A yeshiva in Brooklyn will pay more than $8 million in penalties for defrauding the government and siphoning off federal benefits meant to feed disadvantaged school children.

The Central United Talmudic Academy (CUTA) in Williamsburg, New York State’s largest private Hasidic Jewish school, diverted millions of dollars from a variety of government programs, subsidized adult parties, paid teachers off the books, and requested reimbursements for student meals it never actually provided.

In addition, the school employed practices such as paying employees with “coupons” to use at local stores, enabling them to underreport their taxable income and become eligible for various government benefits.

Breon Peace, a U.S. Attorney for the Eastern District of New York, announced the penalties on Monday following an agreement reached before a U.S. District judge.

According to Peace, who referred to the various plots as an “underground economy”, CUTA received upwards of $3.2 million in reimbursement between 2014 and 2016 from a U.S. Department of Agriculture program meant to feed needy students.

In a statement, Peace said: “The misconduct at CUTA was systemic and wide-ranging.

“Today’s resolution accounts for CUTA’s involvement in those crimes and provides a path forward to repay and repair the damage done to the community, while also allowing CUTA to continue to provide education for children in the community.”

To avoid facing criminal charges, CUTA agreed to pay more than $8 million in restitution following an investigation by the U.S. Attorney’s Office, the FBI, and other agencies.

A lawyer representing the yeshiva, Marc Mukasey, said school leaders would work collaboratively with the government to fulfill its obligations under the agreement.

Michael J Driscoll, assistant director in charge of the FBI’s New York office, said: “Today’s admission makes clear there was a pervasive culture of fraud and greed in place at CUTA.

“We expect schools to be places where students are taught how to do things properly. The leaders of CUTA went out of their way to do the opposite.”

Two former employees of the school, Elozer Porges, the school’s former director, and his assistant, Joel Lowy, pleaded guilty to fraud in 2018. Porges was sentenced to two years in prison in October 2019, while Lowy was sentenced to five years’ probation, 1000 hours of community service and over $98,000 in restitution penalties in April 2022.

CUTA is the home base of the Satmar movement, and is a not-for-profit school serving over 5000 students, from preschool to high school, out of three buildings.

In 2019, more than 1,000 students at CUTA took New York State’s standardised tests in maths and English. Every single one of them failed.