A civil-fraud lawsuit against United Talmudical Academy in Brooklyn’s Williamsburg neighborhood, a school that serves as the educational arm of the Satmar Hasidic community, and that was caught up in the massive fraud involving Allou Health Care, is moving closer to trial.
By Patrick Fitzgerald • Wall Street Journal
A civil-fraud lawsuit against a school in Brooklyn’s Williamsburg neighborhood that serves as the educational arm of the Satmar Hasidic community, and that was caught up in the massive fraud involving Allou Health Care, is moving closer to trial.
Judge Elizabeth Strong of the U.S. Bankruptcy Court in Brooklyn denied the United Talmudical Academy’s bid to dismiss a suit filed by a bankruptcy trustee for allegedly aiding and abetting Allou management’s fraud. In a recent decision, Strong granted UTA partial summary on a number of other claims involving almost $30 million in scores of transactions over a six-year period among Allou, UTA and other entities.
Kenneth P. Silverman, the bankruptcy trustee who’s been running Allou since 2003, and lender Congress Financial allege that UTA and some of its senior leaders knew of and actively participated in the massive fraud perpetrated by Allou’s former management, namely members of the Jacobs (aka Jacobwitz) family.
UTA attorney Thomas Kissane said his client had no knowledge about the Allou fraud.
“The judge confirmed that plaintiffs will have to establish that UTA knew about the fraud and fiduciary misconduct at Allou in order to prevail,” said Kissane, of New York law firm Schlam Stone & Dolan. “UTA had no such knowledge and is confident that the ultimate resolution will reflect that.”
UTA was founded in 1949 and operates religious schools in Brooklyn and elsewhere for the Satmar community, which, with more than 100,000 adherents, is one of the largest and fastest-growing sects of Hasidic Judaism in the world. About 7,500 students from prekindergarten through high school attend UTA’s schools. To pay the bills, UTA solicits and accepts donations and interest-free loans and holds an annual fundraising dinner.
According to the trustee’s suit, that structure provided Arthur Meisels, one of UTA’s leaders, with cover to let Allou and the Jacobses “park” money with UTA and launder funds through UTA. The government claimed the brothers siphoned millions of dollars from Allou for their own enrichment by laundering funds through affiliated companies controlled by the family and Meisels.
Agriprocessors, Aaron Rubashkin's butcher shop in Brooklyn and Nevel Proerties, the Rubashkin family's real estate company in Postville, Iowa received more than $3 million from Allou, but Sholom Rubashkin was unable to give a credible explanation of what Allou received for that money:
…Agriprocessors Vice President Sholom Rubashkin gave a deposition in the [Allou bankruptcy] proceedings. Court records indicate that Rubashkin said his Postville real estate company, Nevel Properties, gave Allou nothing in return for tens of thousands of dollars in cash - an admission that apparently caught his attorney off guard:
"What did Nevel do for Allou?" the trustee asked.
"Nothing," Rubashkin replied.
"Perfect," said Rubashkin's attorney, Bernard Feldman. [Feldman would later be appointed Agriprocessors 'CEO' after the immigration raid and related publicity forced the Orthodox Union to 'demand' a new 'independent' CEO. Feldman had no meat industry experience and functioned as a fig leaf for the Rubashkin family with the winking consent of the OU.]
"Do you know of any reason why Allou would be paying Nevel?" the trustee asked.
"I said before, I need to understand before I can answer you," Rubashkin replied. "I will get back to you on that."
Rubashkin later testified that Allou's payments to Agriprocessors were made in exchange for surplus meat products. But no one from Allou or Agriprocessors offered any explanation of why a pharmaceutical company would buy $3 million worth of kosher meat.
Rubashkin testified that the sole Agriprocessors executive who handled the Allou account died at his desk in 2003, taking with him all firsthand knowledge of Allou's purchases.…
Agriprocessors, Nevel and Aaron Rubashkin's butcher shop were subsequently forced to return $1.4 million to Allou.
[Hat Tip: critical minyan.]