September 24, 2013 Former Chief of Jewish Charity Stole Money Early and Often, Prosecutors Say By WILLIAM K. RASHBAUM and RUSS BUETTNER Shortly after William E. Rapfogel became the leader of one of New York City’s most influential social service organizations in 1992, prosecutors say, he began to steal. He received envelope after envelope, stuffed with skimmed cash kickbacks, according to a criminal complaint filed on Tuesday. Also cited were a $27,000 check written to a contractor working on his apartment, roughly $100,000 to help his son buy a home, and a campaign finance scheme that manipulated the city’s matching-funds formula, fraudulently increasing campaign contributions to favored city politicians who provided government grants to his organization. Over two decades at the nonprofit Metropolitan New York Council on Jewish Poverty, Mr. Rapfogel and two confederates stole more than $5 million, much of it taxpayer money, said the complaint, which detailed the schemes and charged Mr. Rapfogel with grand larceny, money laundering and other crimes. Some of the money went to the co-conspirators, who were not named in the complaint; some of it was directed to politicians and political organizations. Mr. Rapfogel, a man whose deeds and connections made his name almost synonymous with the city’s Jewish philanthropic causes, was accused of keeping more than $1 million for himself. The cash-stuffed envelopes clearly added up. Investigators found $400,000 squirreled away in his Lower East Side apartment — a sizable chunk in his closet — and in his home in Monticello, N.Y., according to the complaint and a person briefed on the matter. Mr. Rapfogel acknowledged unspecified wrongdoing when the charitable organization, known widely as Met Council, uncovered the financial improprieties and fired him last month. He issued a statement saying, “I deeply regret the mistakes I have made that led to my departure.” On Tuesday, Mr. Rapfogel, dressed in a blue suit with a white shirt and no tie, was arraigned in a brief proceeding before Judge Kevin McGrath in Manhattan Criminal Court. He did not enter a plea and waived his right to a speedy trial, a move suggesting that he was or would be involved in plea negotiations. Judge McGrath released him on $100,000 bail. After the hearing, Mr. Rapfogel declined to speak to reporters outside the courtroom. But his lawyer, Paul L. Shechtman, said: “Mr. Rapfogel hopes for a fair resolution of this case and will continue to make amends to Met Council. It’s a sad day, but happily people who know Willie well are still in his corner.” The charges, which the complaint said were in some measure based on investigators’ interviews with Mr. Rapfogel and the two people referred to as co-conspirators, stem from an inquiry by the state attorney general, Eric T. Schneiderman, and the state comptroller, Thomas P. DiNapoli. They began to look into Mr. Rapfogel’s stewardship of Met Council after the organization detected the improprieties and alerted state authorities. “It’s always sad and shocking when we discover that someone used a charity as their own personal piggy bank — but even more so when that scheme involves someone well respected in government and his community,” Mr. Schneiderman said in a news release announcing the charges. Mr. DiNapoli said, “The scale and duration of this scheme are breathtaking.” Their investigation revealed that Mr. Rapfogel conspired with Met Council’s insurance broker, Century Coverage Corporation, to pad the agency’s insurance payments by hundreds of thousands of dollars a year, according to the complaint. The two co-conspirators set up the scheme before Mr. Rapfogel joined the council as executive director, but under his watch, the amount artificially added to the annual cost for insurance steadily increased. As part of the scheme, officials said, Mr. Rapfogel directed a co-conspirator at Century to make the political donations on behalf of Met Council, using money obtained from the padded payments. That co-conspirator delivered regular checks for the campaign contributions to Mr. Rapfogel, who in turn passed the checks on to various politicians and political organizations. Mr. Rapfogel’s wife, Judy, has since the 1970s served as chief of staff to Sheldon Silver, the speaker of the State Assembly. Under Mr. Silver, the Assembly has in some years provided $1 million in grants to the Met Council, and he has attended the charity’s fund-raising events. Since 2000, Century and people identified elsewhere as its employees have donated $13,000 to Mr. Silver or committees he controls. Michael Whyland, a spokesman for Mr. Silver, said that Ms. Rapfogel was not aware of the money that was said to have been stashed in her homes or of the improprieties that prosecutors have accused her husband of committing. Her employment status with the speaker’s office has not changed, he said. The complaint said that Mr. Rapfogel brought his political savvy to bear in a way that increased the benefit of donations to favored candidates — almost like campaign contributions on steroids. The complaint said that for certain political contributions, Mr. Rapfogel directed that separate checks in smaller amounts should be obtained from multiple donors rather than one large check, to maximize the use of the city’s matching-funds program, which provided a six-to-one increase with public funds. Because the program included a cap of $1,050 per contribution, a $600 donation would garner $1,050 while four $150 donations would bring in a total of $3,600. Over the course of the conspiracy, various candidates for city, state and federal elective offices received tens of thousands of dollars in contributions from Century owners and employees. None of the politicians have been accused of any impropriety. The case suggests that even large charities that appear to be well-run can be vulnerable to the same sorts of abuses as the more dubious organizations at the center of recent scandals that sent local politicians to prison, including the former State Senators Pedro Espada Jr., Hiram Monserrate and Efraín González Jr., and a city councilman, Larry B. Seabrook. “The lack of oversight makes these organizations fertile ground for those looking to game the system,” said Daniel L. Stein, a partner at Richard Kibbe & Orbe, who oversaw several prosecutions of nonprofit groups as a federal prosecutor. Mr. Rapfogel, who was compensated more than $400,000 a year as the organization’s chief executive, surrendered early on Tuesday morning at the First Precinct station house in Lower Manhattan, where he was fingerprinted and photographed. He was charged with one count each of first-degree grand larceny, first- and second-degree money laundering and fourth-degree conspiracy; four counts of third-degree criminal tax fraud; five counts of first-degree falsifying business records; and three first-degree counts of offering a false instrument for filing. Suspicions arose after officials at the Met Council received an anonymous letter a few months ago indicating improprieties with insurance payments. A law firm hired to review the organization’s finances uncovered evidence indicating that the payments had been padded by as much as several hundred thousand dollars a year, according to a person briefed on the review. Century’s owner, Joseph Ross, has also been a focus of the state investigation, which is continuing. His lawyer, Benjamin Brafman, has said he was “aware of the investigation and intends to address the issues raised in a responsible fashion.” The 40-year-old charity had expenditures of $112 million last year, money that went to help more than 100,000 people, most of them elderly. Among other things, it provided food assistance to 60,000 people, home-care services to 14,000 and affordable housing to 1,500. Met Council, in a statement released through a spokesman, said it would continue to cooperate with the investigation, as it has done since it brought the matter to the authorities in August. “We take the matters involved in this investigation, and the need to correct the issues of the past, very seriously,” the statement said. The organization, under the leadership of its new executive director, David Frankel, a former city finance commissioner, “will remain focused on what has been the core mission of Met Council for more than 40 years — providing essential services to thousands of New Yorkers in need.” The case has already had an impact on Met Council’s revenue. The city has put a hold on $7.2 million in city contracts and pending City Council grants to the organization and its affiliates. The withheld money, while a fraction of the $90 million it received in government money last year, could begin to squeeze the organization’s charitable ambitions if a resolution is not reached quickly.
Posted on: Wed, 25 Sep 2013 04:30:17 +0000
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