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Thursday, July 5, 2012

Kabbalah Centre case taken up by federal authorities

Madonna was spotted  at the Kabbalah Centre, accompanied by her boyfriend Brahim Zaibat.

Los Angeles - Federal authorities have taken over an investigation into the management of an elderly heiress' fortune by a key figure at the Kabbalah Centre, police said Tuesday.

A supervisor with the Palos Verdes Estates Police Department, which had led a criminal probe into the handling of the housebound widow's affairs, said the department turned over files concerning her longtime business manager, John E. Larkin, to federal agents last month.

Sgt. Steve Barber declined to name the agency but said its focus was "financial activities" involving the 88-year-old heiress, Susan Strong Davis, and Larkin, a veteran Hollywood business manager who helps oversee the Kabbalah Centre's money.

The Internal Revenue Service has been investigating the Los Angeles-based spiritual organization, known for celebrity followers such as Madonna and Demi Moore, for tax evasion since 2010. A federal grand jury in New York has issued subpoenas for records relating to its controlling family, the Bergs, and the center's assets, which are estimated in the hundreds of millions of dollars.

An IRS spokeswoman declined to comment, saying federal law barred the agency from confirming or denying investigations.

Larkin, 64, Davis' longtime business manager and a close associate of center founders Karen and Philip Berg, came under law enforcement scrutiny in April after a Times report about his handling of Davis' money. The heiress has spent at least $2.65 million in recent years building a home in Beverly Hills near the Kabbalah Centre despite suffering from what relatives describe as dementia.

Larkin sold her a lot he owned as a site for the home in 2009 for what real estate filings indicate was a $300,000 profit. He has overseen the ongoing construction, approving the design of the four-bedroom home and instructing the builder earlier this year to install a kosher kitchen.

Davis, who has no children, has lived in a large Palos Verdes Estates home overlooking the ocean for 30 years. Relatives said she never mentioned moving to Beverly Hills or talked about the Kabbalah Centre. Tax records show that in 2005, a period in which her nieces said she was still lucid, she gave $600,000 to the Kabbalah Centre's children's charity. Subpoenas in the IRS investigation have listed that nonprofit, Spirituality for Kids, as the subject of the tax evasion investigation

A spokesman for the center, which has said it is cooperating with the IRS, declined to comment.

Barber said federal agents would look into the Beverly Hills property deal as well as other financial dealings. A probate judge is expected to review Larkin's management of Davis' family trust fund at a hearing later this month. The trust fund, valued at more than $11 million in a recent court filing, pays Larkin and another trustee $100,000 a year to oversee its investments. Larkin signed off on millions in loans from the trust for the purchase of the Beverly Hills lot and construction of the home there without disclosing to the probate court, which oversees the trust fund, that he had a personal stake in the project as the seller. Numerous trust experts have called the transaction a conflict of interest that required disclosure.

A lawyer for Larkin declined to comment on the new federal role in the Davis investigation but insisted Larkin had done nothing wrong.

"Mr. Larkin has and continues to at all times act as a responsible trustee in the interest of his client," attorney Gary Lincenberg said.

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