How Do Haredi Schools Get All That Money?

Service providers haul in millions in tech funds for schools and libraries, but some don’t even have websites.

02/19/13
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Editor's Note: This is second in a three-part series. The first article is here, and the third is here.

From the outside, Computer Corner does not look like a technology business handling million-dollar technology contracts.

On a recent Tuesday afternoon, a graffiti-marred metal gate covers the window, and the doorway, in need of a paint job, has no sign.

The only indication that a computer store lies inside this four-story red-brick building with rusty fire escapes on a modest residential block of Brooklyn’s South Williamsburg is a discarded Dell computer carton lying next to the garbage cans.

Nonetheless, the company recently sought $1.2 million from E-rate, a federal program subsidizing technology costs for schools and libraries, to equip its neighbor, Bais Ruchel D’Satmar, with “internal connections” and provide “internal connections maintenance.”

Universal Service Administration Company (USAC), the nonprofit that runs E-rate and other programs for the Federal Communications Commission, appears to have denied that particular request. However, it did pay Computer Corner more than $500,000 in 2011 for services provided to the Satmar girls’ school, a school that 12 years earlier was implicated for colluding with the local community school district. The 1999 scheme involved placing dozens of chasidic women on the public schools’ payroll in no-show teaching jobs in order to funnel more than $6 million to the school and its parent organization, United Talmudical Academy.

How did Computer Corner — along with numerous other little-known companies, most of them located in fervently Orthodox neighborhoods of Brooklyn and Rockland County — get to be among the largest service providers in the E-rate program, earning millions of dollars providing Internet and other tech services to yeshivas whose leaders publicly rail against what they call the “evils” of the Internet?

Some of these companies, many of which, like Computer Corner, don’t have a website, have even appeared on E-rate’s top 10 list of funding approvals and funding denials nationwide.

E-rate, which disbursed $2.2 billion nationally in 2011, was created under President Bill Clinton, part of the
sweeping Telecommunications Act of 1996. That legislation established the Universal Service Fund, a pool of money collected through a fee on long-distance phone service and then used to “help communities across the country secure access to affordable telecommunications services,” according to the USAC website.

But the E-rate money is not distributed evenly. In 2011, 285 Jewish schools in New York State, which enroll approximately 4 percent of the state’s K-12 students, were approved for more than $30 million, more than 20 percent of the state’s total E-rate allocations.

In a four-month investigation, The Jewish Week reviewed E-rate data along with numerous filings submitted by Jewish schools and their service providers. The paper conducted an extensive analysis of 2011 E-rate awards, reviewed the funding history of the Jewish schools and service providers receiving the largest sums of money, examined “470” forms detailing schools’ technology requests, and looked at various audit reports and FCC rulings. With the exception of the 470s, all of this information is publicly available on the website of E-rate Central, a Long Island-based E-rate consulting firm.

The Jewish Week also made repeated attempts to interview administrators at several of the yeshivas receiving the largest sums of money, as well as officials at companies that have billed E-rate for services reportedly provided to these schools. With the exception of an E-rate consultant, whom one school suggested The Jewish Week contact, none of these people returned calls or agreed to be interviewed.

It is not hard to become an E-rate service provider.

More than 4,000 companies nationwide collect payments through E-rate; becoming an official provider simply requires calling USAC to obtain a Service Provider Identification Number (SPIN) and providing basic information, like the company’s name and street address. Beyond that, USAC and the FCC do not vet service providers, requiring them only to submit an annual certification form containing basic company contact information and certifying that they will abide by the rules of the program. (Companies that provide telecommunications services responsible for contributing to the Universal Services Fund, which funds E-rate, must register with the FCC, however).

Many of the providers that haredi schools rely on for the bulk of their E-rate-subsidized purchases seem, like Computer Corner, to be small businesses that appear to serve an exclusively Jewish clientele.

These businesses include:

Williamsburg-based Discount Cellular Plus (DCP), which became an E-rate service provider only in 2010, has been allotted about $1.5 million through E-rate in New York between 2010 and 2012. It appears to provide E-rate services exclusively to fervently Orthodox schools, and has so far requested more than $500,000 in E-rate reimbursements for fiscal year 2013.

