Inside Hollywood's Hottest Cult - Part 4

Inside Hollywood's Hottest Cult (Kabbalah)

Part Four: There’s No Profit Like Non-Profit

Radar Magazine/June 1, 2005 | By Mim Udovitch

How did a family of middle class mystics end up with matching mansions in Beverly Hills?

Our final installment examines how the Kabbalah Centre is pouring millions into a network of businesses controlled by the Bergs and their minions.

The public image of the Kabbalah Centre is a mishmash of celebrities, $26 red string bracelets, and bottled water imbued with curative powers. But there is another side to the organization the public never sees. In the last part of our series about the Kabbalah Centre and the family that runs it, Radar looks at the commercial operations of this nonprofit, tax-exempt religious institution.

As reported in yesterday’s installment of “The Kabbalah Chronicles,” in 2003 Spirituality for Kids, the Centre’s children’s program, devoted a paltry $1,985 to its scholarship fund. However, over the last eight months SFK—for which Madonna is the international chairperson—has loaned about $1.5 million in private mortgages to Barak Enterprises Inc., a for-profit company with a P.O. Box address that flips Los Angeles properties in such unpromising neighborhoods as Watts, Compton, and Inglewood. Like a number of companies with which the Centre does business, Barak is run by devoted followers of Philip and Karen Berg, the Centre’s leaders and founders, in this case Ilana Koresh and her husband Yoav Atzman. The couple have an excellent eye for real estate, realizing profits of up to 80 percent on properties sold mere weeks after they were purchased. It is part of SFK’s mission, prominently emphasized in its literature, to help families in the kind of at-risk neighborhoods where Barak often turns a fast buck.

Barak is not the only company doing business with the Centre belonging to friends or students of the Bergs. In 2002 the Kabbalists announced “an exclusive deal” to make a line of Kabbalah clothing with Sharagano, a semi-chic label favored by, among others, Alana Stewart and Susan Lucci. Sharagano (per its website the name is Aramaic for ray of light) is owned, according to the Centre, by a man named David Shamouelian, to whom the Bergs are connected through his relationship with Karen Berg’s daughter from her first marriage, Suri Shamouelian. Asked about its dealings with Sharagano, the Centre replied, through the corporate crisis-management firm Sitrick and Company, that it had given Sharagano a small loan, which had since been repaid. Furthermore, the Centre’s own for-profit subsidiary, Kabbalah Enterprises Inc. (KEI), sometimes does business with itself. For example, KEI once sold property to a limited-liability company called KAF Investments, which is co-owned by KEI with Kabbalah Centre member Rafael Feig, whose construction company, Bravo, is currently doing some major work for the Centre.

The Centre defends the loans to Barak on the grounds that it earned interest on these loans. In an e-mail, Kabbalah Centre publicist Alison Cohen wrote that the Centre was “proud” to be involved with Barak, which, per this e-mail, invests in properties in depressed areas in order to improve the stock of available affordable housing. But Barak isn’t always in the business of improving its real estate. In at least one case Barak sold the property to Ilana Koresh, who sold it to Barak, an MO that clearly does not make housing either more available or more affordable. “Those kinds of transactions are closely examined by the IRS, because of the potential for diversion of moneys to individuals,” says Marc Owens, a partner at the D.C. law firm Caplin & Drysdale who served as the director of the exempt organizations division of the IRS between 1990 and 2000.

These convoluted dealings are not confined to real estate. As previously reported in this series, Darin Ezra, a spokesperson for Kabbalah Energy Drink, repeatedly denied his product’s ties to the Centre when speaking to the press. Ezra told Radar that Kabbalah Enterprises Inc., the drink’s distributor, was formed about six months ago and that the company had no connection to the Centre. In fact, KEI is a for-profit subsidiary of the Centre and was incorporated in 2000. Its articles of incorporation list as its president Philip Berg. (Ezra also told Radar that Kabbalah Energy Drink was not the Centre’s type of product because it wasn’t “completely healthy” and that his investors’ identities were confidential.) In response to Radar’s questions about this, Centre spokesperson Alison Cohen said that what Ezra was trying to convey was that the energy drink was distributed by the Centre’s for-profit subsidiary, rather than by the Centre itself. Cohen makes a fine distinction. An asset of KEI is an asset of the Centre.

Whether Kabbalah Energy Drink still is an asset of KEI is unclear. The name “Light Force Water Source Inc.” now appears at the bottom of the Kabbalah Energy Drink website, although the site itself remains registered to the Centre. The Centre initially said it did not have any affiliation with Light Force, but Cohen then said that although the name didn’t ring any bells at first, it was a company that a Centre student, Marc Taubman, was going to use to market Kabbalah Energy Drink. Light Force, whose CEO is Marc Taubman, identifies itself on public documents as a beverage distributor, not a marketing company. As to the unfamiliarity of its name, the Centre has trademarked the phrase Light Force Water. According to an online person-locator database, one of Marc Taubman’s previous personal addresses is another property owned by the Centre.

