Page images
PDF
EPUB

ing these texts with someone supposedly more learned than themselves. It should be remembered as we discussed at the outset of this section, that this activity is taking place in the context of a community which views the study of Jewish texts as part of one's religious obligation. Thus, Bais Fruma students are in reality doing nothing more than what any observant member of the community would otherwise engage in as part of his religious observance.

The certificate awarded by Bais Fruma appears to be an essentially worthless piece of paper, because as Bais Fruma itself states, its program is not designed to lead to career preparation or professional progress. Students enrolled in Bais Fruma's program therefore must be engaging in this course of study for the sake of knowledge itself. Again, it must be remembered that this is exactly the view of study which is at the core of this community's religious beliefs.

Why then create a program which grades students and has academic transcripts, which tracks satisfactory academic progress and which awards certificates of Judaic Studies? In the absence of any evidence to the contrary, it seems clear to the Staff that the only reason must be in order to qualify such a program to receive Federal student financial aid funds. This is exactly what Bais Fruma appears to have done. It applied to participate in Federal student financial aid programs at the earliest moment at which it became legally entitled. Upon being accepted, it steadily increased its participation to the point at which it was receiving over $4.5 million in Pell Grants in 1 year alone. In fact, in 1992, Bais Fruma's Pell Grant receipts constituted over 86 percent of its total income.

The main questions all of this leads to, of course, are why would Bais Fruma want access to Federal funds and what has it done with the Federal money it has received over the years? Once again, the Staff can only speculate on these issues because of the refusal of Bais Fruma's officials to submit to questioning. A review of Bais Fruma's financial statements and bank records, however, does suggest some possible answers.

The Staff reviewed Bais Fruma's bank account records for the period December 1989 through April 1993. This review revealed the following payments during that time period which are shown in the chart on the right. Cross checking these payments against Bais Fruma's financial statements reveals that the payments to the Rabbinical Seminary of Munkacs represent payment on a mortgage for a piece of property at 1377 42nd Street in Brooklyn. The chart 1 shows the payments to the Rabbinical Seminary total $412,500 for the time period studied. This mortgage, which commenced in September 1991, is in the amount of $700,000 and its terms call for interest-only payments for 10 years, payable at an interest rate of 7.5 percent.

The Staff notes that Bais Fruma made five payments, totally $250,000 to the Rabbinical Seminary between November 1990 and June 1991, well before the commencement of the mortgage. The Staff has been unable to determine whether these payments were related to the purchase of this property.

1 See Appendix F to Staff statement, pages 189–190.

The payments to the Boro Park Torah Institute, which the chart shows as totaling over $1.2 million, also represent payment on a mortgage. This one is in the amount of $2 million for a piece of property located at 4018 15th Avenue in Brooklyn. This address is literally around the block from the first property, and the chart here shows photographs of each of these properties.

Senator COHEN. Is that 18 percent interest?

Mr. EDELMAN. Yes, Senator.

Senator COHEN. When was that mortgage entered into?

Mr. EDELMAN. That mortgage commenced in September 1988 and also called for interest-only payments for 10 years, and as you have noticed, the rate for that mortgage was 18 percent.

Senator COHEN. Which bank?

Mr. EDELMAN. There's no bank involved in this. And, in fact, there is no note or no paper evidencing this mortgage or the mortgage on the other piece of property.

Chairman NUNN. What were the normal mortgage rates when that 18 percent mortgage was entered into?

Mr. EDELMAN. The Staff was rather suspicious of this high interest rate so we checked the mortgage rate indices for the year 1988. This check confirmed our suspicions when we found out that in September 1988, mortgage rates ranged between 10 and 11 percent. Why Bais Fruma would sign a mortgage for 7 to 8 percentage points more than prevailing market rates is again something that unfortunately we are unable to answer, because we have not been able to get anyone at Bais Fruma to talk to us.

Chairman NUNN. Is that mortgage still current? Does it continue today?

Mr. EDELMAN. That mortgage is still current. They are still paying monthly payments, to the best of our knowledge, on the mortgage and the rate is still 18 percent. And as we all know, mortgage rates since 1988 have steadily dropped to the point where today they range from 6 to 7 percent. And again why Bais Fruma has not over the years sought to refinance this mortgage or cut the mortgage rate down is a question which we have been unable to ascertain the answer to.

Senator COHEN. Excuse me for interrupting, Mr. Chairman, but is that an empty building?

