Lakewood rabbi, others arrested in alleged million-dollar welfare fraud

A look back: As a part of its year in review, the Asbury Park Press is taking a look back at our most-read stories of 2017. This story was originally published in June.

LAKEWOOD -- A prominent rabbi and several others were arrested in simultaneous federal and state raids Monday morning on charges related to alleged public assistance fraud on a scale rarely seen before in New Jersey.

Rabbi Zalmen Sorotzkin, who runs the synagogue Congregation Lutzk and businesses linked to the synagogue, was taken into custody Monday and is facing charges of theft by deception in Ocean County Superior Court.

Also arrested in the sting headed by the FBI, Ocean County Prosecutor’s Office and other agencies were Zalmen’s wife, Tzipporah Sorotzkin, and married couple Mordechai and Jocheved Breskin. The three also face state criminal charges, according to a source close to the case who spoke on the condition of anonymity because of the ongoing investigation.

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In addition, four others were arrested Monday and were taken to Trenton to face federal charges in U.S. District Court. They are Mordechai Sorotzkin, brother of Zalmen, and his wife, Rachel Sorotzkin, and Shimon and Yocheved Nussbaum. View the map below for the locations of the homes raided or attempted to be raided Monday.

Authorities said this is just the first wave of raids in Lakewood and that there would be more arrests in the days and weeks ahead. The scale of the alleged public assistance fraud may well top several millions of dollars, authorities said.

“The investigation to date has found that government benefits fraud and income tax evasion in the Lakewood community is widespread,” said a source involved in the case, who spoke on the condition of anonymity because the investigation is ongoing.

The investigation found an alleged scheme that “rival the most sophisticated of financial frauds,” the source said.

It is alleged that all four couples made tens of thousands dollars more per year than they reported to the public assistance programs, a law enforcement source said.

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"Financial assistance programs are designed to alleviate family hardships for those truly in need," said Ocean County Prosecutor Joseph Coronato in a statement. "My office gave clear guidance and notice to the Lakewood community in 2015 of what is considered financial abuse of these programs.

"Those who choose to ignore those warnings by seeking to illegally profit on the backs of taxpayers will pay the punitive price of their actions."

Federal and state agents fanned out to the four Lakewood homes early Monday morning, mostly in black, unmarked cars. FBI agents repeatedly knocked on Rabbi Sorotzkin's door just before 6 a.m, to no immediate answer. But he was in custody, along with the seven others, by 7 a.m.

Around the same time on Hadassah Lane, agents waited with the Nussbaums in their townhouse while the couple found someone to watch their children. At one point a teen was seen packing suitcases and boxes into a van parked in front of the house. The couple, handcuffed, was then placed in a black law enforcement van.

The Lakewood residents are accused of taking advantage of multiple public assistance programs to defraud the government of around $1.3 million over the past few years, Coronato said.

The Breskins are being charged with second-degree theft by deception for allegedly collecting $585,662 in public assistance benefits they weren't entitled to, the prosecutor said in the statement.

Zalmen and Tzipporah Sorotzkin face the same charges for allegedly collecting $338,642 in Medicaid, food stamps, Section 8 housing subsidies and Supplemental Security Income, according to the prosecutor's office.

Both couples appeared by video in Ocean County Superior Court on Monday afternoon to hear the charges against them. All four people were released Monday and will next appear in court on Aug. 16.

After the hearing, Edward Bertucio, attorney for Zalmen and Tzipporah Sorotzkin said his clients were "innocent" but declined to comment specifically on the case.

The Nussbaums allegedly underreported their incomes and failed to disclose money they received from a number of companies -- including a clothing company and a daycare company -- in order to collect Medicaid, Section 8 housing assistance and food stamps between 2011 and 2014, according to a federal complaint signed by FBI Special Agent Michael Farina.

In that time, the Nussbaums allegedly collected $178,762 in public assistance they weren't entitled to get. Read the full complaints at the bottom of the page.

The Nussbaums and Mordechai and Rachel Sorotzkin appeared in federal district court wearing street clothes, with their wrists and ankles shackled, though U.S. District Court Judge Douglas Arpert allowed the Sorotzkins to proceed without handcuffs at the request of Rachel Sorotzkin's attorney Fred Zemel.

Arpert agreed to release all four defendants , provided each posted a $100,000 unsecured bond.

Arpert also ordered that the two couples restrict their travel to New Jersey, New York and Pennsylvania unless they clear a longer trip with the court. All four surrendered their passports before leaving the federal courthouse in Trenton Monday.

The complaint against Mordechai and Rachel Sorotzkin accuses them of also underreporting their incomes to collect Medicaid. Rachel Sorotzkin allegedly failed to report $1.5 million she received from a limited liability company when signing up for public assistance.

In the complaint, Farina wrote that Mordechai and Rachel Sorotzkin received more than $96,000 in Medicaid funds they shouldn't have claimed.

Both couples face separate counts of conspiring to steal government funds, according to a statement from the U.S. Attorney's office. The conspiracy counts each carry a maximum potential penalty of up to five years in prison and a $250,000 fine, or twice the gain from the offense.

Zemel said "everything's going to work out" and all the defendants "will be vindicated."

Mordecai Sorotzkin's attorney Ben Rosenberg declined to comment, as did Jacob Laufer, who represented both Nussbaums Monday.

"This operation highlights the success of federal, state and county cooperation in New Jersey's effort to combat Medicaid and other government benefits fraud," said state Comptroller Phillip James Degnan in a statement. "My office will continue to ensure that only individuals and families truly in need of benefits receive them, and that those who choose to steal from New Jersey taxpayers are referred for prosecution."

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Authorities were able to determine that the families allegedly misrepresented their incomes partly by tracking illegal money transfers made at a Lakewood beeper store, according to the source. The owner of Beepers Plus on Clifton Avenue pleaded guilty on Feb. 23 to transmitting millions of dollars without a license, an indictable offense in New Jersey. Watch the video below for an Asbury Park Press report on the beeper store.

Beeper store home to hundreds of Lakewood companies A beeper store on Clifton Avenue in Lakewood in the mailing address for hundreds of LLC enterprises in the township. STAFF VIDEO BY THOMAS P. COSTELLO

By looking at some of those transfers, along with private school tuition records and withdrawals from a state fund that pays medical fees for sick children whose parents can’t afford their care, investigators uncovered the alleged fraud, the source said.

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The investigation into the alleged public-assistance fraud began around three years ago and now comprises a variety of federal and state law enforcement agencies. The FBI, the Social Security Administration, the New Jersey Treasury Department, the state comptroller’s Medicaid Fraud Division and the Ocean County Prosecutor’s Office all have been investigating.

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