkany made up the story to trick fund managers into giving millions to the Bais Yaakov School in Borough Park, where he is the dean, and another school, Torah Vodaath, prosecutors said.
Balkany said prosecutors are telling tales.
"Seven or eight years ago I was accused of wrong-doing and the government had to back off then. This is much more ridiculous," Balkany said as he dodged photographers while leaving Manhattan Federal Court Thursday night.
"When you are in public service that's the price you pay. An innocent man is constantly dragged through the mud," he said before speeding off in a black SUV after being released on $250,000 bond.
Balkany, known as the "Brooklyn Bundler" for his skill at campaign fund-raising - mostly Republican - said he was just trying to help a young man in prison.
"This is from helping an individual in jail. He got a very lengthy term and I was trying to reduce it. I was in touch with the U.S. Attorney's office the whole time," he said.
Prosecutors say it was all a scheme.
He told the hedge fund managers that if they quickly turned over $2 million to Bais Yaakov and another $2 million in a loan to Torah Vodaath, he would tell the inmate not to talk.
Without the money, Balkany said he would get the Otisville inmate to spill his guts to the FBI.
Balkany told the hedge fund manager since they were both "'co-religionists' he did not want to see him get hurt," the federal criminal compliant charged.
A lawyer for the hedge fund recorded his conversations with Balkany.
"This is not a matter that can sit around indefinitely," the rabbi said, according to the criminal complaint.
He later said prosecutors were out to get the hedge fund manager.
"He's the one they want. ... They would love to target (him) and chop him down, you know."
"You tell me what to say, what not to say, who to say about, who not say about and I will do exactly what you tell me," Balkany said, according to the criminal complaint.
The feds set up a meet between Balkany and the hedge fund lawyer for Thursday. As audio and video tapes rolled, Balkany accepted two checks from the hedge fund - $1.25 million for Bais Yaakov and $2 million for Torah Vodaath, according to the criminal complaint.
This is the second time Balkany's been accused of being involved in financial shenanigans.
In 2004, he agreed to pay back some $700,000 in federal grants earmarked for disabled preschoolers. So prosecutors in Manhattan's Southern District agreed not to prosecute.
"The government had to back off. And it wasn't that much that I paid back," Balkany said Thursday night.
In that deal, Balkany also agreed never to lobby the federal Bureau of Prisons again on behalf of any federal inmate.
He had been implicated - but never charged - in a scheme to bribe prison officials to transfer inmates from tough prisons to cushy "Club Fed" prison camps.