DCP is currently being sued in federal court by Sprint/Nextel. The suit alleges that DCP, along with its owner Yoel Stossel and two other men, Chaim Weiss and Yanky Katz, targeted yeshivas to steal their special discounts and rate plans and that the defendants then fraudulently acquired large quantities of “new high-end Sprint phones,” including iPhones, which they illegally unlocked and resold for a substantial profit. When a Jewish Week reporter called DCP to talk about E-rate and the Sprint case, she was referred to the company’s attorney. A message left with the attorney was not returned by press time.

Mekach Tov Enterprises, Inc. has done about $850,000 worth of E-rate business in the three years it has participated in the program. The company, which has an address in Brooklyn and is sometimes listed as Tov Mekach, is categorized in Manta, an online database, as a “Burglar and Security Systems store.” However, a company by the same name at the same Borough Park address (which appears to be a storefront mailbox rental establishment) appears previously to have been an importer of religious books and articles. A call to the phone number listed for the company was answered by a fax machine.

Not all of the providers serving haredi schools are exclusively local or small, however and several, it seems, are run by the same or related people.

Dynalink and Birns are both located in the same building on West 17th Street in Manhattan and both list Mendel Birnbaum as the contact person on E-rate forms. Birns, a large telecom company that was established in 1973 and has participated in E-rate since 1998, has received over $9 million serving Orthodox schools in New York through the program. It landed at No. 7 on a list of E-rate’s top 10 funding commitments nationally in 2011.

Dynalink, which appears in New York State to serve almost exclusively haredi or chasidic E-rate clients (it also does E-rate business in other states, including New Jersey, Florida, Texas and Tennessee) got into the E-rate business in 2006. But it has already been awarded over $6 million in New York alone, the majority of that for telecom services followed by internet access.

In 2009, XO Holdings — a Delaware-based company with revenues of $1.4 billion in 2007 and whose subsidiary, XO Communications, has participated in the E-rate program with all types of schools nationwide (it has been awarded close to $90 million since 2005) — filed a federal lawsuit against Lawrence Fishelson, a former XO employee, and Solomon Birnbaum (who co-founded Birns), Mendel Birnbaum, Dynalink and Voice Data Technology Consultants. Upon Fishelson’s termination from XO in 2005, he formed Dynalink with the Birnbaums. The complaint alleges that together they conspired to intentionally interfere with XO’s business relationships with yet another company, Choice Tel Communications, which Birnbaum acquired from his father-in-law, Moshe Birnbaum and daughter, Chaya Freund.

Other big E-rate providers in the Jewish community include: Communications Data & Security, Inc., in Rockland County ($10.2 million); Hashomer Alarm Systems in Rockland County ($8.9 million); Smart Telecom in Far Rockaway ($8.2 million); ID-Tech, which has offices in Borough Park and in Lakewood, N.J. ($7.5 million); and LightHouse Equity, Inc., a Borough Park company that, according to state records became inactive 2010 but still seems to be operating ($4 million).

Given the amount of E-rate business it has done over the years, one would expect there would be more public information available about LightHouse (which found its way onto a top 10 list of both funding commitments and denials in 2011). The contact address for the company, in care of an entity called My Advisor LLC., appears to be a residential building in Borough Park, the back of which practically abuts Bnai Zion, a Bobover yeshiva on 15th Avenue (to which the company has provided service, among other Bobover yeshivas and other haredi schools). The contact for LightHouse’s E-rate program is Thomas Monahan, however a call to the number listed for him on E-rate forms was answered by a woman who indicated that she was not at the company’s physical location but worked for an answering service. A message left for Monahan was not returned by press time. 

In 2011, Hashomer and Birns Telecommunications each collected more E-rate money for services provided to Jewish schools than did Verizon, Sprint or Nextel. In fact, Hashomer, which received close to $3.5 million in E-rate work for Jewish schools in 2011, did more E-rate business in the Jewish sector that year than Verizon, Sprint and Nextel combined.

