Former Councilmember Chaim Deutsch sentenced to 3 months for tax fraud

Chaim Deutsch
Former Councilmember Chaim Deutsch.
Courtesy of Chaim Deutsch’s office

Former southern Brooklyn Councilmember Chaim Deutsch was sentenced Thursday to 3 months in prison and 1 year of supervised release, along with $107,000 restitution to the government and a $5,500 fine in relation to federal tax fraud charges.

The former pol appeared alongside his attorney, family, and friends before US Magistrate Judge James Cott at Manhattan federal District Court to face sentencing, after pleading guilty in April to evading nearly $83,000 in taxes he owed between 2013 and 2015 as the owner of real estate firm Chasa Management. The charges against Deutsch carried maximum penalties of up to a year in prison, a year of supervised release, and a fine of $100,000. Deutsch’s attorney, Henry Mazurek, had asked that he be sentenced to probation, community service, and restitution of the tax liability plus about $25,000 in interest.

Deutsch, a Democrat who represented the 48th Council District, which includes Brighton Beach, Manhattan Beach, Sheepshead Bay, Homecrest, and part of Midwood, was expelled from the City Council in April, a few days after copping to the charges. City Council Speaker Corey Johnson cited the state’s public officers law stating that an office was automatically vacated after its holder is convicted of a crime involving the violation of their oath of office in a statement after expelling Deutsch from the Council.

“I want to apologize to the court, my family, my former staff from the City Council’s office, and most of all, my former constituents of District 48,” Deutsch said in remarks before Judge Cott. “I apologize for the conduct that brings me to my sentencing today. I was wrong for what I did. I should never have tried to avoid paying my fair share of taxes. I’ll have to live with these bad decisions for the rest of my life.”

Eli Mark, the prosecutor in charge of the case with the Southern District of New York, however, argued that what Deutsch did was not a mistake, but rather continuous, systematic fraud that occurred, at least partially, while he was charged with representing his community in a position of high public trust.

“This was not aberrant conduct that occurred on a single occasion,” Mark said. “It was deliberate conduct that occurred year after year.”

Cott also argued that Deutsch’s position of public trust exacerbated the offenses he committed in handing down a sentence, and said that his sentence should act as a deterrent to both members of the community and other public officials that tax evasion wouldn’t be tolerated even by powerful people.

“There is no doubt that his conduct was intentional,” Cott said. “It was not a mistake, or an oversight. His course of conduct is exacerbated by the fact that the defendant was a public official at the time of his criminal activity. Indeed…Mr. Deutsch was not paying his fair share of taxes to fund the very government services he was helping to oversee as a member of the City Council.”

“I do believe, given all the circumstances here, that a period of incarceration is necessary,” Cott continued. “To decide otherwise would send the wrong message. There is a real financial loss to the government in this case. A public official who knowingly filed false tax returns for three years must go to jail.”

Mazurek noted that Deutsch will have to sell his house to pay restitution, though Mark noted that the house was purchased while the tax fraud was being committed.

Cott ordered that Deutsch surrender to federal custody to begin his sentence by October 29. Mazurek asked that Deutsch be remanded to the federal prison at Otisville, Orange County, which Cott agreed to recommend, though ultimately the determination is up to the federal Bureau of Prisons.

Deutsch, 52, was first elected to the Council in 2013 and was reelected in 2017. Prior to serving in public office he worked as a political aide, in real estate and property management, in fashion manufacturing, and volunteered with the Flatbush Shomrim patrol, which he founded in 1991.

Deutsch’s real estate business was relatively lucrative: before the Council voted to limit outside income in conjunction with a pay raise, he had some of the highest side earnings of any member of the Council, with earnings from Chasa Management topping six figures. Deutsch in 2017 pledged to divest from his real estate holdings by the time the new outside income limits went into effect on Jan. 1, 2018, the first day of his second term; Judge Cott noted Thursday that Deutsch had not received income from Chasa Management since 2017.

The pol is a conservative firebrand and often found himself at odds with the priorities of the Council’s Democratic caucus at large, but his office was nonetheless considered to have strong constituent services. District residents and former Deutsch staffers say that those services have diminished significantly since the Council’s central office took over the 48th District’s operations, which now include only constituent services, with no legislative or political teeth.

As of July 23, in keeping with Council procedure, Deutsch’s staffers have either been laid off, or have moved to work in the central office or with other members. The layoffs have been criticized by both former staffers and residents.

Had Deutsch not been expelled from the Council, his term would have been up at the end of the year. The Democratic primary to replace him was won by Steven Saperstein, who will face Republican Inna Vernikov in the November general election. Whoever wins the election will take office as soon as the Board of Elections certifies the results, rather than on Jan. 1, 2022 as will most new councilmembers.

The Daily News reported that Deutsch has been working as a property manager in Brooklyn as he awaited sentencing this summer.