NEWS REVIEW

Dirty laundry

Right: Rita Goldberg leaves court.
(Below) Her husband, Nachum Goldberg,
counts the money on a bank surveillance tape.

Photo: JASON SOUTH

A Melbourne judge lifted a suppression order yesterday, allowing an extraordinary tale of a master money launderer to be told. Paul Barry reports.

Nachum Goldberg is not a man one could hide in a crowd. With his long black coat, big black hat, bushy grey beard and wire-rimmed glasses, he would stand out on any street. And at the ANZ Bank in Chapel Street, Prahran, the staff had plenty of opportunities to notice him.

For 13 years, the devoutly orthodox Jew was one of their most important customers, visiting the Melbourne suburban branch twice a week, come rain or shine, to conduct his business. By 1990 he was even being ushered through the banking hall to a back room where the tellers had set up a counting machine for him. There he would pull from his pockets or from plastic bags a mixture of $50 and $100 notes that would be sorted into bundles of $10,000. Goldberg would deposit this money into a special account that the local ANZ manager had provided for him in the name of United Charity. He would then go to the main banking hall and hand over instructions for the money to be telexed to Israel. In an average week he would send $150,000 offshore in this way. In an average year he would export $7 million.

Week after week he turned up with so much cash that the bank was able to dispense with Armaguard deliveries. If money was running out, staff just gave Goldberg a ring to check that he would soon be on his way.

The notes were often damp, soiled and crumpled. Yet the ANZ Bank never bothered to inquire where Goldberg had come by so much cash. Nor did its tellers object that the telex instructions were signed by rabbis they had never seen. They simply assumed that Goldberg was collecting all this money for charities in Israel and doing the Lord's work.

Banks are not normally negligent in this area - opening an account is often a nightmare for the average Joe. But the ANZ failed to ask Goldberg the most basic questions and to demand the most elementary documentary evidence. As a result, it never uncovered one important fact.

United Charity did not exist. It was not a registered charity, nor a registered company, nor even a business name. And almost no-one in the Jewish community had ever heard of it.

Neither were the huge wads of soiled notes which Goldberg unloaded every week really charitable donations. For Nachum Goldberg was a master money launderer, who was helping some of Sydney's and Melbourne's ultra-orthodox Jewish businessmen evade tax.

Thanks, in part, to the ANZ's negligence, this scam went uncovered for more than a decade. As Judge Strong observed in sentencing Goldberg in June in Melbourne's County Court:

"The ANZ Bank asked very few questions. Tens of millions flowed out of the country and the Australian Tax Office and the Australian public were comprehensively swindled."

Investigators received precious little help from ANZ management when they tried to prove this fraud had occurred. To obtain crucial bank documents, the Australian Federal Police (AFP) had to get seven separate search warrants. And bank staff were advised not to give evidence, then instructed, on pain of dismissal, only to talk to police with one of the bank's solicitors present.

Goldberg is in Fulham prison, Victoria, serving a five-year jail sentence for defrauding the Commonwealth of at least $20 million in tax. But with time off for good behaviour, he will serve just half that time behind bars.

Neither he nor his wife, Rita, was prosecuted for social security fraud (which could have seen them jailed for up to 10 years) even though they lived off family allowances and unemployment benefits, totalling $80,000, while the money-laundering operation was at its height.

There are many remarkable features of the Goldberg case, but one of the most remarkable is that it took so long for him to be caught. Since 1990, Australia has had a sophisticated cash-tracking system, called Austrac, which is the envy of the world. Yet for five years Golding's massive deposits and transfers of cash raised no alarm. By the time he was finally arrested by the AFP in 1997, he had probably moved about $90 million in dirty money out of Australia to Israel (although the lack of bank records before 1990 meant that the prosecution could prove only $42 million beyond reasonable doubt), but almost all of this had escaped notice.

One key reason why the watchdog failed to bark is that the ANZ Bank's Prahran branch allowed Goldberg an account in the name of a charity, which gave the international transfers a gloss of authenticity. Another is the vast amounts of cash were made to look more genuine by a smattering of cheques made out to genuine charities. But two other factors were even more important. The fact that the ANZ branch designated the United Charity account a special "manager account" minimised official scrutiny. And more important still, the branch's willingness to accept Goldberg's transfers to Israel in 200 false names meant that Austrac's computers failed to detect any pattern to the payments.

