There’s something very fishy on the Lower East Side and it’s not the Fulton Fish Market. A mysterious deal to sell a shul out from under its members and donate more than three-quarters of the proceeds to a small unrelated sect in Israel has raised so many red flags that it looks like a rally in Tiananmen Square.

Here’s what’s happening.

There’s a hearing next Wednesday—April 15—in the New York State Supreme Court before a judge who will be asked to approve the $13 million sale of Home of the Sages, a venerable synagogue/nursing home at 25 Bialystoker Place just south of Delancey St. The buyer is a developer named Peter Fine, who has built nearly 10,000 affordable housing units and is also a friend of William Rapfogel, the now-disgraced Met Council boss who was hugely influential in LES affairs before beginning his three to 10-year prison term for insurance kickbacks,

As a nonprofit, the Home of Sages needs a “Leave of the Court” to finalize its sale. Also intriguing is that the institution—a nonprofit selling a building for the tiny-by-New-York-City-standards price of $13 million—is represented by Patrick Rohan at the law firm Boies, Schiller & Flexner. Why is a partner at a superstar law firm representing the seller in a transaction that’s less than half what many high-end condos sell for these days in Manhattan? So that’s another bright red second flag. (Reached by email for comment, Mr. Rohan revealed himself to have the good judgment to be a 25-year reader of the Observer, but declined to answer specific questions. This story will be updated if he weighs in.)

The deal first began to percolate about a year and a half before Mr. Rapfogel went to jail in 2014. All of the institutions and the land involved fall under the jurisdiction of the Attorney General’s Office Charities Bureau (OCB). In a wolf-guarding-the-henhouse situation, Mr. Rapfogel had actually been appointed by Attorney General Eric Schneiderman to the panel that advised the AG’s office on best practices for charitable institutions. According to a lawyer who spoke to the Observer on condition of anonymity because of ongoing dealings with OCB, “Two years ago, when Willie went into the office, he was the prince. Whatever he said was golden. No one looked, no one checked. When he went to jail, a lot of things he did began to blow up, and this one of them.”

The deal is complex, and even a thorough reading of the “Application for Leave to Sell Real Property” doesn’t reveal the motives for the sale. (Though it is interesting in its own right, simply as a glimpse into changing New York City: paragraph six states, “Prior to 1996, the Petitioner chose the portion of the Bialystoker Property as a home for elderly and needy scholars of the Orthodox Jewish Faith. In or about 1996, or shortly prior to that year, the petitioner ceased operating a home for elderly and needy scholars of the Orthodox Jewish faith because the demand for such a facility was almost nonexistent. It thereafter leased the facility to CKCM Corporation, now by merger New East Side Nursing Home, LLC.”)

According to multiple sources and the Observer‘s own review of the documents, the deal works something like this.

Peter Fine, acting as the sole Member of Purchaser “On the Way to Brooklyn,” the LLC established for this purchase (it is common for developers to establish new LLCs for each new project), seeks to develop this as housing, joining Home of the Sages with two other nearby lots. To get this thing sold, Home of the Sages first had to go to the AG’s Charities Bureau for approval, which has been granted. Now comes next week’s hearing for final approval, in front of State Supreme Court Judge Arthur Engoron.

Behind the Scenes

Meanwhile, there’s a rabbi named Samuel Aschkenazi who is a Trustee and President of Home of the Sages. Mr. Aschkenazi is not the “pulpit rabbi” of the shul; he’s simply the president of the board and happens to be a rabbi. (Rabbi Shmuel Fishelis is the pulpit rabbi and spiritual leader.) Mr. Aschkenazi convened the board of trustees and suggested that the synagogue close and sell itself. That struck many congregants, who felt that the synagogue had plenty enough action to remain open, as odd. But the board—all nine of whom do not live in Manhattan, which is another red flag, since usually most or all of the board of an Orthodox synagogue lives within walking distance—approved and reached a deal to sell its building and land for $13 million to Mr. Fine.

This rang loud alarm bells for many congregants. Dr. Aaron From told the Observer, “I’ve been attending services there for 25 years. I don’t know any of the guys on the board. None whatsoever. None whatsoever. None of them are from the East Side, none of them have anything to do with anything.”

According to David Jaroslawicz, the attorney representing the congregants who oppose the sale, the shul’s spiritual leader, Rabbi Fishelis was equally nonplussed by the sudden emergence of this shadow board. “I saw Fishelis yesterday and met with him and actually had him sign an affidavit. He’s been the rabbi there for 35 years. He never heard of 90 percent of the people who were allegedly the members who voted to sell the shul, never even heard of them.”

