Chasidic leaders approved scam for families to fraudulently claim housing benefit in Stamford Hill, court told

Mrs Kliers married her former husband Shlomo in 1995. The couple, described as members of a Chasidic sect in Stamford Hill, separated in 2012 and later divorced (under Jewish, but not civil, law).

In 2004, a £418,000 house was bought for them in Kyverdale Road, N16 with a £300,000 mortgage from the Royal Bank of Scotland. Mrs Klier said she contributed £103,800 and her husband £32,900 towards the purchase.

The house and mortgage, however, were registered in the name of Mr Schmerler who had put no money into it. Under a tenancy agreement, the couple gave him rent to cover the mortgage payments, including around £150,000 they had obtained in housing benefit.

Mr Rosen said that from the evidence of Mrs Kliers,” it seems to me that the purpose of putting the property into Mr Schmerler’s name, and the tenancy which was also involved, were to obtain funds from the Bank of Scotland as mortgagee, from housing benefit, from the London Borough of Hackney and the Department of Work and Pensions, to which there would have been no entitlement had the true state of affairs been fully and frankly disclosed to those third parties.”

Mr Rosen accepted Mrs Kliers had come under “undue influence” to agree to the arrangement through “pressure exerted on her by her father and others, under the aegis or justification of what they were told by the rabbis should be done”.

She said the property had been acquired in Mr Schmerler’s name at the directions of “various authoritative gentlemen”, including Mr Kliers’s Grand Rabbi in Jerusalem, with the support  of her father, their London rabbi and a community adviser, because of Mr Kliers’s poor employment status and precarious income.

Mr Kliers, who had spent time as a talmudic student in Israel, was largely unemployed, while Mrs Kliers worked in various jobs.

The evidence was “one-sided,” Mr Rosen explained, because Mr Kliers chose not to take part in the court proceedings, while Mr Schmerler was debarred as a defendant  for failing to provide information to the court.

Through his solicitor, Mr Schmerler claimed he was the sole owner of the house and had paid for it with his own funds.

But Mr Rosen accepted Mrs Kliers’s evidence as honest and accurate and awarded her a 75 per cent share of the house - while ruling that Mr Kliers had a 25 per cent stake.

Although he did not find Mr Schmerler “subjectively dishonest”, he said it might beggar belief for the court to assume he had been unaware of what had gone on.

Speaking of the scam, Mr Rosen said: “The fathers, both familial and community, considered that to be the way to achieve the purpose and the borrowing, and the receipt of publicly funded benefits.

“Why senior persons should consider that to be proper, it is not for me to say, but there can be no doubt that it is an illegal purpose and contrary to our law and one would have thought to the relevant religious law as well, but as to that, fortunately, I am no authority whatsoever.”

He noted it had been Mrs Kliers's evidence that the arrangement was "a common practice in this community - although that conclusion would be unpalatable for any court and there is no need to go so far."

Mr Murray accepted her undertaking that the Bank of Scotland and social security authorities would be repaid from the proceeds of the house.

She also agreed to assist the tax authorities over any money owed to them. Some of the money used for the house purchase, the judgment said, was “purported charity when, in fact, it was some part of remuneration, in particular Mrs Kliers’s remuneration, which again it is said it is a habit in this community to disguise this charity in order to avoid tax on such remuneration.”

The Department for Works and Pensions, asked whether it were following up the claims that such housing arrangements were common practice, said it would not comment on whether it was investigating.