Union City, N.J., Man Admits Operating Supposed Charity As Illegal Bank, Falsifying Taxes
NEWARK, N.J. - A Union City, N.J., man who operated a supposed charitable organization, or “gemach,” admitted today that he ran it as an unchartered bank, accepting millions of dollars in deposits – including nearly $1 million of his own money – which he shielded from state or federal regulation, U.S. Attorney Paul J. Fishman announced.
Moshe Schwartz, 33, a/k/a “David Schwartz” or “Gedalya David Schwartz,” pleaded guilty to two counts of an information: operating an unchartered bank and aiding and assisting in the filing of a false 2007 tax return. Schwartz entered his guilty plea before Judge Jose L. Linares in Newark federal court.
According to the information and statements made in court:
Schwartz operated Gemach Shefa Chaim (GSC), purportedly to provide interest-free loans to needy members of the Sanz community in Union City. During his guilty plea proceeding, Schwartz admitted he operated GSC as a bank, with millions of dollars in deposits and more than 350 client accounts by July 2009.
To operate a bank in the United States, a bank is required to obtain a charter from the United States or the state in which the bank operates. Chartered banks are subject to oversight, regulation, and periodic review by federal and state authorities. Neither Schwartz nor GSC had such a charter.
Schwartz admitted that, in operating GSC as a bank, he accepted deposits and credited clients’ accounts, wrote checks from GSC as directed by clients, made transfers between accounts, disbursed client funds upon request, negotiated GSC checks presented by persons other than the named payees, conducted wire transfers, provided clients with receipts of transactions, charged clients a fee for bounced checks and provided overdraft notices to clients. Schwartz also admitted that he opened and maintained various bank accounts at financial institutions in or around North Jersey in the name of GSC and used those institutions to deposit client funds, negotiate checks, provide clients with GSC checks and conduct wire transfers. Because client funds were deposited into and commingled within GSC’s bank accounts at financial institutions, the funds could only be traced back to GSC, thereby concealing the true ownership, nature and source of the funds. Many clients were thus able to use their GSC accounts to engage in suspicious and, at times, illegal activities, including evading federal taxes and money laundering.
Schwartz also admitted that he provided false and fraudulent information to his tax preparer in Union City concerning his income for tax year 2007, falsely representing that his income was $24,475 when it was approximately $208,845. Schwartz admitted that he used his own GSC account and a false identity to conceal his income and assets from the IRS, causing a $74,889 tax loss.
The banking offense to which Schwartz pleaded guilty carries a maximum potential penalty of five years in prison and a $250,000 fine. The tax offense to which Schwartz pleaded guilty carries a maximum potential penalty of three years in prison and a $250,000 fine. Schwartz is scheduled to be sentenced on July 30, 2014.
GSC bank accounts were seized in July 2009 and approximately $500,000 was ultimately forfeited. The accounts had been used by Moshe Altman, 44, Itzak Friedlander, 46, and Shimon Haber, 38, to launder proceeds that cooperating witness Solomon Dwek, 41, had purported to be the proceeds of illegal activities. Altman pleaded guilty in December 2010, to, among other things, conspiring to launder monetary instruments and was sentenced in March 2011 to 41 months in prison. Friedlander pleaded guilty in April 2010 to conspiracy to launder monetary instruments and was sentenced in April 2011 to 24 months in prison. Haber pleaded guilty to the same charge in January 2010 and was sentenced in May 2010 to five months in prison.
U.S. Attorney Fishman credited special agents of IRS-Criminal Investigation, under the direction of Acting Special Agent in Charge Jonathan D. Larsen, with the investigation leading to today’s guilty plea; as well as the FBI, under the direction of Special Agent in Charge Aaron T. Ford; the Federal Deposit Insurance Corporation-Office of Inspector General, under the direction of Special Agent in Charge A. Derek Evans; and the Social Security Administration, Office of the Inspector General, under the direction of Special Agent in Charge Edward J. Ryan, for their assistance.
The government is represented by Assistant U.S. Attorneys Maureen Nakly of the U.S. Attorney’s Special Prosecutions Division and Frances C. Bajada of the office’s Criminal Division.
Defense counsel: Ricardo Solano Esq., Newark