California Chabad group must pay nearly $850,000 for misusing grant

For misusing more than $250,000 of a federal grant, Chabad of California has been ordered to pay triple that

A federal judge has ruled that the California branch of the Hasidic Jewish group Chabad-Lubavitch must pay nearly $850,000 in damages for misappropriating federal money they'd been granted to pay for security cameras.

The case was filed in 2010 by husband and wife whistleblowers who will receive a portion of the damages. Judge Morrison England ruled that Chabad misappropriated $272,495, but he awarded treble damages and penalties to bring the amount it must pay to $844,985.

"What the court is saying here is what the whistleblowers have always maintained: that the facts and law are not in dispute, and that Chabad knowingly defrauded the United States," said Michael Hirst, attorney for whistleblowers Aria and Donna Kozak.

Chabad, based in New York, is probably the best-known Hasidic movement in the world. The group is known for its celebrity telethons, rigorous observance of Jewish law and the wide-brimmed hats, long beards and long black coats that men wear. The organization runs community centers, synagogues and camps.

The case revolved around funds Chabad received from the U.S. Department of Homeland Security to install surveillance equipment in facilities in Los Angeles and San Bernardino counties.

Chabad applied for the money in 2008 from the Department of Homeland Security, as part of a program that provides security upgrades for nonprofits. The program was administered by the California Emergency Management Agency. Rabbi Boruch Shlomo Cunin signed agreements to comply with government financial rules "that would … safeguard the integrity of any grant payments made."

"Rabbi Cunin treated the grant advances as if they were gifts to Chabad that, once paid by Cal EMA, were no longer the 'business of the government,'" England wrote. "Chabad proceeded to use grant funds to pay unauthorized expenses...."

The judge said that Chabad did not have policies to ensure that the grant funds were not mixed with other money. Instead, the grant was placed in the general fund and used to cover payroll, utility bills and other expenses.

"Cunin made it clear that the absence of such policies was not an oversight and conceded that he never planned to safeguard the grant advances and ensure that funds so received were used only to pay authorized grant costs," the judge wrote.

The Kozaks filed their suit in 2010, and the federal government joined it two years later. The Kozaks will receive an undetermined amount of the award.

Chabad's attorney, Mark Hathaway, said the organization was disappointed at the judge's ruling and is considering its options.
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