Light Force was a company owned by a Centre student, Marc Taubman, through which Kabbalah Energy Drink was going to be marketed.

The popularity of its potable assets with its donors has also been beneficial to the Centre’s philanthropic activities. After posting a widely publicized appeal at the beginning of January for funds to finance the distribution of Kabbalah Water and Zohars to victims of the December tsunami, the Centre raised $960,244.76 by the end of March, according to an April e-mail to donors. The same e-mail claims that the Centre had spent and/or was formally committed to spending “exactly $384,562.45.” The bulk of that amount was to go for 700,000 one-liter bottles of Kabbalah Water, on which the Centre placed a value of $219,996. However, according to International Medical Corps, the global relief agency cited in the memo to donors as the Centre’s main partner in distributing the water, the need for bottled water decreased following the immediate aftermath of the tsunami. As of mid-May, 2,317 cases of water, valued by the Centre at $77,256.10, had been shipped, and no certain plans were in place to ship more. (SFK also has a tsunami relief effort, a plan to send backpacks full of toys, crayons, books, and other goodies to tsunami orphans. After a quick start when SFK got 10,000 teddy bears from JetBlue in January, this effort has run into, according to the Centre, “logistic complications.” The donor e-mail states that the backpacks were to have been distributed by the end of April. As of mid-June, not a single teddy bear had reached Indonesia.)

In short, whether the focus is celebrity, philanthropy, merchandising, or the tithing and donations involved in the practice of Kabbalah itself, the one constant is sizable amounts of money. This goes to the heart of the Centre’s mantra of “giving and sharing”—the golden rule of Kabbalah, Berg-style. Both present and former students told Radar that this only ever means one thing. In the words of one, “Every teacher explicitly said, the only true charity that counts is to give to them—all your spare time and even your work time. People were encouraged not to go to work, because you have to share, you have to give.” Like most of the former students with whom Radar spoke, this woman considers herself to have been brainwashed during her time with the Centre. Cult experts Steven Alan Hassan and Rick Ross have both counseled former Centre students and received numerous calls from worried family members and friends of people who have gotten involved with the Centre. The techniques the students allege the Centre uses—isolating members from external support networks, pinpointing and exploiting their fears and desires, giving them a community that promises to fulfill all their needs—are so elementary that it’s hard to believe they would work on significant numbers of people.

But they have, they do, and doubtless they will continue to, in ways both small and large. Another former student, who worked as chevre at the Los Angeles Centre, living with four other volunteers in a one-bedroom apartment for a stipend of $35 a month, considered herself lucky to get private time with Yehuda Berg. Her teachers used to tell her that the body doesn’t really need more than four or five hours of sleep a night—in fact, more than that is bad for you. In this student’s belief, if she had given the Centre the $30,000 in her savings account she would not have ended up in the ranks of the chevre. If they couldn’t get her money, well then, her labor would do.

In January, JetBlue donated 10,0000 teddy bears to the Centre’s tsunami relief fund. But as of mid-June, not a single teddy had reached Indonesia.

There are many ways to study Kabbalah without going through the Kabbalah Centre. What the Centre offers is the wisdom of the Rav, and his family is determined to make sure it reaches everyone. An imaging and branding memo given to Radar defines each of the Bergs according to demographic appeal. For example, the Kangol-cap wearing Yehuda is “the everyman.” His audience is “all of working-class America…. It is a similar audience to the Oprah audience, the Billy Graham audience…. The people who read People magazine—everyday people.” In the internal marketing notes for one of his books, Yehuda’s position is summarized as “I am not the guy in the slick suit, I am like you, I am a regular person.” Michael, in contrast, is “a scholar and intellect.” His audience reads the New York Times and Wall Street Journal. It consists of “people who are not interested [in] ‘Kabbalah lite.’?” Karen is appealing to “people who read Marianne Williamson.” Philip Berg is simply “THE KABBALIST.” Through Alison Cohen the Centre denies that these documents were ever authorized by or known to the Bergs. Yet these are precisely the qualities the Bergs have used to build their empire and the expanding network of commercial and spiritual enterprises that have brought them so much influence and wealth. Michael Berg emphatically states that all revenues from the Bergs’ books, tapes, and other items go directly to the Centre and not to the members of his family. There is no reason to doubt this. The question in situations like this, as Owens remarks, “is not whose name is on the bank account, it’s who enjoys the fruits of the enterprise.”

At least some of the fruits of the Kabbalah Centre’s enterprises, whether in the form of spiritual or material rewards, have accrued to Philip Berg and his family. In his transformation from Shraga Feivel Gruberger to Philip Berg to the Rav, Berg is a true American story of self-invention and making good. And what he’s selling is all-American as well: a mystic elixir every bit as powerful as snake oil, guaranteed.