A Brooklyn rabbi who has been a major political fundraiser was charged Tuesday with embezzling $700,000 in federal funds earmarked for disabled preschoolers and spending some of it to pay his taxes and credit card bills.

According to a four-count complaint unsealed Tuesday in U.S. District Court in Manhattan, Rabbi Milton Balkany, 57, president and director of the Bais Yaakov Jewish Day School in Borough Park, allegedly misappropriated Department of Housing and Urban Development funds between December 1999 and February 2000.

"When Congress appropriated this grant, it did so with the intent that the funds be used to build a school and help New York's disabled children," Manhattan U.S. Attorney James Comey said in a statement Tuesday. "The defendant ignored those requirements in order to line his own pockets and reward others who clearly were not entitled to the taxpayers' money."

Balkany is a well-connected fundraiser to both Republicans and Democrats. Federal Election Commission records show that he donated tens of thousands of dollars to Republican and Democratic federal candidates since the early 1990s, including former Sens. Bob Dole and Alfonse D'Amato. He also made campaign contributions to Gov. George Pataki, Rudolph Giuliani and Alan Hevesi, the current state comptroller.

According to the complaint, Balkany obtained an economic development initiative grant to establish the Children's Center of Brooklyn, which was to house education and therapeutic programs for disabled preschoolers. At the time, he was serving as head of Bais Yaakov, a Hasidic girls school on East 49th Street.

A HUD audit found Balkany signed a $300,000 check to an Israeli company where his son-in-law is an officer; transferred $78,600 to a bank account he controlled; and diverted $5,000 to a Ridgewood import company where another son-in-law is president.

Balkany allegedly used the money to pay insurance premiums, at least $17,000 in personal credit card bills and $7,000 to pay his federal taxes.

U.S. Magistrate-Judge Gabriel Gorenstein released Balkany on a $750,000 bond and set a Sept. 25 court date.

Balkany declined to comment Tuesday, but his lawyer, Benjamin Brafman, said the rabbi is innocent and expects to be exonerated. He faces up to 10 years' imprisonment if convicted on the theft charges.

"The regulations for these programs are extraordinarily complicated and there are times when mistakes can be made," Brafman said. "But a mistake that is made in good faith is a far cry from intentional conduct. And in this case, there are no intentional criminal violations of the law."

Balkany has been the subject of prior investigations by the city's Department of Investigation regarding the awarding of subsidized day-care vouchers to politically connected Brooklyn communities. No charges were brought in that probe.