Mr. EDELMAN. Yes, Senator, both of the buildings are empty buildings and the Staff went to the location of each of these buildings, looked into the buildings, found them to be basically shells of the building.

Senator COHEN. No prospects for renovation?

Mr. EDELMAN. We saw no signs that any renovation had been done on either of the buildings that any signs of any renovation was underway at any of the buildings. We would note in that regard that the picture on the bottom which is the 15th Avenue address, on which they have a $2 million mortgage, is a building which Bais Fruma has now held for 5 years. And in those 5 years, there are no signs that they have done anything to make any use of the property and all they have done is pay money, over a million dollars on the mortgage.

Chairman NUNN. Are you going to go into explanation about the recipients and who they are?

Mr. EDELMAN. Yes, Mr. Chairman. The other thing about these two pieces of property which has struck the Staff as odd, is the fact that as we stated at the outset, Bais Fruma is an independent studies school. It is a school which has no teachers, no classrooms, no laboratories, no dormitories. Students who attend the school study on their own in their homes. Why then in light of that Bais Fruma needs two such buildings of rather large size is again a question which the Staff has which no one at Bais Fruma has been willing to answer for us.

A closer examination of the mortgage holders on these properties makes the payments even more intriguing. The Rabbinical Seminary of Munkacs is, of course, run by the Munkacser Hasidic Movement. The Munkacser Movement also runs Bais Fruma. Moreover, a check of the Metronet name and address database reveals two addresses for the Rabbinical Seminary of Munkacs-4712 14th Avenue and 4601 14th Avenue, both of those in Brooklyn. These addresses were confirmed by a call to directory assistance for the 718 area code which is Brooklyn. Of the two addresses listed for the Rabbinical Seminary of Munkacs, one, 4601 14th Avenue, is the same address as that of Bais Fruma.

The Boro Park Torah Institute, which is the holder of the mortgage on the property pictured in the bottom photograph, also appears to be affiliated with the Munkacser Movement. A check of the Real Property Display database for the address 4018 15th Avenue, the address pictured here [indicated], shows the owner to be "Boro Park Torah Institute, c/o Rabbinical Seminary of Munkacs." A cross check with directory assistance for the 718 area code revealed no separate telephone listing for Boro Park Torah Institute.

It is possible that these mortgages are nothing more than convenient ways for Bais Fruma to launder its profits, while at the same time legitimizing what is in essence nothing more than the transfer of Federal funds from one arm of the Munkacser Movement, namely, Bais Fruma to other affiliated arms, namely, the Rabbinical Seminary and the Torah Institute.

Similarly, the Staff questions the payments to Mosdos Munkacs, the United Munkacser Yeshiva, Congregation Kahal Adas Israel Munkacs, Yeshiva Minchas Eluzar Kollel, and Yeshiva Minchas Eluzar, insofar as each of these entities are also arms of the Munkacser Hasidic Movement. The affiliation of the first three is obvious from their names. The affiliation of the latter two was determined when the Staff visited the 4712 14th Avenue address listed for the Rabbinical Seminary of Munkacs. On the outside of this building, which is only one block away from Bais Fruma, was an inscription in Hebrew which read "Beit Midrash V'Yeshiva Minchas Eluzar Munkacs."

According to Bais Fruma's Cash Disbursements Journal for the period September 1, 1991 through August 31, 1992, the only period for which the Subcommittee was provided with such a journal, the payments to Mosdos Munkacs and Yeshiva Minchas Eluzar Kollel were listed as being for "educational" research. The Staff notes that for the 2-year period from March 1991 through April 1993, Bais Fruma paid a total of $170,500 to these two institutions. In addition, Bais Fruma also made a one-time payment of $8,000 to K'hal Chasidim Munkacs London in February 1992 and a one-time pay

ment of $5,000 to K'hal Chasidei Munkacs in March 1992. The purpose of these payments was also listed as "educational research." Why a school which is run as an independent, self-directed study program needed to spend over $183,000 on educational research is a question which again the Staff has been unable to answer.

With respect to the payments made to Mosdos Munkacs, the Staff notes that $23,000 paid to this entity was wired to an account in B'nei Brak, Israel. The Staff has also discovered that three wire transfers made by Bais Fruma in 1992 from its own bank account in New York went to Israel to an account in the name of Bais Fruma. These transfers totaled over $120,000. And again, the Cash Disbursements Journal lists these payments as being for educational research.

The payments to Congregation Kahal Adas Israel Munkacs, which totaled over $240,000, are listed in the journal as being for a "training facility." Again, why an independent study school which employs no teachers needs a training facility is a question which the Staff cannot answer.

