A Union City man was sentenced to 27 months in prison for operating a phony charity, or “gemach,” as an unchartered bank, accepting millions of dollars in deposits – including $1 million of his own money – U.S. Attorney General Paul Fishman announced.
By John Heinis/Hudson County View
Moshe Schwartz, 34, also known as “David Schwartz” or “Gedalya David Schwartz,” previously pleaded guilty before U.S. District Judge Jose L. Linares to two counts: operating an unchartered bank and aiding and assisting in the filing of a false 2007 tax return, authorities said.
Linares sentenced Schwartz to 27 months in prison yesterday.
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, officials said.
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, court documents show.
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, and various other transactions that are illegal without a bank charter.
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, authorities said.
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.
Additionally, Schwartz stated 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.
In addition to the prison term, Linares sentenced Schwartz to serve two years’ supervised release and ordered him to pay restitution of $74,889 and a $60,000 fine.
GSC bank accounts were seized in July 2009 and approximately $500,000 was ultimately forfeited.
The accounts had been used by Moshe Altman, 45, Itzak Friedlander, 47, and Shimon Haber, 39, to launder proceeds that cooperating witness Solomon Dwek, 42, had purported to be the proceeds of illegal activities, authorities said.
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.
Additionally, Friedlander pleaded guilty in April 2010 to conspiracy to launder monetary instruments and was sentenced in April 2011 to 24 months in prison.
Finally, Haber pleaded guilty to the same charge in January 2010 and was sentenced in May 2010 to five months in prison.
Dwek, the key cooperating witness in Operation Bid Rig III, was instrumental in having the FBI arrest Altman, Freidlander and Haber – along with 41 others – on July 23, 2009 (via Asbury Park Press).