Escondido man admits to tax evasion scheme with former Chabad of Poway Rabbi

 

Date: February 2, 2021

Contact: newsroom@ci.irs.gov

San Diego — Stuart Weinstock of Escondido pleaded guilty in federal court today to filing a false tax return as part of a years' long tax-evasion scheme with former Chabad of Poway Rabbi Yisroel Goldstein.

"Mr. Weinstock admitted that he broke the law and cheated the United States out of over $100,000, and in so doing, he also cheated honest taxpayers who pay their fair share," said Special Agent in Charge Ryan L. Korner. "Mr. Weinstock's tax evasion scheme spanned eight years, exploiting charitable giving laws and abusing a tax-exempt religious organization. IRS Criminal Investigation will pursue all who defraud the U.S. Treasury and we are committed to working with our law enforcement partners to uphold the law and protect our Nation's tax and financial systems."

Until around 2018, Rabbi Goldstein was the director and head rabbi at Chabad of Poway, a tax-exempt religious organization. For approximately eight years, Weinstock made supposed "donations" to Chabad of Poway, and Rabbi Goldstein funneled approximately 75 percent of those "donations" back to Weinstock in cash, allowing Weinstock to evade more than $100,000 in taxes.

According to Weinstock's plea agreement, between 2010 and 2018, Weinstock provided Rabbi Goldstein with at least approximately $872,815 in checks that fraudulently described the funds as "contributions," "donations," or "business expenses." Weinstock gave these "donations" to Rabbi Goldstein monthly. Rabbi Goldstein then secretly returned 75 percent of the money, or approximately $654,611, to Weinstock. To do so, Rabbi Goldstein met with Weinstock in person at Weinstock's home or business to pick up the checks and give cash back – less the rabbi's 25 percent cut – to Weinstock in an envelope. Weinstock then falsely claimed on his tax returns that the full amount of his fraudulent donations were tax deductible donations or business expenses, thereby fraudulently reducing his taxes. Through this scheme, Weinstock avoided over $100,000 in taxes that he should have paid to the IRS.

In his plea agreement, Weinstock also admitted that in October 2018, one of Rabbi Goldstein's acquaintances contacted Weinstock to tell him that Rabbi Goldstein had been arrested and that Rabbi Goldstein wanted to warn Weinstock not to accept any more envelopes. Weinstock understood this as a warning that the rabbi was cooperating with law enforcement and their future interactions could be recorded.

In July 2020, Rabbi Goldstein pleaded guilty to fraud charges, admitting that he participated in a complex, years-long, multi-million dollar tax-evasion scheme and other financial deceptions involving theft of public money. Rabbi Goldstein's plea agreement outlined the tax evasion scheme with Weinstock.

"This years-long fraud and tax evasion scheme brought to light by this investigation has resulted in ten guilty pleas, including defendant Stuart Weinstock and previously convicted Rabbi Yisroel Goldstein," said Suzanne Turner, Special Agent in Charge of FBI's San Diego Field Office. "Dedicated FBI agents uncovered and worked diligently to piece together a complex financial scheme perpetrated by those who exploited a non-profit and religious organization to cheat a system designed to benefit those in need. As shown in this case, the FBI, working with our IRS and DOJ partners, will bring justice to those who commit fraud and cheat honest taxpayers."

So far, 10 people have pleaded guilty to crimes discovered in this investigation, including Weinstock and two others who have agreed to deferred prosecution agreements. Rabbi Goldstein has agreed to cooperate with the ongoing investigation. He is scheduled to be sentenced by U.S. District Judge Cynthia Bashant on April 26, 2021.

"This was a deceptive, carefully-planned scheme and the victims are honest taxpayers," said U.S. Attorney Robert Brewer. "Those who cheat the system by exploiting the tax-exempt status of non-profits and religious organizations will be held to account for their illegal conduct." Brewer praised prosecutors Michelle Wasserman and Oleksandra Johnson and FBI and IRS agents for their excellent work on this case.

Stuart Weinstock is next scheduled to appear at a sentencing hearing on April 26, 2021 at 9 a.m. before Judge Bashant.