‘Challah’ and ‘tefillin’ were code words in the Chabad of Poway’s tax fraud scheme

A San Diego attorney was sentenced in federal court for conspiring with the former rabbi of the Chabad of Poway to commit tax fraud, using coded language about “wrapping tefillin,” or phylacteries, to hide the pair’s intentions.

The attorney, Elliot Adler, was sentenced to one year and one day in prison on August 19 for his involvement in the scheme. The rabbi involved, Yisroel Goldstein, who was charged in July 2020, was sentenced to 14 months in prison in January.

In what prosecutors are calling a “90/10” scheme, Adler made donations to Chabad of Poway, of which Goldstein funneled 90 percent of the funds back to Adler, keeping another 10% for himself. This scheme began in 2010 with amounts in the tens of thousands of dollars, snowballing into larger amounts over time. Prosecutors also say that Adler falsely claimed the fraudulent donations as tax-deductible on his tax returns, reducing the amount of personal income tax he would have to pay by a total of about $500,000 between 2011 and 2017.

Adler and Goldstein communicated using coded language, referring to cash as “challah” and the source of the money as “the baker.” Goldstein would invite his co-conspirators to “wrap tefillin” when he was arranging for deliveries of checks, cash, and gold. Prosecutors say that Adler’s participation in the scheme involved receiving $1 million back in gold coins from Goldstein in 2018.

Aside from Adler and Goldstein, another 11 individuals involved in the scheme have also been previously charged, including MendelGoldstein, the brother of Yisroel Goldstein (not to be mistaken with Yisroel Goldstein’s son, the current Chabad of Poway rabbi who is also named Mendel Goldstein and was not implicated in the scheme).

Adler pled guilty, and as part of his sentence, he was forced to forfeit the gold. He is also no longer eligible to practice law, according to the California State Bar, and a restitution hearing set for October will determine what else he owes.

Chabad of Poway, located near San Diego, was the site of a 2019 shooting that occurred on the last day of Passover. One woman was killed and another three people were injured, including the rabbi at the time, Yisroel Goldstein. In the moments after the attack, the 19-year-old shooter told a 911 operator that he opened fire on the synagogue in order to save white people from Jews. 

The shooter had also written an antisemitic manifesto that he posted to 8chan, an internet forum that has been linked to white supremacy and antisemitism. The murder and attempted murders were classified as a hate crime, to which he pleaded not guilty. He was sentenced to life in prison.

Yisroel Goldstein, who was shot in the hands and lost a finger in the attack, retired from his position at Chabad in Poway in November 2019. Unbeknownst to the public at the time, federal agents were already investigating the tax fraud scheme, even before the shooting. Goldstein pleaded guilty to tax fraud in 2020 and was sentenced to 14 months in prison in January 2022.

The Los Angeles Times reported that the prosecution and the defense attorneys both recommended Goldstein be sentenced to home confinement because of his public leadership in the wake of the shooting — which included an appearance at the National Day of Prayer in Washington, DC, and a condemnation of antisemitism at the United Nations — but the judge found the punishment to be insufficient, given the severity of his crimes and his influence in his community.

Although he was not implicated, Goldstein’s son Mendel, the current rabbi of Chabad of Poway, has been urged to resign from his position by the Vaad of San Diego, the umbrella organization for the Chabad-Lubavitch movement in the area. The Vaad had previously planned to appoint a senior representative to supervise Goldstein, which Goldstein alleges is an effort to push him out of his position.