The room is dark. Giant oversized pencils hang from the ceiling. It's a crazy upside-down world full of crayons that are 3ft long, Lego bricks bigger than loaves of bread and huge geometry sets. Then there is the light. Demi Moore is on stage with two candles. She spreads the flame from one candle to another: “About ten years ago I was in an enviable position. I was making $12 million a movie. I was at the top of my career. I stepped away from all that to spend time with my children. Now I make $125,000 for a movie, but do I have less?”

Well, obviously she does have less - “but there is no accounting for spending that time with my children”. It is all about finding your light and sharing it. At this point more people emerge from the darkness with candles. “I share this light in peace,” says one, as each person leaves a candle at a table.

This is not a strange childhood dream; it's the Greenwich Village studio space that belongs to the designer Donna Karan and is bustling with a New York-LA nexus of fashion and fame. Karan, Moore and her actor husband, Ashton Kutcher, are present for this high-powered fundraiser. Madonna is a co-chair. They are all friends, tied together originally by the red string of Kabbalah, the controversial religious group that has now given birth to the focus of the evening, Spirituality for Kids. SFK is a global youth programme that is already working within British schools as part of the curriculum and plans to expand. Its purpose, it claims, is to encourage children to recognise their own goodness, see the light and have more spiritual powers.

Kabbalah opponents have been surprised and outraged to learn that SFK is now running classes in six schools in London, with more on a waiting list.

“I heard it was their intent, but I hadn't realised that they had infiltrated British schools. I believe they work using mind manipulation,” says Rabbi Yitzchak Schochet, of Mill Hill Synagogue, London. He points to reports four years ago in The Times that former members of the London Kabbalah Centre had been subjected to emotional manipulation and financial pressure. Such allegations prompted the Chief Rabbi, Sir Jonathan Sacks, to issue the following statement: “In light of the issues which have been brought to our attention relating to the Kabbalah Centre in the UK we wish it to be known that this organisation does not fall within the remit of the Chief Rabbinate or any other authority in the UK recognised by us.”

Critics believe the modern-day Kabbalah movement has hijacked a traditional form of Jewish mysticism and promoted it for financial gain using high-profile celebrities, most prominently Madonna. While traditional Kabbalah is practised only by male Hassidic scholars over the age of 40, celebrity Kabbalah spawned a T-shirt saying: “I scanned the Zohar with Ashton.” When David Beckham, Winona Ryder and, briefly, Britney Spears, were spotted with a red Kabbalah string tied to their wrists the group was dubbed “Hollywood's hottest cult”.

“That it is not supported by any main religious group in the world, what does that tell you?” Rabbi Schochet asks. “I'd like to tell Madonna: I won't meddle in your songs if you stop meddling in my Judaic traditions.”

Karen Berg is the founder of Spirituality for Kids. She is also the co-director of the Kabbalah Centre based in LA, and wife of the Kabbalah guru Philip Berg. She frowns and affects astonishment that anyone would question the connection.

She has just introduced the SFK fundraiser with an emotional speech about herself: a little girl, neglected by her parents, forced to make her own way in the world. Berg now has a Beverly Hills mansion, but still speaks with the Brooklyn twang of someone who has gone from nothing to considerable fame. The Kabbalah website says that she has an “unquenchable thirst for spiritual knowledge”. So much so that she was once attacked by a “bat-wielding religious zealot” for taking traditional Jewish teachings and turning them into popular books with titles such as God Wears Lipstick.

The UK branch of SFK is based at the Kabbalah Centre, Central London, and many SFK teachers and helpers - as well as the higher echelons - are practising members. Most of the terms central to SFK, such as sharing the light, stopping reactive behaviour and “The Opponent”, are also found in Kabbalah. But SFK maintains that it is based on fundamental spiritual principles and is non-religious. It is not, it maintains, Kabbalah for Kids.

Heath Grant, the executive director of SFK, does not worry about the concerns of Kabbalah critics. “I don't even think about that. I just do my thing.”

