The alleged ringleader, Marvin Berkowitz, is a former Chicago rabbi accused of directing the fraud from Jerusalem, where he was arrested Sunday night, U.S. official said. He is among 10 defendants indicted in Chicago on 41 counts in February. The indictments were unsealed Monday.
The U.S. Justice Department said Berkowitz allegedly caused at least $800,000 in tax refunds to be paid to, or for the benefit of, at least eight family members, including son Yair Berkowitz and son-in-law Eric Berkowitz, both arrested in Chicago Sunday night. Another son, David Berkowitz, was arrested in the Los Angeles area.
All 10 were charged with one count of conspiracy to defraud the United States by impeding the Internal Revenue Service in the collection of income taxes, as well as defrauding numerous state tax departments.
The Justice Department said the scheme, dubbed operation "American Pie" by investigators in Israel, fell short of its goal of $35 million. The indictment seeks forfeiture of $4 million.
The department alleges Marvin Berkowitz, who also is charged with six counts of identity theft, recruited dozens of co-conspirators to submit more than 2,900 federal income tax returns and more than 400 false state income tax returns. Officials said the returns were filed using Social Security numbers of federal prison inmates without their knowledge or consent.