Settlement Reached In NYLAG Case

The third financial scandal at a major Jewish institution here in the last three years ended in a settlement last week.

The office of New York State Attorney General Eric Schneiderman announced that it has reached the settlement in a two-year-old legal case against the founder and former head of a legal assistance organization that aids low-income New Yorkers, among them many members of the Jewish community.

In dropping further charges against Yisroel Schulman, who served as president of the New York Legal Assistance Group (NYLAG) from 1990 until early 2015, the attorney general assessed Schulman $150,000 for “costs incurred in connection with the various investigations and proceedings” borne by NYLAG.

As part of the settlement, Schulman, who admitted negligence in administering NYLAG funds over a 15-year period, is barred for the next five years from serving “in any position in which he has any fiduciary responsibility” for any not-for-profit or charitable organization in New York State.

The settlement follows two other financial scandals that have rocked New York City’s Jewish communal world in recent years. In 2014, William Rapfogel, the politically connected head of the Metropolitan New York Council on Jewish Poverty since 1993, was sentenced to between three and one-third to 10 years in prison for embezzling Met Council Funds in an insurance overpayment kickback scheme. And in 2015 FEGS Health and Human Services, one of the city’s largest social service agencies, announced a nearly $20 million shortfall in funds; the agency, with long ties to the Jewish community, was subsequently taken over by The Jewish Board of Family & Children’s Services.

NYLAG, a UJA-Federation of New York partner that in the last three years has added new internal controls and hired new senior staff, numbers many Holocaust survivors and immigrants from the former Soviet Union.

“NYLAG does vital work providing free legal services to the most vulnerable in the community,” said in a statement from UJA-Federation. “We are proud to support the organization’s extraordinary work and mission. We are pleased this issue has been resolved.”

The annual budget of NYLAG grew to more than $20 million during Schulman’s tenure there.

The attorney general’s office decided to accept his admission of financial irresponsibility, and to impose the financial penalty in lieu of a civil trial, “to avoid the expense and inconvenience,” the settlement document states.

“Officers have a responsibility to the charities they serve and the donors who entrust them with their contributions,” said Schneiderman in a statement. “Today we’re making clear that there are consequences are used as personal slush funds.”

“My conduct in regard to those decisions fell below the high standards that I set for myself, and I now recognize I unintentionally breached fiduciary duties to the organization. For that, I truly am sorry,” Schulman said in an email statement to The Jewish Week.

“As the person who founded NYLAG and ran the organization for 25 years, I am extremely proud of the work that we did representing hundreds of thousands of indigent people. I also want it to be known that although I made mistakes at NYLAG and certainly am not perfect, I never intended to mislead anyone nor took anything from NYLAG or any other charity that did not belong to me,” Schulman said.

He was terminated by NYLAG in February 2015, following an investigation by a federal grand jury.

In a seven-count lawsuit filed on Nov. 29, the same day as the settlement, Schneiderman charged that Schulman, an attorney who is now working in private practice, had breached his fiduciary duties by diverting “to charitable organizations that he controlled” — primarily a chasidic synagogue and yeshiva in his Monsey, N.Y., community — more than $2 million in a manner “inconsistent” with NYLAG’s primarily legal assistance mission.

The complaint further charges that Schulman “falsely made NYLAG appear to potential donors as in greater need of donations than it truly was.”

While the complaint against Schulman states that he “reap[ed] personal financial benefits,” it does not specify any profit he made from the NYLAG funds or indicate that he used them for illicit purposes.

Schulman has claimed he was unaware that the funds he sent to other charities was the property of NYLAG, said his attorney, Hal Lieberman.

NYLAG, in a statement, thanked the attorney general’s office for its “thorough inquiry into this matter” and noted that “the critical legal services NYLAG provides have been unaffected and that NYLAG’s funds are intact.”