Tax experts this week sharply questioned a New York State Assembly member’s use of a religious charity run by a convicted tax evader to fund a campaign to get Israel’s prime minister to resign.
Brooklyn Assemblyman Dov Hikind raised some $40,000 to run full-page ads in Jewish newspapers last month calling on Israeli Prime Minister Ehud Olmert to quit and urging supporters to back his cause by writing tax-deductible checks to a charity called Yad Moshe. Both pre- and post-ad contributions were channeled through Yad Moshe.
The ads, however, instructed donors to mail the checks to an address that was not the charity’s but the headquarters of Hikind’s campaign finance committee, Friends of Dov Hikind.
The committee’s headquarters is also the Brooklyn residence of Wolf Sender, a longtime Hikind political associate. Last July, Friends of Dov Hikind gave $2,000 to Yad Moshe.
Sender declined to answer questions about the arrangement. But Rabbi Gershon Tannenbaum, the head of Yad Moshe, said they used Sender’s address merely as a mail drop to “segregate” the funds meant for the anti-Olmert campaign. Hikind and Rabbi Tannenbaum defended their use of the charity to solicit tax-deductible contributions, arguing that their cause was not political but moral and nonpartisan.
“The ads were not supporting any candidate from a political point of view,” said Hikind. “Who do I prefer [to replace Olmert]? I have no clue. The message was that this is a man who endangers Israel.”
The Internal Revenue Service prohibits the use of charity money for partisan political purposes—including abroad—and bars donors from taking deductions on contributions made to such causes. Hikind’s use of a religious charity to channel funds connected to his ad were first noted on The Politicker, a blog published by The New York Observer, and followed up on YudelLine, a Web site authored by Larry Yudelson, a former reporter for the Jewish Telegraphic Agency.
The ad in question ran last month in a number of high-profile Jewish papers, including The Jewish Week, The Forward and The Jewish Press. Headlined in large type at the top of the ad with a picture of Olmert was the message: “PRIME MINISTER OLMERT, PLEASE RESIGN!”
The ad went on to denounce Olmert, also in upper case type, as, “ARROGANT,” “IRRESPONSIBLE,” “DELUSIONAL,” “INEPT,” “CONFUSED,” “INDECISIVE,” “OVERWHELMED,” AND “INCOMPETENT.”
“Olmert, please resign. For the sake of Israel and the Jewish people,” the ad concluded. Its sponsor was identified as “ASSEMBLYMAN DOV HIKIND,” adding, “COMMITTEE IN FORMATION.” Smaller type on the bottom instructed donors wishing to “participate in this campaign” to “forward your tax deductible contributions to Yad Moshe, 1254 E. 35th Street, Brooklyn NY 11210”—Sender’s residence.
After reviewing the ad, Bruce Hopkins, one of the country’s leading authorities on charities law said, “I just don’t see how these contributions are tax deductible. They’re clearly for a political campaign.”
Further, he said, if the funds collected were spent to advance the cause of ousting Olmert, “It would cause them [Yad Moshe] to lose their tax-exempt status.”
Hopkins conceded that in most cases, “When you think of a political campaign, you think of transferring money to help someone get elected or to prevent their election. Here, it’s more in the nature of a recall. But it’s the same outcome.” He noted the ad’s use of the word “campaign” in its solicitation and suggested that could have legal implications.
Marcus Owens, a former chief of the IRS’s exempt organizations division, which includes charities, said, “What the ad suggests is potentially actionable. An ad calling for the resignation of a political figure is not a charitable act.”
Yad Moshe, he said, would be particularly vulnerable to legal action if the sums funneled through it constituted a significant portion—“say, 25 percent”—of its budget.
“The IRS has been moving aggressively to seek injunctions where promoters are promising tax deductions for things that are not charitable,” said Owens.
Rabbi Tannenbaum declined to say how large Yad Moshe’s budget was. And no financial data on the charity were available because it is registered with the IRS as a religious organization. Unlike secular nonprofits, such as education or social-welfare organizations, religious charities are exempted from reporting to the IRS or to the public on their finances or how they spend their money. The government maintains this exemption to avoid entanglement between religion and state. The charities, in exchange, are expected to rigorously avoid involvement in partisan politics.
Rabbi Tannenbaum, however, has had a checkered record when it comes to handling money. The cleric, who heads the Rabbinical Alliance of America and is spiritual leader of B’nai Israel of Linden Heights, pleaded guilty to tax evasion in 1996 and served 10 months in prison for the felony.
More recently, the Securities and Exchange Commission has charged Rabbi Tannenbaum with securities fraud in a civil case. And a jury in 2002 found him guilty in a federal civil suit filed by a plaintiff who claimed he was a victim of the fraud, which involved false claims about the assets of a company whose stock Rabbi Tannenbaum and others were promoting. The SEC case remains unresolved. Rabbi Tannenbaum is appealing the jury’s decision in the civil suit.
Rabbi Tannenbaum declined to comment on his criminal conviction. But he said that the campaign to get Olmert to resign “is absolutely not political. It’s definitely within the functions and purposes of a charitable organization . … We’re not endorsing any candidate. We’re talking about the unity of the Jewish people. It’s moral and religious.”
He said he and Hikind chose to use Yad Moshe as their conduit on the advice of an accountant, whom he declined to name.
Rabbi Tannenbaum said of Yad Moshe, whose address is his residence, “It’s a congregation, basically. All the things I do besides my shul [B’nai Israel of Linden Heights] are through Yad Moshe.” These include “a lot of chesed activities”—aid and comfort to the downtrodden—“bikur cholim”—visiting the sick—“and other activities like that.”
Rabbi Tannenbaum said the $40,000 raised to pay for the ads was channeled “partially” through Yad Moshe. But he said the response to the financial appeal was “not especially strong . . . The contributions did not replenish our cost.” Nevertheless, “The ads gave us the recognition we were looking for. At least the discussion got started.”
Asked about previously announced plans to place similar ads in Israeli newspapers, Rabbi Tannenbaum said, “It’s not maturing as rapidly as we thought. We’re not accelerating, and we’re not racing toward it.
Hikind, however said, “We have gotten a lot of support” when asked about donor response to the ads. “We have a group in Israel that will be placing full-page ads there. We’ve gotten a very, very positive response.”
Hikind was acquitted of federal bribery charges in 1998 in a case in which two officials of a Brooklyn charity were convicted of having misappropriated government funds by directing them to benefit Hikind.
Like Rabbi Tannenbaum, Hikind stressed that the ad’s message was “a moral issue, because we believe Israel is in jeopardy. When I say the situation in Israel is so dangerous, there is nothing political about that. … The ads were bipartisan and not supporting any candidate or from a political point of view.”
But Hikind acknowledged, “I’m not a tax attorney. If someone has an issue [with the ads] they should raise it. I can’t tell you I’m an expert. I discussed it, not with tax experts but a number of people. … I spoke with one person who some consider an expert . . . and one person who is an accountant said [he] did not see a problem.”
He declined to name the accountant.
Staff Writer Stewart Ain contributed to this report.