Prosecution evidence at Goldberg's trial said:

"The ANZ Bank did report deposits and transfers to Austrac. The vice was that they did not report that it was Nachum Goldberg who was carrying out these transactions. This fact was concealed by the bank's acceptance of false documents."

Why the ANZ Bank permitted all this, God alone knows. But perhaps it was because Goldberg looked like a rabbi.

In any case, it was not until March 1995 and the appointment of a new manager at Prahran, that the watchdog began to stir. Within weeks of the United Charity account being stripped of its special "manager account" status, Austrac started to notice that huge amounts of cash were going through it, and notified the National Crime Authority. In September 1995 the investigation was handed over to Operation Flange, a joint task force of the Australian Taxation Office, NCA and AFP.

It soon emerged from police phone taps and the bank's records that Goldberg and his son Naphtali were making regular trips to Sydney to pick up large quantities of cash, which they either deposited in Sydney or brought back on flights to Melbourne.

In November 1995 and again in January 1996, a team from the AFP tracked Goldberg from Sydney Airport to two different diamond dealers in the same CBD office block. On each occasion, he emerged carrying a plastic shopping bag that he had not taken into the building. And on each occasion he deposited a large amount of cash on the following day into United Charity's account at the ANZ in Prahran, which he then telexed to Israel.

On the second occasion, the police organised for Goldberg's bags to be searched as he boarded the plane to Sydney. They discovered a number of BBQ chicken bags in his briefcase, apparently to hide the cash from the metal detectors -- the foil shields the banknotes. But they failed to catch him red-handed on his return. Goldberg travelled to Sydney on Ansett but went back to Melbourne on Qantas. It was apparently cheaper to buy two separate return tickets with a Saturday night in each.

Prosecution evidence at Goldberg's trial said most of the money that he laundered came from the sale of diamonds that had been imported illegally into Australia. After the gems were sold, the cash was picked up by Goldberg and sent back to the overseas suppliers via his United Charity account in Prahran. This avoided millions of dollars in sales tax on the stones and yet more millions of dollars in income tax on the profits.

Four banks in Jerusalem and Tel Aviv were used to receive the money that Goldberg sent offshore, but the bulk went to Bank Leumi in Jerusalem, of which Goldberg's brother David was the manager. Telephone intercepts allowed Australian police to identify numbered accounts at Bank Leumi, Israel Discount Bank, United Mizrachi Bank and the Republic National Bank in Geneva, as well as two coded accounts, referred to by Goldberg as the "Rabbi Sapir" account and the "Uncle George" account.

Two of these were traced to diamond merchants in Israel and Belgium, who were supplying wholesale diamonds to Australia. A third is allegedly linked to a Sydney diamond merchant.

In January 1997, the AFP investigators persuaded a Melbourne rag trader called Dzienciol, who was facing prosecution on other charges, to ask Goldberg to launder money for a friend. In the police videotape, which was shown to Melbourne County Court in May, Dzienciol told Goldberg:

"Listen, I've got a guy, he's got some lot of mazuman ... and he wants to get it to Switzerland. Can we do anything? It's from gambling, I think, from the casino ... they've been dealing with some guy from Hong Kong, but he's been taking off the top."

Goldberg: "Of course we can do that. I'm doing it all the time. If you send it Monday it can be in Switzerland Wednesday. Before I used can do [sic] for half a million a day, but today I have to be very careful. A hundred a day is no problem."

Goldberg told Dzienciol it was also no problem to get the money back to Australia. In fact, he said, that was the easy part. Once it was in Israel, it could go anywhere in the world. But he was reluctant to do it for anyone who wasn't kosher -- who was outside their tight-knit Jewish community.

The Addas Israel congregation, of which Goldberg is a prominent member, is the strictest of the strict and as orthodox as they come. The men are dressed from head to foot in black, with just a white shirt to break the pattern. The boys wear their hair in curly side locks, while the men have beards and the women shave their heads and cover them with wigs. All are forbidden to watch television, listen to the radio or go to the cinema. Alcohol and tobacco are banned, as are most newspapers, and contact with the opposite sex outside marriage is forbidden. As a result, Goldberg hardly lived the high life of a typical fraudster. Despite earning an absolute minimum of $800,000 commission in the 1990s from his money-laundering service (or more than twice that amount, says the Australian Taxation Office) he and his family lived in the austere style that their faith prescribed. The family home was dowdy and rundown, and there were no flashy cars in the driveway -- just an old Nissan Pintara and a 1994 Toyota Tarago.

