The IRS Investigates the Kabbalah Centre: Madonna, Roseanne, and Other Celeb Supporters Quiet

October 18, 2011; Source: Los Angeles TimesIn March, the NPQ Newswire mentioned the charitable muck-up of Madonna in Malawi with the extensive assistance of the Kabbalah Centre based in Los Angeles.  Something didn’t sound quite right about the Centre’s operations, which seemed to stray from teaching Jewish mysticism into a number of other areas that were hard to connect to the Kabbalah, and we said so, only to be excoriated for impugning the motives of Michael Berg, one of the scions of the Centre’s founders, Philip and Karen Berg.

Now comes a powerful two-part investigation by the Los Angeles Times, following up on the recent investigation into the Centre’s operations by the Internal Revenue Service. 

The Kabbalah has become a hot topic for the Hollywood set.  Involved in and at times financially supporting the Centre in addition to Madonna (who reportedly has donated $10 million) have been Sandra Bernard, Demi Moore and Ashton Kutcher (who were married by a Centre teacher), Roseanne Barr, Donna  Karan (contributor of $2 million), Elizabeth Taylor, Gwyneth Paltrow, Britney Spears and Paris Hilton.  No offense to any of these people, but the Los Angeles Times article gives the Kabbalah Centre the flavor of a cult, with acolytes treating the Bergs as Christ-like and infallible, notwithstanding statements from rabbinical groups that the Bergs’ teachings are not just a bit off the mark in terms of the Kabbalah or anything else in Judaism. 

The rabbinical critics were also a bit concerned with the Centre’s fundraising and expenses, which are at the heart of the IRS investigation.  In 1999, the Centre’s parent organization, the Kabbalah Centre International was reclassified as a church, meaning the flow of publicly accessible tax returns (990s) stopped.  A former financial officer at the Centre told the Times that its assets have grown from $20 million in 1998 to $260 million in 2009 (including $200 million in residential and commercial real estate in Las Vegas, New York, and Florida and a $60 million investment fund).  Some of the assets clearly benefit the Bergs.  The Centre bought three $1.8 million homes, side-by-side, in Hollywood for Philip and Karen Berg and their two sons.  Gifts from donors to the Bergs have included parties (with Michael Buble and Madonna as entertainment at one), private airplane rides, jewelry, and overseas trips.  It’s not clear how this is connected to the Kabbalah, but Karen Berg seems to be attracted to the craps tables at Caesars Palace and other casinos in Las Vegas.

In 2010, a chief financial officer as fired after three months on the job, reportedly because he discovered instances of tax fraud at the Centre.  According to the Times, since this investigation started, with IRS staff apparently well versed in the Centre’s operations, the celebs connected to the Centre have been a little scarce.  The Bergs refused to talk to the Times, but issued a statement they would cooperate with the IRS even though it feels to them that the investigation “is being fueled by rumors spread by a few disgruntled former students and former employees with personal agendas.”  That’s the traditional stock answer against charges lodged by whistleblowers. 

What might have attracted the IRS’s attention?  Certainly some lawsuits with former staff who had revelations to share.  How about the Centre’s for-profit arm buying a property in Los Angeles for $830,000, transferring it to an LLC whose principals included Karen Berg which then created eight condos in the property that sold for a total of $5 million?  Or maybe court-ordered fine it had to pay for having run a Ponzi scheme in New York?  Maybe it was the Centre’s trademarks for cosmetics, livestock vaccines, and a liquid chemical compound for decontaminating nuclear waste, all not quite in the Zohar (the book of the Kabbalah).  Perhaps it is the Centre’s unusual product lines, including the sale of red string bracelets to ward off evil spirits and bottled water with miraculous unspecific healing powers. 

Let’s hope that the IRS has the chutzpah to follow through.—Rick Cohen