Inside The Satmar School Scandal

Peering out at the reporters and TV cameras clamoring around the entrance of his religious girls school in Brooklyn last week, Rabbi Hertz Frankel’s mind raced as they demanded he comment on his crime. It was a serious crime, a federal felony involving no-show teachers, fund diversions, false job titles and clear breaches of the separation of church and state. It was one Frankel had quietly pleaded guilty to the previous week.

But despite his guilty plea and a sentence criticized by the Board of Education’s inspector general as "extremely lenient," Frankel told the reporters in an official statement issued that day: "I am the victim of a great injustice."

Two days later, a New York Times story seemed to compound the impression of a self-confessed but

uncontrite felon. Explaining carefully how the whole scheme had been initiated and pressed upon him by now-deceased Board of Education officials (how the funds had not benefited him personally, but had gone to help fund secular education in his cash-strapped parochial school) the 68-year-old rabbi was quoted as saying: "You’re right to say, ‘The end justifies the means.’ "

On April 9, after five years of investigation and negotiation, Frankel was sentenced to three years’ unsupervised probation for conspiring to defraud the federal government and the New York City school system of millions of dollars in remedial education aid for children. Frankel’s school, Beth Rachel, a Satmar chasidic school in Williamsburg, had to pay a fine of $1 million.

Federal prosecutors minced no words in also fingering senior officials of School District 14 as key conspirators together with Frankel, who were not charged with benefiting personally from the scheme. But the three central school officials involved (district superintendent William Rogers; his successor, Mario DeStefano; and district administrator Fran Gasman) were beyond the reach of any earthly court. Between 1992 and 1998, all three died of stomach cancer.

For many, Frankel’s sentence and his later comments evoked images of communal clout and an accompanying communal mind-set sometimes stereotyped as characteristic of New York’s ultra-traditionalist Orthodox community.

"If you had a secular organization that bilked a public school out of $6 million, you would see [him] either going to prison or paying hefty fines," said Professor Marci Hamilton of Yeshiva University’s Benjamin Cardozo Law School. This, she said, was "a light slap on the hand [that] could only be attributable" to government favoring an influential religious group.

"You can be certain there were all sorts of conversations with politicians in this case intended to find a way out for this individual," said Hamilton.

But Frankel’s lawyer, the prominent Washington attorney Nathan Lewin, moved not one inch from his stance that his client, though guilty, was a victim of injustice: or worse.

"This is the case that finally persuaded me of the bias of the U.S. attorney in Brooklyn against chasidim," he told The Jewish Week.

The illegal scheme, Lewin asserted, was initiated and run by the now-deceased top district officials. "They approved it. They knew every detail of it," he said. "But because the two superintendents are dead, my client is now being left to shoulder the blame."

If the prosecutors had to go for criminal rather than civil penalties at all, Lewin said, it should have been against the school, not his client.

Monday, sitting in the same somewhat ramshackle principal’s office in which he gave The Times interview, Frankel maintained the stance he says he has tried to project from the beginning: guilty, with an explanation. But coached now on the impact of his remarks, Frankel’s words and tone were markedly different.

"Certainly it was wrong," he said. "But sometimes you see something and you try to divert your thoughts to other issues, especially when you’re being reassured that it’s all right by people who should know. … When you’re involved in the problems of the school, and you see teachers not being paid for three months, you sort of justify a situation that turns out to be wrong."

Still, Frankel referred to himself as "the sacrificial lamb," explaining, "If the others were alive, I’m sure they would’ve gone after them."

No one disputes that the three senior District 14 administrators played crucial roles in the Williamsburg conspiracy. At a minimum, beginning in 1978, Rogers and Frankel implemented a scheme under which Frankel provided the school district with lists of women from the Satmar community who could present appropriate credentials to be put on the district’s payroll as teachers and teachers’ aides at Beth Rachel. But the women actually never worked at these jobs.

Instead, for lending their names to the scheme, they received the health insurance benefits their jobs carried. Beth Rachel officials, meanwhile, cashed their salary checks and used the money to pay other, younger women who lacked the required credentials to perform this teaching.

"We only want Satmar teachers for Satmar girls," Frankel said, alluding to the insular community’s fierce resistance to outside influences. But since there was an acute shortage of such women with the credentials required by the Board of Education who were free to work, Frankel simply turned to women who were not free to do so and used their names.

Constitutional standards allow such federal funding to parochial schools for remedial education Washington offers to all, as long as the students learn outside the religious school classrooms in a "neutral setting." But the teaching in this case took place in the school.