But perhaps another reason for the modesty of their lifestyle was that Goldberg spread his earnings so thin. He chose to provide for a vast extended family, buying houses for four of his 10 children and supporting some 24 grandchildren. Apart from two sons who worked in the money-laundering business, only one of his 10 children had a job.

Yet greed was not Goldberg's motive. Judge Strong said he was "an Orthodox Walter Mitty gone bad -- who has sought wealth not for its own sake but to enable him to bestow largesse on others and thereby gain their admiration and approval". He was, said the judge, "a dreamer and fantasiser, a rather pitiful individual whose life has been characterised by mediocrity, contrary to his own perceptions". He thought that providing a money-laundering service for the rich would make him useful. "In fact he was used."

When Goldberg was arrested in June 1997 he refused to co-operate with the police in any way. His wife, Rita, and the two sons, Naphtali and Hershel, who had helped run the money-laundering business, also refused to be interviewed. During his sentencing remarks, Judge Strong made very pointed reference to this lack of co-operation and to Goldberg's refusal to identify his customers.

He also questioned the role of a lawyer who sat in the body of the court, giving the Goldbergs support and encouragement. "A member of the Bar, Mr David Havin, who is also a member of the Adass community, has been present for weeks on end. Why has this level of support been provided?" asked the judge. "Are the Goldbergs disinclined to bite the hand which feeds them? This is a troublesome issue. As I say, the silence has been deafening. Attempts to explain it were made on religious and cultural grounds. I am unconvinced. I find it morally indefensible."

The strict religious faith of the defendants was one of the main elements of the plea that the sentences should be lenient, and it was one of the main reasons why the judge went easy on the Goldberg family.

It was put to the court by one of the defence witnesses, a prison chaplain, that if Orthodox Jews were rated on a scale of 1 to 10, then Goldberg and the Addas Israel congregation would be a 10. And this, it was argued, would make his life behind bars exceptionally harsh, because (in the words of the judge) "no Jew imprisoned in recent memory would rate more than 5". There would be problems for Goldberg in washing, getting kosher food and observing religious rituals, and the special treatment that he would need could well lead to him being victimised. "The likelihood is that an ultra-orthodox Jewish prisoner, male or female, would spend all his or her sentence in protection and, very likely, in solitary confinement. This would add to the burden of the sentence."

Similar arguments were used by Judge Strong to suspend prison sentences given to Goldberg's wife and their two sons, who also pleaded guilty to tax fraud. "Rita Goldberg, for example, is 56 years of age", said the judge. "In common with Adass women, her head is shaven. She wears a wig. There is no greater humiliation for an Adass woman than being compelled to bare her head. This is unlikely to be understood by prison staff, let alone prisoners. I am satisfied that imprisonment would place Rita Goldberg in situations which she would regard not only as traumatic but as deeply humiliating, degrading and offensive to her religious beliefs and her cultural background. Similar considerations apply to the other prisoners."

But while they may or may not have escaped lightly -- and the DPP is appealing against the leniency of Goldberg's sentence, which could have seen him jailed for 20 years and fined $220,000 -- they will face other penalties. The Goldbergs will forfeit their family home under a reparation agreement to pay $15 million to the ATO, and Goldberg will lose $200,000 in cash that was recovered at the time of his arrest. The two sons will also lose half the equity in their homes. And all will probably be bankrupted.

Meanwhile, the people who evaded $20 million and more in tax with Goldberg's help, have yet to be brought to justice. Since Goldberg would not give evidence against them, it was impossible to prosecute.

One Melbourne diamond dealer, Reuben Flescher, was charged with tax fraud along with Goldberg, but died during the trial. Another, who appears lucky not to have been prosecuted, was the Sydney diamond dealer who was identified to the court as one of Goldberg's customers. The court heard evidence of cash collections from his Sydney offices and of numerous phone calls between the two men to arrange deliveries.

The judge was in no doubt that they were the real villains. Tax evasion was theft, he told the court. "They are masquerading as respectable citizens, but they are in fact thieves."

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Jail not kosher for three in $42m laundering scheme