'Hero' Rabbi in Chabad of Poway Shooting Gets Jail Time for Tax Fraud

Rabbi Yisroel Goldstein, who signed off on millions of dollars in fraud schemes, took government funds to boost the Poway synagogue's security but never made changes before the 2019 attack occurred

The Forward
Louis Keene
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Rabbi Yisroel Goldstein, senior rabbi of the Chabad of Poway synagogue in San Diego, Calif., address the United Nations General Assembly at UN headquarters in New York, in 2019.
Rabbi Yisroel Goldstein, senior rabbi of the Chabad of Poway synagogue in San Diego, Calif., address the United Nations General Assembly at UN headquarters in New York, in 2019.Credit: Bebeto Matthews /AP
The Forward
Louis Keene

In a stunning decision, a federal judge sentenced former Chabad of Poway rabbi Yisroel Goldstein to 14 months in prison for tax and wire fraud on Tuesday, overriding prosecutors’ sentencing recommendations of house arrest and providing a measure of relief to a community still reeling from a deadly shooting at the synagogue in 2019.

Federal prosecutors had recommended a sentence of eight months of home confinement and four years probation, seeking leniency for Goldstein due to his cooperation with investigators and for his leadership following the attack.

But Judge Cynthia Bashant, who has sentenced nearly a dozen defendants involved in Goldstein’s sprawling conspiracy, rejected that possibility from the outset, saying she did not think home confinement adequately reflected the severity of what he did.

“You dragged so many congregants down with you,” Bashant told Goldstein. “Many of those individuals thought they were committing the offenses to help Chabad.

“But really it was just to benefit you – for your personal benefit,” she added. “And I can’t ignore that fact.”

The judge also ordered Goldstein to pay approximately $2.8 million in restitution.

Though not all of Goldstein’s co-conspirators have been revealed, both the synagogue he led – which is now run by his sons – and Chabad Headquarters, which banished him from the movement, will look to the sentencing as the conclusion of an ugly saga that severely depleted the membership of the once-thriving community, including victims of the attack who say Goldstein’s fraud partly enabled it.

In addition to defrauding taxpayers, Goldstein ripped off the Federal Emergency Management Agency, the California Office of Emergency Services and a few of San Diego’s most prominent employers, using Chabad of Poway and an affiliated nonprofit for children with disabilities to do it.

Former congregants who attended the hearing were buoyed by Tuesday’s ruling. Among them was the daughter of Lori Kaye, the beloved congregant who was killed in the 2019 attack.

“I would like to express my gratitude to the court and to the justice system for favoring a prison sentence and holding him to the highest standard that the law will permit in this case,” said Hannah Kaye, addressing the court shortly before sentencing. “We were bracing ourselves for a different result.”

Yisroel Goldstein got his first taste of grift in the 1980s, not long after he opened a Chabad synagogue in a tiny Poway storefront. In what eventually became his signature fraud, he helped a congregant write off a sham donation in exchange for a tenth of the amount claimed, a tax fraud authorities referred to as the ‘90-10’ scheme.

In the ensuing decades, as Chabad of Poway graduated from the storefront to one of the largest synagogues in the San Diego area, the rabbi’s schemes enfolded more of his community, and grew more complex.

In one, Goldstein exploited Friendship Circle of San Diego, an affiliated nonprofit that serves disabled people and their families, to loot corporate donation-matching programs: People would donate money to Friendship Circle, the corporations would match the amount. Goldstein would return the original amount to the donor — providing a receipt for tax deduction — and pocket the matching donation.

In another scam, he used fake invoices to obtain federal emergency grants for earthquake damage that never occurred.

Later, he secured government funding to bolster the synagogue’s security, but never made the upgrades. That failure loomed larger after April 27, 2019, when a man steeped in white nationalist ideology walked in the front door with an assault rifle and opened fire, killing Kaye, 60, and injuring three others, including Goldstein, who lost a finger in the attack.

By then, Goldstein was already cooperating with a joint FBI and IRS investigation into a conspiracy that involved dozens of people, many of them his congregants, and which included his brother Mendel Goldstein, who lives in Brooklyn.

Some of the victims are now suing Goldstein, Chabad of Poway and Chabad of California over alleged misappropriation of the security funds. The shooter, John T. Earnest, was sentenced to life in federal prison in December.

In total, Goldstein admitted to signing off on about $6.2 million in false tax deductions in the 90-10 scheme; $875,000 in grant fraud, and $134,000 via donation matching.

Prior to his sentencing, Goldstein addressed Bashant and the packed courtroom from prepared remarks. Dressed in a black suit, Goldstein began by apologizing for his crimes, then veered into a description of his relationship with the Kaye family.

“For 26 years, my wife and I hosted Howard, Lori of blessed memory, and Hannah Kaye at our home every Saturday afternoon,” he said, adding, “Lori was like a sister to me.”

Lori Kaye’s sisters, Randi Grossman and Ellen Edwards, were seated with her daughter in the small courtroom. As Goldstein mentioned the family members, a gasp was audible in the quiet courtroom.

Afterwards, Kaye called Goldstein’s remarks “another exploitative, manipulative tactic to make himself out to be a victim.

She further noted that Goldstein had already used her mother’s death as an opportunity to bolster his image before the crimes were made public – yet may have contributed to it.

“We hold him partially responsibly for her murder,” she said because of a lack of security on the premises that day in spite of the grant. “And then lying about it – and saying that he didn’t have enough money and that we’re only a small synagogue.”

In the days following the attack, Goldstein achieved national renown, embarking on a high-profile speaking tour that included appearances at the United Nations and the White House — where he met personally with then-President Donald Trump. In December 2019, he quietly stepped down from the pulpit, citing exhaustion.

In July of 2020, his plea agreement — which included waiving the right to an appeal his eventual sentence — became public.

Hannah Kaye was one of several former Chabad of Poway congregants who mailed remarks to the court advocating for a prison sentence. But other congregants and close friends of Goldstein wrote in on his behalf, crediting him for building the Poway Jewish community and for various acts of kindness over approximately 40 years at the helm.

What remains is a community divided over the future of the synagogue. Chabad of Poway is now led by Yisroel Goldstein’s son, Menachem Goldstein, known as Mendel, and served by a board that includes Mendel’s brother, Yehoshua Goldstein, and father-in-law. Many former longtime congregants want to see the family stripped of control, and have formed a breakaway congregation in the wake of the scandal.

Kaye, 24, said she was thinking of her mother, who would have wanted justice for his crimes.

She added that the damage to the congregation where her mother was a fixture for decades was irreparable.

“The community is ravaged,” she said. “The community is deceased.”

Goldstein became at least the 11th defendant sentenced as part of the conspiracy, but with another dozen or more people listed in various indictments, he is unlikely to be the last. The focus of the case now turns to two mystery defendants described in Goldstein indictments as San Diego religious leaders but identified only by their initials.

One of them, Y.F. received a $1.2 million tax writeoff for donating an “ancient Iranian Torah” that never existed, according to court documents. Another, Y.H., helped facilitate the donation-matching fraud.

Chabad World Headquarters in Brooklyn, New York, did not respond to a request for comment.

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