Later Grant will accompany Karan to the Mayor of New York's office to discuss a city-wide SFK schools programme. First, he will visit an SFK class in an elementary school in Far Rockaway, in Queens. The school has mesh on the windows and a police officer at the entrance. Most of the children who attend are from the nearby public housing projects.

“OK guys, the spiritual detective searches for clues within himself,” says Daniel, the SFK teacher for a class of eight-year-olds, as he turns to a page in the SFK handbook. There is a picture of Sherlock Holmes searching for the “good seeds” and “bad seeds” that children plant. “It's time for the spiritual detective glasses,” Daniel says, producing a pair of joke-shop frames with a large nose and eyebrows. Kiena, a girl with plastic flowers in her hair, puts on the glasses. What clues to her spiritual state will she reveal today? “I felt angry because my sister woke me and I yelled at her,” she says

“Thank you for your honesty,” Daniel tells her. Another girl follows her to the front. She relates an issue about a pencil-throwing incident. “And what did you do?” Daniel prompts. “I scratched his face, threw him on the ground and hit him,” she replies. “Thank you for your honesty,” Daniel repeats.

Much of the SFK programme is based on the principle of cause and effect: if you do good things, good things will come to you; if you do bad things, bad things will come to you. Daniel speaks with childlike enthusiasm and simplicity. When the children are called on to think about their plans for the future, he asks his adult assistant, Jackie, where she sees herself in a year's time. “I'm an SFK facilitator. In a year's time I want to be an SFK teacher,” Jackie beams. “Awesome,” Daniel says.

One of the most important tenets of SFK is teaching children to identify two different voices. “The Good Guy”, who SFK tells them is their own authentic voice, and “The Opponent”, who leads them astray.

Kutcher likes to illustrates this with a story about his romance with Moore. “I was 25, I was in New York City. I had a hit movie. Then I met a woman. I just beat Prince William to be the most eligible bachelor in the world - I could do a lot of damage. But then I heard another voice saying ‘This could be real'. But The Opponent did not give up. The voice said “You can't be faithful to this woman. You can't support this woman. She has three kids. But then another voice said, ‘Follow that woman'.” He breaks down and points at Moore: “I followed her here, I would follow her to the end of the world.”

Most of the children spend their hour-long SFK lesson engaged and enthusiastic. “It's fun,” says Dyshawna, who is on her third level of SFK teaching.

The room is decorated with SFK posters. The first has rays of light pouring through a keyhole: there's unseen power in everything, it indicates. The second poster claims that this unseen power makes us be the best we can be and stops us being scared and lonely. Paper plates with sun-like rays hang from the ceiling. They have been made by the children and the principles of SFK are printed on each one: Stop your reactive behaviour. Ask your Good Guy to guide you. Share and make room for all life's blessings.

Critics of SFK believe the lessons it gives demonstrate that the programme is at best silly and at worst sinister - although it appears to have support from parts of the education community and evidence of academic success. A recent study by the Rand Corporation, a research institute, found that children taking SFK classes in Florida showed improvement in areas of leadership, communication and study skills. In the five years since it was founded SFK is now working in the US, UK, Malawi, Israel and Latin America. Karen Berg would like to see SFK expand into every school, with teachers being taught SFK to incorporate it into the curriculum. Supporters insist that the SFK programme, which primarily teaches 6 to 12-year-olds in a ten-week block with two eight-week follow ups, has a transforming effect on children's lives.

At the SFK fundraiser in New York, Moore and Kutcher encourage everyone to be children for the night. One activity involves saying hurtful things while tearing up a paper heart. The task of trying to reconstruct it with glue demonstrates that broken hearts are hard to mend. The next day it's the children's turn. At a special “funday” they arrive to eat popcorn, play with SFK dominoes and act out the Good Guy and The Opponent with finger puppets. Most parents seem unaware of a link between SFK and Kabbalah and none expresses concern.

