Joseph Gutnick fined after found guilty for cheating friend

Mining magnate Joseph Gutnick, one of Australia’s most senior Chabad rabbis, has been ordered to pay A$1 million (NIS 3,252,000) after a judge found him guilty of “misleading and deceptive conduct” in a business deal with a fellow Lubavitcher in Melbourne.

Justice Ross Robson of the Supreme Court of Victoria last week found in favor of Roy Raphael Tashi, who in 2010 was convinced by Gutnick to buy A$1 million worth of shares in Northern Capital Resources Corporation, a Canadian gold mining company founded by Gutnick.

Having lost his lucrative job and facing the prospect of having to sell his multi-million-dollar home, Tashi believed letters he faxed to the grave of the late Lubavitcher Rebbe asking for a “miracle” had borne fruit when Gutnick offered him the shares at a “bargain price.”

Instead, he was left with shares that Gutnick knew were “probably close to worthless,” Justice Robson wrote in his blistering 80-page judgment.

“Mr. Gutnick’s behavior was not that of a friend assisting another in trouble,” the judge wrote. “Rather, I find that it was predatory behavior in which Mr Gutnick was primarily motivated by enriching himself at Mr Tashi’s expense.”

Tashi didn’t question the deal because he knew Gutnick was a “very generous individual” and, in the absence of financial statements and disclosures, he “totally relied on Mr Gutnick’s goodwill towards him,” the judgment stated.

He said he would not have bought the shares if he knew he was “buying at market price, at no bargain.” When he asked Gutnick to buy some of the shares back in 2011, the latter refused.

Justice Robson ordered the share sale agreement be declared void and Gutnick to pay Tashi A$1 million with interest.

In one of several letters faxed to the Rebbe’s grave that were cited in the judgment, Tashi wrote: “If you can further intervene and provide a ‘miracle’ that brings about a windfall financial gain in one form or another I will share this with the community with at least 20 percent going to tzedekah [charity] as well as taking it upon myself to be more observant.”

Tashi told Haaretz this week he was “obviously delighted with the result” but unhappy that his letters to the Rebbe had been published.

“I was disturbed that my letters to the Rebbe were made public in court,” he said. “They’d not been seen by my rabbi or my wife.”

Tashi added that he was “not uncomfortable” taking a fellow Lubavitcher to a secular court, because he “got advice from my [Chabad] rabbi.”

Gutnick, 61, denied any wrongdoing during the court case in April. He declined to comment on the judgment when contacted in New York this week, except to say his legal team may consider an appeal “in the coming days.”

Gutnick was appointed by the late Lubavitcher Rebbe to the post of “Special Emissary to the Integrity of the Land of Israel.” He is one of three chief Chabad rabbis in Melbourne sanctioned by Chabad headquarters in Brooklyn. 

A replica of the Chabad U.S. headquarters that he built a replica in Melbourne in 2001 was opened by Israeli Prime Minister Benjamin Netanyahu. Gutnick is credited with assisting Netanyahu’s 1996 Israeli election victory by bankrolling the controversial “Bibi is good for the Jews campaign.”

Virtually wiped out in the 1987 stock market crash, Gutnick claims the Rebbe told him in 1988 exactly where to mine in Western Australia. 

He was soon dubbed “Diamond Joe” as a result. The father of 11 has disbursed millions in philanthropy in Australia and Israel and has accrued a wealth estimated at $285 million, according to Business Review Weekly magazine’s 2013 rich list.

He recently relocated to Singapore, whose government lures investors with tax incentives. He is reportedly in the process of establishing a Chabad house in the tiny city-state, which he says has “no anti-Semitism.”

Tashi said he joined the Chabad movement about 25 years ago and is a director of a Chabad house in the Melbourne suburb of Malvern. Gutnick previously donated $250,000 for a preschool at the center. 

The chair of the Community Security Group in Melbourne, Tashi is also a former president of the Mount Scopus College Foundation and a life governor of the college, life member of Jewish Care and life governor of Montefiore Homes, two aged-care organizations. He was awarded the Order of Australia in 2006 for “service to the Jewish community.”