Criminal charges have been filed against 17 alleged members
of a long-running scheme that defrauded programs established to aid survivors
of Nazi persecution out of more than $42 million.
Employees of the Conference on Jewish Material Claims
Against Germany (the Claims Conference), which administered the programs, were
supposed to process and approve legitimate applications. Instead, officials
claim, they approved over 5,500 fraudulent applications, resulting in payouts to
applicants who did not qualify for the programs. In exchange, these insiders
allegedly kept a portion of the money for themselves and their co-conspirators.
Greed and fraud
"If ever there was a cause that you would hope and
expect would be immune from base greed and criminal fraud, it would be the
Claims Conference, which every day assists thousands of poor and elderly
victims of Nazi persecution," said Manhattan U.S. Attorney Preet Bharara. "Sadly, those victim funds were themselves victimized. Without the
extraordinary cooperation of the Claims Conference in ferreting out this
alleged scheme to defraud them, it never would have been exposed."
The Claims Conference, a not-for-profit organization which
provides assistance to victims of Nazi persecution, supervises and administers
several funds that make reparation payments to victims of the Nazis, including "the Hardship Fund" and "the Article 2 Fund," both of which
are funded by the German government.
Applications for disbursements through these funds are
processed by employees of the Claims Conference's office in Manhattan, and the
employees are supposed to confirm that the applicants meet the specific
criteria for payments under the funds.
Bad apples
As part of the charged scheme, a web of individuals --
including six of the employees who worked for the Claims Conference --
systematically defrauded the Article 2 Fund and Hardship Fund programs for over
a decade, according to the criminal complaint.
The Claims Conference first suspected the fraud in December
2009, and immediately reported its suspicions to law enforcement, which
conducted a wide-reaching investigation.
Fund fleeced
The Hardship Fund pays a one-time payment of approximately
$3,600 to victims of Nazi persecution who evacuated the cities in which they
lived and were forced to become refugees. Members of the conspiracy allegedly submitted
fraudulent applications for people who were not eligible, the complaint
charges.
Many of the recipients of fraudulent funds were born after
World War II, and at least one person was not even Jewish. Some conspirators
allegedly recruited other individuals to provide identification documents, such
as passports and birth certificates, which were then fraudulently altered and
submitted to corrupt insiders at the Claims Conference, who then processed
those applications.
When the applicants received their compensation checks, the
complaint states, they kept a portion of the money and passed the rest back up
the chain.
From the investigation to date, approximately 4,957 Hardship
Fund applications from 2000 through 2009 appear to be fraudulent. These
applications resulted in a loss to the Hardship Fund of approximately $18
million.
Doctored documents
The Article 2 Fund makes monthly payments of approximately
$411 to survivors of Nazi persecution who make less than $16,000 per year, and
either (1) lived in hiding or under a false identity for at least 18 months;
(2) lived in a Jewish ghetto for 18 months; or (3) were incarcerated for six
months in a concentration camp or a forced labor camp.
The fraud on the Article 2 Fund involved doctored
identification documents in which the applicant's date and place of birth had
been changed. It also involved more sophisticated deception, including altering
documents that the Claims Conference obtains from outside sources to verify a
person's persecution by the Nazis. Some of the detailed descriptions of
persecution in the fraudulent Article 2 applications were completely
fabricated, according to officials.
From the investigation to date, approximately 658 Article 2 Fund cases processed by the Claims Conference have been determined to be fraudulent, from approximately 1993 through 2009. Those cases have resulted in a loss to the Claims Conference of approximately $24.5 million.
