Legal News

Extortion For Dummies? Rabbi Allegedly Targeted Hedge Fund

By Amir Efrati

As we mentioned last week, prosecutors at U.S. attorney’s office for the the Southern District of New York get their fair share of interesting cases, and one could imagine that they get some pretty unusual phone calls from tipsters about alleged fraud.

One case that broke last night promises to be yet another attention-grabber. It involves a Jewish Orthodox rabbi from Brooklyn, a yet-unnamed Connecticut hedge fund and a call the rabbi made to the U.S. attorney’s office as part of an alleged shake-down of the fund.

The case came to a head on Thursday, when the fund allegedly paid out $4 million at the direction of Milton Balkany, the rabbi who has been known as a Republican fundraiser and is nicknamed the “Brooklyn Bundler.”

Balkany, 63 years old, said after his bail hearing Thursday night that he previously was accused of wrongdoing, and “the government had to back off then,” according to this WSJ story. “This thing is much more ridiculous.”

Balkany was referring to charges in 2003 that he misappropriated federal grant money. Those charges were dropped after he paid back some money, according to this Daily News story.

The rabbi was right in saying that the allegations prosecutors made on Thursday more dramatic. Prosecutors said that starting in December, Balkany contacted the lawyers for a Connecticut hedge fund, claiming an inmate to whom he was a spiritual advisor told him the fund made trades based on inside information.

Balkany allegedly told the fund that prosecutors were aware the inmate had this information and were anxious to talk with him. If the fund ponied up cash, he would encourage the inmate not to spill the beans. There were apparently no insider trades, and the fund recorded some of the calls, according to the Daily News story.

At the same time, Balkany contacted the U.S. Attorney’s office to induce prosecutors to contact the inmate in order to put pressure on the fund, prosecutors said. During those conversations, he allegedly made false statements.

Balkany said after Thursday’s hearing that he was trying to help an inmate reduce his sentence, but declined to name the inmate. “When you are in public service that’s the price you pay. An innocent man is constantly dragged through the mud,” he said, according to the Daily News.

Full post as published by Law Blog - WSJ.com on February 19, 2010 (boomark / email).