The Jewish Week called Hashomer, which has addresses in both Spring Valley and Monsey, but was told by the man who answered the phone — who did not give his name but said he was with the “Security Division”— that nobody was in the office as they were all out in the schools, making estimates for upcoming E-rate application deadlines; he told The Jewish Week to call back “in a few weeks.”

Reached by phone at Dynalink, Hirsch Birnbaum (this name also appears on Birns’ documents as vice president of sales for that company) told The Jewish Week that he didn’t have time to talk about E-rate unless the reporter wanted to buy a contract or was willing to pay him $200 an hour. A call to Birns was answered by someone who told The Jewish Week he was in “service” and didn’t even know “what an E-rate is” and had “no idea” what the reporter seeking information was talking about.

When The Jewish Week called Communications Data & Security, the reporter was put on hold by the woman who answered and then put through to a number that rang more than 20 times, with no answer and no voicemail.

In 2007, Bais Ruchel D’Satmar — the school that was the top Jewish E-rate recipient in 2011 and has been awarded about $3 million since E-rate’s inception — is also identified in public data as a service provider, with two service-provider identification numbers associated with its name. One is the same number Hashomer has today, while the other now belongs to All Care Communications Inc. Asked why this may have been the case, an E-rate consultant who requested anonymity so as not to jeopardize client relationships, told The Jewish Week that it could have been some kind of typo. However, the consultant added that schools registered as service providers should raise red flags because of the possibility of self-dealing.

Between 2007-2010, All Care was approved for close to $1 million in E-rate funds. Since 2009, it has been registered with the FCC as headquartered at 320 Roebling St., a low-rise apartment building with a mailbox rental establishment on the first floor. Several calls to the listed contact person, Joel Polatsek, were answered by the sound of a beep. A call to a Brooklyn-based company called All Care Management yielded a message that the number had been disconnected.

Asked if he finds it odd that the yeshivas rely largely on small businesses that serve only other Orthodox institutions, Richard Bernstein, a Woodmere, L.I., E-rate consultant whose clients include Jewish and non-Jewish schools, said no.

“That’s the way [they] do business in general, with people they know,” he said. “Other groups are the same, they want to work with someone who knows and understands them. … It comes down to service. You want to know if there’s a problem you can make a call and someone will come fix it. You don’t want to call Dell and get someone in India. Schools can’t afford to [have their computer system go] down or to not have their phones work.”

Julie Wiener is associate editor; Hella Winston is special correspondent.
Julie.inthemix@gmail.com; @Julie_Wiener

 

Last Update:

03/26/2013 - 12:54

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There is nothing really in the article that proofs they were stealing! what ever happened to innocent until proven guilty?

these articles are so full of OJ haters its scary!!! All L'sheim Shomayim, with words like Geneiva....

There is no mention in the article that items on the contract were bought with erate money and resold??? Where is the proof????

30 million dollars in total, for almost 300 schools, are you kidding me? that's allot of Money? OMG

And the comparison to Public schools is fraud: they receive billions from TAX PAYERS $$$ to fund everything and everything so they do not need as much $$$ from eRate!!

Public schools and ALL BOEs (Board of Educations) from every district will have X amount of money to use per year. Suppose at the end of the year they have 1 million left; they will spend it on anything and everything even if they dont need it at all never to be used, just to guarantee next years money allocation will be the same.... (from an insider).

So all your screamers, who know nothing about the eRate program, the jewish schools and their providers are proving sane peoples' point; YOU ARE JEW HATERS!!!!!

This is Mesira and then some! Ask any competent rav! (Look up what it says about a Mossir!!)

I cant believe Im reading this garbage before Pesach, how low can a person fall?

To those who think that no crime was committed and that the whole incident is nothing more than helping oneself to a cup of coffee to which one may or may not be entitled to, I say: Let the law decide and dina de'malkuta, dina. I hope that the State Attorney General reads the Jewish Week and that, unlike DA Charles Hynes, he actually does his job, and let the (computer) chips fall where they may.