“It's just basic good behaviour,” one mother shrugs. Christy Turlington, the model, turns up with her daughter. One of Jerry Seinfeld's children correctly identifies the task that proves that life is more fun when it's difficult and challenging. In a chaotic afternoon it's no wonder that sometimes even SFK volunteers listen to the voice of The Opponent; when Karan bustles past wearing a green T-shirt covered in graffitiand big baseball cap, one mutters: “She looks like a lettuce.”

Karan does not hold back: “I want to be clear. SFK is not Kabbalah, it's for every child in the world to have the tools for life.” She does practise Kabbalah, adding that she has seen it help her friends, including Moore and Madonna. “It's not a religion, it's a science. It's the science of connection.”

Sonja Nuttall, Karan's co-founder at their charitable foundation Urban Zen, is sitting in on the discussion and appears irritated. “It's incredible that we have to defend SFK and talk about Kabbalah when all we are trying to do is teach children that they have innate goodness and help them to figure out the rules of life.”

But today the focus is on the whole child. “It's a hard sell,” Moore says, wearing her own over-sized orange T-shirt and baseball cap in the Tolerance and Unity area. “Anything to do with the word spirituality has connotations for people,” she says. Moore has been to Rikers Island prison to meet the teenage boys taking the SFK programme. She hopes to return in a few weeks to see their progress.

Despite such enticements, in the UK at least, there are serious doubts. “SFK approached us to work with them in schools,” says Camila Batmanghelidjh, of Kids Company, a children's charity in South London. “We turned them down. It didn't feel right. I don't believe in doing it their way.”

Spiritual development has been part of the school curriculum since the Education Act of 1944, but Batmanghelidjh believes that although young people need emotional support and love, spirituality is something they should be left to find in their own time. Kids Company has worked with vulnerable children for many years. “It takes a long time for these children to trust you - you have to prove that you are a constant in their lives.”

But one of her key workers, Christina Enright, points out that there is a gap in the market. “Schools have removed religious education to be more inclusive, but they've lost something important - morality and community. The Government is trying to balance that with personal and social development and citizenship, but it's so poorly organised it's not meeting anyone's needs.”

The headmistress of a North London primary school, which is now in its second year of SFK teaching, agrees. “SFK approached me and since we started the programme it has had a significant effect on some of our children's lives. A lot of them have behavioural problems and SFK has helped them to become more active in making decisions.”

There is a more conventional programme favoured by other state schools that also aims to teach children about moral and emotional development called Personal Health, Social and Citizen Education (PHSCE) but, she claims, it is more time-consuming and difficult to implement. “SFK didn't talk about Kabbalah when they came to see me originally, but a few of our parents spotted the connection and came to talk to us about it. They were worried about terms such as ‘the light' and thought it sounded a bit like a cult. Two parents took their children out of the class.” Despite this the school has decided not to discuss the issue with parents beforehand.

Today's SFK class is “The Art of Problem Solving”. It is stage three of the SFK programme and attempts to make children think about their problems through great artists. Monet, we learn, was bored, but by adding light to his work he changed his world. Children can add light to their days by caring about other people and sharing. “Some of our children have horrible lives,” says Greg, the class teacher. “I'm not sure about all this business of ‘the light'. All I know is that this has helped these children. It's about common decency and teaching them how to behave. Frankly, its better than nothing.”

But some people who have encountered Kabbalah do not agree. “I'd question the integrity of any school that hasn't properly researched the work of the Kabbalah Centre,” says Rabbi Schochet. “It might make the children feel good, but so would drugs and alcohol - it is not necessarily good for them. The schools and the Government are going to have a lot to answer for when the implications of SFK is understood.”

Michael Berg, director of SFK, says: “SFK is the Kabbalah Centre's children's charity and it shares the same co-founder, Karen Berg, who has dedicated her life to bring spirituality to the world. Many of the volunteers and donors of SFK come from the Kabbalah Centre. One of the major principles of Kabbalah is to share and give back, as seen with Donna Karan who is a student of the Kabbalah Centre and who also gives back through her work with SFK.”

He also pointed out that all money going to the SFK stays within the organisation and that it operates as a separate charity.

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