The journal lists the payments to Yeshiva Tifereth Bunim as being for rental of a library and the payments to Yeshiva Chaim V'Shulom as being for rental of a property at 1270 52nd Street, Brooklyn. That address is shown in the photograph on the top.

From its inception in 1980 until sometime in 1986, Bais Fruma was located in this address, pictured in the top photograph. According to a February 1989 letter by Rabbi Simche Waldman, Bais Fruma's administrator, the school moved from the 1270 52nd Street address to its current location at 4601 14th Avenue in order to secure additional space. The letter states that students and faculty were transferred to the new location at that time. The photograph at the right shows this location today. Nothing on the outside of the building indicates that it has anything to do with Bais Fruma. Indeed the sign on the outside of the building reads, Talmud Torah Tiferes Bunim Annex. This building is attached to the building in the photograph on the bottom which also bears a sign reading Talmud Torah Tiferes Bunim. The address for this building is 5202 13th Avenue.

As you will notice from the photographs the sign on each of the buildings contains Hebrew writing above the English name. While I do not expect any of the members of this panel to be able to read that writing, I can tell you that it states

Senator COHEN. I wouldn't be so sure of that.

Mr. EDELMAN. I apologize, sir.

Chairman NUNN. You are right about the Chairman though.

Mr. EDELMAN. I will read it for you anyway. The writing reads, "Talmud Torah Tiferes Bunim D'Munkacs," again indicating that the institutions operating in these buildings are part of the Munkacser Movement. From observations of these buildings, it appears that they are a high school. The Staff has been unable to determine why Bais Fruma is paying rent for a building which it acknowledges having moved out of years ago, nor does the Staff know why Bais Fruma is renting a library from a high school, particularly in light of the fact that Bais Fruma's school bulletin states that its own facility contains a "well stocked Judaica library." All

we do know is that over the past 3 years the payments to Tifereth Bunim and Chaim V'Shulom have totaled over $1 million.

Staff also notes that as was the case with the two mortgages which Bais Fruma is paying, no written agreements appear to exist with respect to any of these rentals. Again, this raises questions as to whether these are legitimate arms-length transactions.

A number of the recipients of the large payments from Bais Fruma are either yeshivas or kollels. These types of entities are institutions of religious study. Yeshivas are generally institutions at the elementary or secondary level, while kollels are generally institutions designed to allow young married men to pursue the study of "Torah Lishmah"; that is, the study of Torah for its own sake. Because the yeshivas are essentially parochial schools and the kollels are non-degree granting, nonvocational schools, neither of these types of institutions would usually be eligible for direct Federal funding.

In light of this fact and in light of the numerous payments made by Bais Fruma to these institutions, the Staff questions whether Bais Fruma's participation in the Pell Grant program is being used by the Munkacser Movement as a vehicle to funnel Federal funds to various religious institutions which otherwise would be ineligible to receive Federal aid. While the Staff currently has no direct proof that such is the case, the blanket invocation of the Fifth Amendment privilege by the administration of Bais Fruma and their refusal to cooperate with our investigation leaves troubling questions such as this unanswered. The Staff would certainly like to hear Bais Fruma's explanations for these payments, as well as for numerous other questions which we have about its operations.

At this point, Mr. Chairman, Mr. Buckley will detail the results of our findings with respect to the Sara Schenirer Teachers Semi

nary.

Chairman NUNN. OK.

TESTIMONY OF DAVID B. BUCKLEY, CHIEF INVESTIGATOR, PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

Mr. BUCKLEY. Mr. Chairman, another school we examined was Sara Schenirer Teachers Seminary, a small, private, nonprofit religious institution operating in Brooklyn, New York. According to its catalog, the school was created to, "Offer a challenging program of higher Jewish study that will prepare women to serve as teachers, mothers, and full realized individuals in the Jewish community."

Based on our investigation, we determined that Sara Schenirer veered from this stated course in the late 1980s and has become nothing more than a Pell Grant mill abusing this Federal program and profiting from it. In the past 10 years this school has drawn down almost $11 million in Pell Grants. Our investigation of Sara Schenirer Teachers Seminary revealed an institution which does not meet the eligibility requirements to the Federal law for participation in the Pell Grant program. We believe the institution circumvented the gatekeeping process to become eligible, receiving waivers from the State of New York and the U.S. Department of Education.

1 See Appendix G to Staff statement, page 191.

« PreviousContinue »