While these egregious examples are wrong and should be prosecuted, there are far more examples of e-rate examples where funds were used properly and school districts across America are benefitting. Don't throw the baby out with the bath water. Just severely punish those who steal and move on.

I did not read any proven facts, which should be abundant, as a result of the JW four month investigation. No one is required to answer JW phone calls. The JW wouldn't do it to my investigative questions of their practices either. Aside from innuendo, there is nothing.

I read this 2nd part and waiting for the 3rd part, I fail to see anything illegal in this part2, what is the writer trying to let us know? Who filed for how much money? If this is all legal then very good.

If there was a coffe machine that was avail for "publishers" to use free of charge, and along comes a reporter who some would consider a publisher and some would not consider her a publisher, if she was found eligable to partake in the free coffee, who then cares how much coffee she takes? as long as it is coffee for her to drink enough for her needs.. unless she is taking the coffee home. but this article says no such thing.

To stay with your analogy: Let's say that your employer provides 10 pounds of ground coffee per month for your office and that there are a dozen employees. Let's further say that one of the employees is a Mormon whose religion prohibits him/her from drinking coffee. Would it be right for this employer to grab 5 pounds of coffee and then sell it to someone outside the workplace, or even to give it to their shul for free, under the theory of, hey, I work here, I am entitled to this coffee and what I can do with it what I want.

This is the whole point of the Jewish Week article: that people who publically denounce the use of the Internet grabbed a disproportionately high percent of funds that were meant for high tech and, in so doing, they are depriving others who would use these funds the way that they were intended.

You write that "if this is all legal, very good". Hopefully (I am saying this as a tax payer), someone with legal knowledge and in a position to investigate exactly how these funds were used, will look into this.

Boy, when you start to receive comments straight out of The Forward, you must be doing something right. Publishing a whole "expose" about perfectly legal conduct by frum Jews taking advantage of government -provided benefits. I've read through this junk twice and still ask myself so what? For the most part you NY Jews voted for an entitlement economy and now you have the chutzpah to complain when your own brothers and sisters drink out of the government trough. I should have known better when I saw the bi-line is Julie Weiner - a whole journalistic career writing about mamash nothing - absolutely nothing of consequence.

Plain and simple super Gunnuvim- move over Madoff .....

Is Chuck Schumer reading this? Shut ERATE down.

The E-Rate should not be shut down because people are stealing from it. Should we shut down a store if people steal from the store? Someone stole my wife's purse; what should I do to her?

Like the 3 frum monkees: See no evil. Hear no evil. Speak no evil. 2 weeks ago a Satmar "psychotherapist" is indicted. Rosh Yeshivos (the one on Ocean Parkway) protects a child molester. On and on it goes. Where there's a buck to be had, you can be sure there's some low-life phony frummie grabbing the cash and then pocketing it. That includes all the phony programs out there! All these Boro Park chippies paying with food stamps yet they prance up and down 13th ave in $600 Laboutan pumps. What a chilul Hashem.

As a taxpayer, I see no justification whatsoever for the Federal government running a program like this. The United States government has inserted itself into areas where it has no right to be present, let alone the enormous cost and corruption that is the net result.

Julie wiener is a brilliant investigative reporter.

This is just another haredi bashing article. Anyone who is slightly familiar with the E-Rate program knows that when you apply for telecommunications funding it comes together as a catagory; telecomm/internet. Anyone who is a little more knowledgeable of the E-Rate program knows that Internal Connections also mean computer networks and the like. And the ones that actually apply for the program know how and why the funding gets distributed like it does. How about doing some research and go to the website of the Universal Service Administrative Company before you announce to the world how biased and uninformed you are about this federal program.

How about the organization cited in the article shows government auditors exactly what they have purchased with the E-Rate money that they have received and how those computer networks and the like benefit their members. How about we do some research about that? Seerms to me that they would be happy to clear their good name with this one simple step and to demonstrate once and for all what a horrible, haredi bashing publication is the Jewish Week.