In addition to these funds, Rogers and Frankel implemented a plan that diverted state and city tax revenue to other women who were classified falsely as "school guards" working for the district. In fact, they, too, worked in Beth Rachel’s secular education division in various capacities, though it is against the law for state or city funds to be used for parochial education under any circumstances.

After Rogers’ retirement as superintendent in 1992, his successor, DeStefano, maintained the scheme with Frankel. Gasman, who served during both tenures, helped process the phony teachers onto the district payroll and handled time sheets and paychecks with Frankel.

In June 1994, this scheme crashed to a halt when federal agents raided District 14 headquarters and carted off boxes of files that helped lay bare the crime. Four months later, Lewin sent a letter to the U.S. attorney detailing numerous aspects of how the scheme worked. The letter listed many of the women who had illegally benefited from it that year, and how much they made.

Most important, Lewin placed the responsibility for initiating the subterfuge squarely on Rogers and stressed the role of numerous other district employees, whom he named, as participants.

Asserting that all the funds, however fraudulently obtained, went directly or indirectly to the legitimate federal program, Lewin urged, "We believe that there … is no basis whatever for any criminal inquiry. … It is sufficient if the questionable practices have been stopped and the ship’s direction has been corrected."

But Edward Stancik, the Board of Education inspector general who initiated the investigation and then turned it over to the federal attorneys, bluntly challenged this.

"Large amounts of money are unaccounted for," he wrote in a detailed report issued last week. "Some of this money made its way into myriad [other Satmar education] organizations, and some has simply vanished."

Citing one example, Stancik charged that Beth Rachel each year received large sums of government money to fund staff for a summer day-camp program. But, he said, "There was no summer camp at Beth Rachel. Camp ’employees’ were often vacationing outside New York City … and prepared post-dated time sheets before they left. … The camp was a fiction designed to keep them on the payroll during the summer."

Lewin, however, submitted to the U.S. attorney affidavits from four women who claimed to have directed the summer camps over the years, overseeing between 300 and 650 girls and supervising from 25 to 50 staff.

Stancik also charged that the illegal payroll deal was part of a larger political quid pro quo. Citing testimony from two "insiders at the district," he asserted that Rogers and DeStefano worked the illegal payroll deal with Frankel in exchange for backing from three Satmar representatives on District 14’s nine-member school board. "This support effectively guaranteed that the superintendents could not be ousted," Stancik wrote.

Frankel insisted he had no power to deliver any of the Satmar board members. And in any case, he said, they never constituted a majority of the board.

Partly due to such conflicting claims, more than four years of tortuous negotiations followed the 1994 raid on district headquarters. Stancik and Lewin each pressed the U.S. attorney in Brooklyn. Finally, those negotiations culminated this month in Frankel’s guilty plea to a single conspiracy charge, his probation sentence and the $1 million fine paid by Beth Rachel.

Nevertheless, when reporters massed around Beth Rachel last Thursday seeking comment on the plea, Frankel was truly caught unaware. Though he had pleaded guilty one week earlier, an agreement between his attorneys and the federal prosecutors dictated that no press release or publicity was to be given out.

It was Stancik’s 10-page report speaking of "a far-reaching criminal conspiracy," released at a press conference last week, that punctured this plan.

"My main concern was to make sure I was not bound by any agreement they might make," said Stancik. "I don’t think that’s a proper agreement. This is a major matter of public interest."

Indeed, Stancik’s report reads in many ways like a detailed protest against the package negotiated between Frankel’s lawyers and prosecutors. But with Frankel’s guilty plea, many of Stancik’s findings, which extend beyond those set out in the negotiated agreement, will never be tested in court.

"It was a very good deal for us, we’re happy," said a federal law enforcement source who, speaking on condition of anonymity, strongly defended the plea bargain. Alluding to a serious heart ailment plaguing Frankel, the source said, "You have a rabbi, 68 years old. Even if he’s convicted at trial, he might not go to jail given his age and his health."

Futhermore, the official said, prosecutors were not confident they could identify the bulk of the lost government funds in a trial. So they chose to accept the $1 million in hand.

"In our view he didn’t really get away with it," said this official. "This is a guy who took a felony plea."

But in Brooklyn, one close observer of ultra-traditional Orthodox affairs said, "I think the sentence sends a message: this was a technicality. Is this the punishment of someone who has embezzled $6 million?"

Staff writer Eric J. Greenberg contributed to this report.