The Rabbi Who Conned Himself

Milton Balkany hedges and misses his bets

The government says Rabbi Milton Balkany engaged in a shakedown, plain and simple, when he asked a wealthy investment firm for $4 million to keep its name out of an insider-trading probe.

Balkany, veteran of New York politics and religion, says he has been badly misjudged. He was merely on one of his many missions from God, trying to line up one more carom shot on the pool table of life, using his high-level access in his usual manner to benefit everyone, especially fellow Jews.

That dispute is up to a jury in Manhattan federal court. But the drama revealed by the secretly recorded conversations played at Balkany's trial last week is the stuff of theater, and even the likes of John Guare or David Mamet would have a hard time doing better.

Rabbi Milton Balkany
Frances M. Roberts/Newscom
Rabbi Milton Balkany

For starters, there is Balkany himself, a 63-year-old rabbi with a regal bearing and bright white beard who cuts an impressive figure on any stage. He is known for raising small fortunes for politicians among Brooklyn's Orthodox Jewish community. He has also been cited for bending the rules in pursuit of his many causes. But nothing has ever stuck, and he and his attorney, Ben Brafman, say the current charge is the same as the others: a misunderstanding.

On the tapes, Balkany is heard describing his plan: First, Steven Cohen, billionaire hedge-funder, would write a pair of $2 million checks. One would go to the Brooklyn girls school Balkany has run for 40 years, the other to another needy yeshiva. This show of good faith would in turn shape the rabbi's spiritual advice to a prisoner serving a 96-month sentence for fraud in the Otisville federal prison camp upstate. Balkany's advice would be that the inmate say nothing to investigators about any wrongdoing he might know about at Cohen's hedge fund.

"I give you my handshake with my word, his name is never coming up," Balkany is heard telling Cohen's attorney in December. He was in a position to influence events, Balkany said, thanks to his standing among both the mighty and the fallen. "You know I give the invocation to the president quite often," he said. "Not Obama, but the Bushes."

In early January, Balkany visited Cohen's firm, SAC Capital, at its Stamford, Connecticut, headquarters. There, he told executives how his Washington connections "began with President Reagan when his wife came to spend a day in our school. Then he started inviting my wife and myself back to the White House. We were there many times as guests." He also had friends in Congress. "Every six weeks, a different senator from Washington comes to my house for lunch or dinner," he said, ticking off a list of names including Hatch, Lieberman, Specter, Kennedy, and Baucus. He knew law enforcement officials as well. "I'm friends with the Attorney General, and because I'm close with the, uh, Justice Department, I can come and go almost anywhere I have to," he told the hedge-funders. "I don't need any pass, I don't need any credentials."

He wasn't bragging, he said, but merely explaining how he came to learn about the trouble headed Cohen's way. During one of his visits to Otisville, where many Orthodox prisoners are held, an inmate named Hayim Regensberg, convicted in a Ponzi scheme, had approached him: The FBI was offering him early release in exchange for information about insider trading deals involving Cohen.

The rabbi's voice dropped to a whisper inside the conference room: "Regensberg asked me if I knew Cohen, because in the White House, in these parties and everything, you get to meet the big, the famous."

His own sources confirmed the probe. "I'm in touch with the FBI all the time," he said. Agents had urged him to get Regensberg to cooperate. "I don't know what they have on [Cohen], or why they're thirsty to tear him down, but I'm convinced that they feel Regensberg is their key," he said.

Balkany, however, had reminded Regensberg that it is forbidden to harm a fellow Jew such as Cohen. "'Listen, you can't do that,'" he said he'd told the inmate.

Still, the government was pushing hard. Agents were headed back to Otisville to lean on Regensberg. "They're coming back to him, I think it's tomorrow," he said.

What would inspire the inmate's silence, the rabbi said, would be a $2 million donation to his school, Bais Yaakov, and a "pure loan" of another $2 million to a Brooklyn boys school. "I don't want it to be misconstrued," the rabbi cautioned. "This is not a hold-up of Mr. Cohen, or anything like that." It was "pure charity," he explained, going to "two very, very worthy causes." It would also spare Cohen legal bills that could run millions more. "The FBI could destroy the man, I don't care how many billions he has."

He had done similar business with other powerful figures, he said. Leona Helmsley gave $2 million to his school when he helped her out in Danbury prison. Mighty General Motors had given $1 million for his aid with a bill in Congress. "I didn't even ask for it," he said softly. The hedge-funders nodded. They also were inclined to help, they said.

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