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Around the Jewish World Family’s Dirty Laundry Exposed As Loan Battle Hits Australian Courts

May 20, 2003
See Original Daily Bulletin From This Date

A bitter battle between two of Australia’s best-known Chabad-Lubavitch rabbis, who happen to be brothers-in-law, recently made it to an Australian courtroom.

The case involves interest on a loan from one brother-in-law to the other to help keep a struggling yeshiva afloat.

In 1994 Rabbi Pinchus Feldman, head of the Sydney Yeshiva, made a plea for help as his institution struggled to stay afloat, crippled by debts of more than $13 million.

Feldman secured a $3.25 million dollar loan from Sydney businessman Richard Scheinberg, and from Feldman’s brother-in-law, Melbourne-based Rabbi Joseph Gutnick.

Gutnick, a Likud supporter and backer of former Israeli Prime Minister Benjamin Netanyahu, made a fortune from mining in the Australian Outback after heeding the business advice of the late Lubavitch rebbe, Menachem Mendel Schneerson.

Gutnick borrowed from the Commonwealth Bank to lend a further $5 million to the yeshiva, which runs girls and boys schools with more than 600 pupils.

As security for their loans, Gutnick and Scheinberg held mortgages over many of the properties the yeshiva owned in its immediate vicinity, some of which housed the boys’ school.

Scheinberg’s loan was repaid in full, but Gutnick’s was not.

Feldman maintains that he had an oral agreement with Gutnick that the loan would not be called in. But Gutnick called it in and asked for a further $5.25 million in interest.

Feldman explained to Judge Peter Young that it is against Jewish law to charge interest on a loan to charity, and that he had attempted to settle the matter through Jewish religious courts.

Gutnick declined to go to the Jewish court. Instead, he decided to exercise his rights to sell the properties on which he held mortgages.

The properties were advertised for sale, causing Feldman to go to court seeking a restraining order against his brother-in-law’s actions.

He told the court that he didn’t believe Gutnick would demand repayment because the loan had been made under “a mutual religious covenant” between two Orthodox Jews. To break the agreement was “to rebel against God,” he told the court.

He believed that the oral undertaking between the two men meant Gutnick would waive his right to recoup the principal on the loan — let alone the interest — and that the dispute should have been heard by a rabbinical court.

Gutnick denied that he had agreed to forgo the loan, even orally, saying that he deserves to be repaid just as Scheinberg was.

There has been a bitter dispute for sometime between Gutnick and his sister Pnina Feldman, who is Rabbi Feldman’s wife. Their father is Rabbi Chaim Gutnick of Melbourne, president of the Rabbinical Council of the State of Victoria.

The packed courtroom bore witness to some amazing scenes as the battle between the brothers-in-law played out.

When Feldman’s backers stood at attention as he left the witness stand, the clerk of the court reminded them that she was the one who told people when to stand and when to sit in court.

Feldman’s followers and relatives clutched prayer books in court, while others prayed in the lobby outside the court, where tables had been laid with chicken, coleslaw and honey cake.

Gutnick referred to Feldman as “Mr. Feldman” when giving evidence, explaining to the judge that Feldman did not deserve to be called rabbi.

Feldman’s refusal to repay the loan and his decision to take the matter to civil court — preventing Gutnick from selling the properties — reflects behavior unbecoming of a rabbi, he says.

“As I was giving my evidence, I could hear Feldman’s followers in court cursing me in Yiddish,” he told JTA.

The case has been adjourned until next month.

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