Federal Deposit Insurance Corporation
Office of Inspector General

Union City, New Jersey, Man Sentenced to 27 Months in Prison for Operating Supposed Charity as Illegal Bank, Falsifying Taxes

United States Department of Justice
United States Attorney’s Office, District of New Jersey
Press Release
May 19, 2015

Union City, New Jersey, Man Sentenced to 27 Months in Prison for Operating Supposed Charity as Illegal Bank, Falsifying Taxes

NEWARK, N.J. B A Union City, New Jersey, man was sentenced today to 27 months inprison for operating a supposed charitable organization, or "gemach," as an unchartered bank,accepting millions of dollars in deposits – including nearly $1 million of his own money – whichhe shielded from state or federal regulation, U.S. Attorney Paul J. Fishman announced.

Moshe Schwartz, 34, a/k/a "David Schwartz" or "Gedalya David Schwartz," previouslypleaded guilty before U.S. District Judge Jose L. Linares to two counts of an information:operating an unchartered bank and aiding and assisting in the filing of a false 2007 tax return.Judge Linares imposed the sentence today in Newark federal court.

According to the information and statements made in court:

Schwartz operated Gemach Shefa Chaim (GSC), purportedly to provide interest-freeloans to needy members of the Sanz community in Union City. During his guilty pleaproceeding, Schwartz admitted he operated GSC as a bank, with millions of dollars in depositsand 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 theUnited 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 hadsuch a charter.

Schwartz admitted that, in operating GSC as a bank, he accepted deposits and creditedclients' accounts, wrote checks from GSC as directed by clients, made transfers betweenaccounts, disbursed client funds upon request, negotiated GSC checks presented by persons otherthan 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 alsoadmitted that he opened and maintained various bank accounts at financial institutions in oraround 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 clientfunds 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 andsource of the funds. Many clients were thus able to use their GSC accounts to engage insuspicious and, at times, illegal activities, including evading federal taxes and money laundering.

Schwartz also admitted that he provided false and fraudulent information to his taxpreparer in Union City concerning his income for tax year 2007, falsely representing that hisincome was $24,475 when it was approximately $208,845. Schwartz admitted that he used hisown 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, Judge Linares sentenced Schwartz to serve two yearssupervised 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 ultimatelyforfeited. The accounts had been used by Moshe Altman, 45, Itzak Friedlander, 47, and ShimonHaber, 39, to launder proceeds that cooperating witness Solomon Dwek, 42, had purported to bethe proceeds of illegal activities. Altman pleaded guilty in December 2010, to, among otherthings, conspiring to launder monetary instruments and was sentenced in March 2011 to 41months in prison. Friedlander pleaded guilty in April 2010 to conspiracy to launder monetaryinstruments and was sentenced in April 2011 to 24 months in prison. Haber pleaded guilty to thesame 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 thedirection of Special Agent in Charge Jonathan D. Larsen, with the investigation leading totoday's sentencing; as well as the FBI, under the direction of Special Agent in Charge RichardM. Frankel; the Federal Deposit Insurance Corporation-Office of Inspector General, under thedirection of Special Agent in Charge Francis L. Mace; 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 Mark J. McCarren of theSpecial Prosecutions Division and Frances C. Bajada of the Criminal Division in Newark.


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