Arnold Klein, the head of a religious charity that laundered illicit money has been sentenced to six months in federal prison.
U.S. District Judge Kenneth M. Karas also sentenced Klein, of Kiryas Joel, Orange County, to two years of supervised release and ordered him to forfeit nearly $300,000 in ill-gotten gains.
Klein pleaded guilty to conspiracy to operate an unlicensed money transmission business for laundering proceeds from a purported health care fraud for an individual who turned out to be a confidential informant.
The feds have not identified the informant in public documents, but Klein has fingered his accountant, Steve Strauss.
From 2016 to 2017, the informant gave Klein four checks totaling $280,000, payable to Gemach Keren Hillel, a nonprofit, religious loan society controlled by Klein.
Then the loan society paid back the source, minus a 6% commission, or about $17,000.
Klein’s attorneys asked Karas to impose no prison time. Prosecutors recommended incarceration for 24 to 30 months.
Klein, 71, was born in Austria, moved to Canada as a child, attended a Hasidic school in Brooklyn, ran a garment business in Manhattan and, when that failed, ran a real estate business, according to a sentencing memorandum by attorneys Susan R. Necheles and Gedalia M. Stern.
They depict Stein as a devoted family man to his eight children, 44 grandchildren and 4 great-grandchildren; a “giving member” of the Kiryas Joel community, where he set up after-school programs and was active in his synagogue; an informal mediator who arbitrated neighborhood disputes; and a supportive husband helping his ailing wife, Rivka.
They recommended no prison time, six months of home confinement, fines and forfeiture of nearly $300,000, and 300 hours of community service.
The Aleph Institute, a nonprofit organization that advocates on behalf of prisoners, recommended 300 hours of community service with the Rockland County chapter of the American Red Cross and a mentoring program where Klein would speak out about obedience to the laws of the United States, in the context of Jewish teachings on ethical and moral behavior.
Klein’s “personal story and remorse will bring this concept to life and provide people with a living, cautionary tale,” Adelph states in a letter to Karas, “while the lessons of the Talmud will provide the concrete parameters to which they can personally relate.”
Klein begged for forgiveness in a letter last month the Karas.
He said desperation for money led him to put money from his accountant into the Gemach account, “with the understanding that I could use the money for a few months.” He said he was wrong to ignore the purported source of the money, and in doing so he failed his family and friends.
“I promise that from now on I’ll only lead by example and only do what’s right,” the letter states.
Klein’s accountant, Steve Strauss, tried to entrap clients, according to Klein’s sentencing memo, and “one of the clients that he successfully convinced to commit a crime was Mr. Klein.”
Assistant prosecutor Shiva H. Logarajah took issue with Klein’s version of events.
“Contrary to the defendant’s curious assertion, the defendant was not ‘convinced to commit a crime’ by the government, according to the prosecution’s sentencing letter.
Recordings show that Klein asked the informant if he knew “people that had a lot of cash they want to get rid of,” and said he could exchange cash for checks, for a fee.
“The defendant ran a bustling off-the-books financial operation using a religious institution’s account,” the memo states. The informant was “one of many clients,” Klein was “entirely comfortable” with the purported illegal source of the funds, and he “used the cloak of charity and religion to cover his criminal activity.”
Karas ordered Klein to surrender to the Bureau of Prisons on Oct. 14.
Charges of money laundering and bank fraud are pending against co-defendant Leon Klein, whose relationship to Arnold Klein is not explained in the indictment.