Mr. Jaroslawicz believes that Mr. Aschkenazi’s membership in the Goor sect of Hasidism played a role in the sale. He told the Observer: “Aschkenazi thought it would be nice to divert the money to his sect, and the people who voted for it, none of whom are really members of this shul, and don’t pray there. They live in Brooklyn, they agreed with him because they’re all members of the sect.” (According to one congregant who texted the Observer, Mr. Aschkenazi is the only member of the Goor sect at the Home of Sages.)

It’s unclear that Mr. Aschkenazi even has the authority to represent the shul’s best interests. As Mr. From put it, “He started off as a nonprofit executive director and now he’s treating himself as if he owns the shul and the nursing home.”

Then another strange red flag emerged. In the application that the Home of the Sages makes to the Attorney General and to the court, the shul says that it doesn’t need the full $13 million expected from the sale—it only needs $3 million for a comfortable reserve for future operations. Home of Sages is going to donate the balance—$10 million of a $13 million sale—to a group that “may use these proceeds to help it build a new synagogue in Jerusalem,” according to the documents. The lucky recipient of that $10 million? “Friends of Mosdot Goor.”

One lawyer the Observer spoke to suggested that donating 77 percent of the proceeds from a sale by one charity to another far-away charity violates the spirit of laws intended to govern the use of tax-shielded charitable donations. Mr. Jaroslawicz concurred, telling the Observer, “I think they have a real problem legally. There’s a legal concept called cy–près doctrine, which means if someone built a home in 1885 for disabled veterans of the Civil War, sooner or later those veterans die out. So what do you do with that money? You say, ‘Listen, this guy obviously wanted to have a home for veterans, so why don’t we give it to veterans of World War II or the Vietnam War or the Iraqi War?’”

One of the synagogue’s congregants, Dr. Aaron From, raised a similar concern about the intent for funds that have been or will be collected: “Basically, it’s a one-man show. [Mr. Aschkenazi] puts this board in to say it’s O.K. we’re going to sell the place. And the ultimate goal is to sell and transfer all the money to Israel. If as recently as this year you were sending charity letters across the U.S., let the money stay here on the Lower East Side to help poor people. Or give it back to the people who gave you the donations. Why give it to Israel? The money shouldn’t go to the last man standing as the neighborhood changes.”

The Attorney General’s office takes abuse by charities seriously. Just yesterday, Mr. Schneiderman announced that he would be suing Board members of two Brooklyn charities for allegedly displacing poor families so they could sell the charities’ brownstones in Bedford-Stuyvesant for $5.7 million. The suit names five people and also alleges that the financial manager siphoned $57,000 from the charities into his personal bank account. Should the AG’s office decide to investigate the Home of the Sages transaction, there’s certainly precedent to follow.

But wait—there’s yet another red flag. The synagogue, which still intends to function, now needs a place to meet. For that purpose, on August 18, 2014, the board entered into a five-year lease with Congregation Tifereth Shmuel, paying $48,000 a year to use its space in Kew Gardens, Queens. Those who understand the rituals of Orthodox prayer know that a daily minyan that meets on the Lower East Side is not going to suddenly move itself way out to Queens. Not to mention the prohibitions against traveling by car or train on the Sabbath. Plus, one of the appealing things about the current Home of Sages for its aging congregation is it is one of the few synagogues on the Lower East Side that is handicap accessible. So the sudden move to Queens is … strange. But then, according to at least one member of the synagogue, it was a surprise to many when it was revealed that the new synagogue in Queens was actually located in Rabbi Aschkenazi’s house, above his garage.

Something even stranger was revealed by an Observer review of the lease itself, which is Exhibit VI in the application. As the “Tenant,” Rabbi Aschkenazi signed it on behalf of the Home of Sages. Signing as representative for the “Landlord,” Congregation Tifereth Shmuel, was someone named “Rahma Bithya.” That is actually the maiden name of Mr. Aschkenazi’s wife, Bithya R Aschkenazi. A thorough Lexis search identified no other instance of Ms. Aschkenazi using the name Rahma Bithya. In fact, the lease itself is not notarized—perhaps no notary could be deployed without a record of that being a legitimate name in current use. The registration for her Infiniti G20, for example, is in the name of “Bithya R. Aschkenazi,” and the same name appears on her voter registration card.

According to Mr. Jaroslawicz this monkey business with the names “was an attempt, in my opinion, to conceal.”