The only substantive reply so far!
I don't see any wrongdoings regarding the e-rate program, mentioned in the entire article at all.
Why mention DCP and XO's suits when it has nothing to do with the e-rate program (I guess it's just to a add to the "haredi bashing" fest).

I agree the XO suit seems pretty tangential to the article, but the Sprint suit against DCP alleges that DCP signed cell phone contracts with schools , then took the cell phones provided under that contract, unlocked them, and resold them. Normally, that wouldn't be profitable, since the service contract cost more than the value of the phone. But since the schools only paid 10% of the cell phone contracts (with E-Rate paying the other 90%), it became very profitable. The E-Rate funding is what made the scam possible. As an example, if you sign a 2-year cell phone contract for $30/month, you can get a free phone worth $250. if you decided to illegally unlock and resell that phone, you'd lose money, since you'd pay $720 in monthly fees over the course of 2 years, and you could only sell the phone for maybe $200. But with the E-Rate, the 2-year cost of the cell phone service is only $72, so if you sell the phone for $200, you get a $128 profit. (If a fraudster were clever, he'd say the monthly cost was $35/month, collect $31.50 from the E-Rate, and then the fraud would net more than $200.)

And then we wonder why we have been so universally beloved as a people, wherever we were. Until 200-150 years ago, almost all of us were Haredim. Since there is no evidence Haredi society and its moral and ethical foundations have changed much over the past two cenrturies, we can unfortunately assume that our great or great-great grandparents may have acted in a similar fashion, which may explain why we were so universally beloved.

To Mr./Ms "moiser". Yes I want these people in jail, and if their families suffer, well that's what happens when you are a criminal. We may very well be a chosen people, but this does not include being chosen to get a "get out of jail card". To me, a proud practicing "post-Halachic" Jew, being Jewish is more about self imposed moral and ethical obligations and responsibilities, not self granted rights, We have no right to get away with criminal behavior. BTW, "dina de malhuta dina"?, I guess you missed that particular Talmud class.

"And then we wonder why we have been so universally beloved as a people"

Yes, we deserved the expulsions, pogroms, and Shoah. And I'm sure you tell victims of rape they deserved it. And blacks that they deserve slavery and racism?

One question, as a community you believe we have committed more serious crimes than others not subjected to the universal dislike you point out?

What a sad example of a Jew you are.

@Anonymous 02/19/2013 - 21:33:

"This is the modern way of mesirah, do you want this people to sit in jail???"

As opposed to the traditional method of looking the other way and saying nothing. Yeah, that's worked out well.

"Do you like destroing family'???"

Why not? You people have no hesitation in destroying a family if even one member doesn't conform to your insane rules.

Please keep the reports coming. While painful and unpleasant these exposes are the only our proud and accomplished people can purge ourselves of this criminal element that seems to have hijacked our Jewish identity. It's high time we proclaimed ich bin nisht ein chasid, ich bin ein yid.

As a regular reader of the web site failedmessiah.com, I am not surprised by the extent of the fraud uncover by the reporters. Julie, do you plan to turn your findings over to the US Attorney's office? You should.

This is the modern way of mesirah, do you want this people to sit in jail???
Do you like destroing family'???

Why is this not gnaivah? I do not understand being super machmir about chalav yisrael, mixed seatings at weddings (shandah!! Oh, BTW, when Reb Moshe Feinstein married off his children, eg Rabbi Tendler the weddings were mixed seating) no pictures of girls in magazines (if seeing a picture of a 4 year old girl turns you on, you have issues) yet when it comes to taking money from the government (MY TAX MONEY!!!!) there is no hesitation !! What hypocrisy!! What a tremendous chilul hashem!!!

Mesirah? Are you serious. These people are stealing and making Jews look bad. Since when are thieves to be protected?

It seems there are some exceptions to our alleged separation of church and state. The Haredim are apparently not only parasites in Israel. One day this will explode and the fall-out will not be pretty.

It takes your breath away

I will not hold my breath waiting for the asifa against scamming the gov't out of taxpayer dollars.

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