The Observer has also obtained the 990s for Home of the Sages from 2010 through 2012, and those too feature some eyebrow-raising revelations. In 2012, for example, the charity donated $50,000 to Congregation Tifereth Shmuel, listing the same address as the Aschkenazis’ home address that appears on Bithya’s voter registration. The space for “Purpose of grant” is left blank.

Here’s another thing worth noting. In 2010 and 2011, the biggest recipients of Home of Sages largess were high schools—$26,000 to Manhattan High School and $9,500 to Yeshiva Ohr Yisroel in Brooklyn in 2010 and $22,000 to Manhattan High School and $8,600 to Yeshiva Ohr Yisroel in 2011. In 2012, Yeshiva Ohr Yisroel dropped off the roster, but Touro College suddenly makes its first appearance, enjoying a $15,000 donation from the congregation. Why is a synagogue that says it’s so broke that it needs to shut down operations making these large donations to Jewish schools?

Reached briefly on his cellphone (which incidentally is registered to “Renee Aschkenazi”), the Observer said, “I’m looking for Rabbi Aschkenazi.” He cheerfully responded, “You found him!” When asked if he’d answer a few questions about the sale of Home of Sages, Rabbi Aschkenazi yelled, “This is not your business!” and hung up.

The Buyer

It is unclear how Mr. Aschkenazi became involved with Mr. Fine; the former hung up on the Observer and the latter’s spokesman didn’t know.

In the past, Mr. Fine, a developer of affordable housing who has also dabbled in Broadway producing, winning a Tony for In the Heights, has endured some controversy. In 2010, after suspicions arose from Mr. Fine’s ally, former Bronx borough president and President Obama insider Adolfo Carrión, supporting Mr. Fine’s project in the Bronx, Department of Investigation and the Manhattan district attorney’s office conducted a joint raid on the Soho offices of Mr. Fine’s Atlantic Development. He was also involved in some nasty litigation against Larry Silverstein and Joseph Moinian, both of whom Atlantic accused of failing to honor agreements to buy the rights to 421-a tax certificates he held when they couldn’t find financing for their luxury projects. Producing Broadway shows and building nearly 10,000 units of affordable housing is high flying for a fellow who grew up in public housing in Queens and had worked as a social worker at the Metropolitan Council on Jewish Poverty, the organization that Mr. Rapfogel eventually headed.

While no one has suggested that Mr. Fine has played any role in this nasty intra-shul dispute, his involvement with a transaction this small, along with his colorful history, is at least worth noting, if not quite a red flag.

Mr. Fine’s spokesman, Mike McKeon, told the Observer, “Peter is a developer, so people come to him and say ‘Would you be interested in things?’ I don’t know the actual history, frankly, of how he came to get involved with this property, but I can tell you it’s not Willie. Willie’s not involved with this piece of property, that much I know for sure.”

The Congregants

The attorney for the congregants who oppose the sale, Mr. Jaroslawicz, is representing his clients pro bono. He is indignant at the entire episode. As someone who grew up on the Lower East Side, he makes clear how personally he takes the perceived shenanigans.

Observant Jews are supposed to take seriously the prohibitions against gossip—known as lashon hara or “the evil tongue.” Asked if it pained him to battle fellow Jews in public, Mr. Jaroslawicz said, “You know what? We’ve offered to go to a beit din,” referring to a court in which learned rabbis would decide the matter in accordance with Jewish law. “We said, ‘Why don’t you adjourn this matter for two or three weeks? This thing stinks. Let’s go to a legitimate beit din and have them rule on it,’ and they don’t want to go. So we have no choice but to air this dirty laundry in public and just let it all out there.”

On Wednesday, the judge denied Mr. Jaroslawicz’s motion to adjourn the matter, which surprised the lawyer. Anyone involved in the simplest uncontested legal matter knows they are easy to get adjourned, so it disappointed Mr. Jaroslawicz that, with the Passover holiday, he’d have little time to prepare before squaring off this coming Wednesday. Still, he doesn’t sound worried.

“Why is the best use of the $3 million—forget about the $10 million which is going off to Israel and no one can trace it there—but the $3 million is to give it to himself and his other shul, rather than any other shul on the Lower East Side? I’m dying to put this Rabbi Aschkenazi on the stand.”

CORRECTION: The spokesman for Mr. Fine contacted the Observer after publication to assert that “Peter was never a co-worker with Willie Rapfogel. His time at the Met Council ended well before Willie Rapfogel started there.” The text has been corrected.