Seventy years after the start of the Holocaust, “betrayal” was the one word used to describe two Holocaust-related developments last week that had particular resonance with the Jewish community.

First, authorities announced Tuesday that two German Holocaust restitution funds had been ripped off to the tune of $42.5 million over the last 16 years and that 17 people had been arrested — including six insiders at the organization that administered the funds, the Conference on Jewish Material Claims Against Germany.

“The betrayal is deep and painful,” said Gregory Schneider, the group’s executive vice president.


Later in the week, an internal government report was released that detailed how the U.S. provided safe haven to Nazi war criminals and their collaborators after World War II. Although the exact number of Nazis who made it here is not specified, the report said it is fewer than the 10,000 previously believed.

“The U.S. is guilty of betrayal of its own values,” said Elan Steinberg, vice president of the American Gathering of Jewish Holocaust Survivors. “To its credit, the U.S. recognizes it now. We still don’t have the whole truth; it’s a process. But it is evolving in a positive direction.”


The report recounts the exploits of the Justice Department’s Office of Special Investigations, which was created in 1979 to deport Nazis found in this country. Neal Sher, a former OSI director, said he had read news accounts of the hitherto secret four-year-old 600-page government report and found little that was new there. The only thing that surprised him, Sher said, was the statement that a former director of the OSI had kept a piece of scalp in his drawer that was thought to have come from Dr. Josef Mengele, the infamous “Angel of Death” at the Aushwitz concentration camp. 


The report said the official — Sher said it was not him — kept the scalp in the hope it would help establish Mengele’s identity should he ever be found. The report described also how U.S. investigators used such things as letters and diaries believed written by Mengele to try to find him in the 1970s. It added that Mengele died in Brazil in 1979 and that his remains were positively identified with the help of that piece of scalp.


‘As If They Robbed The Collection Plate’

Meanwhile, the scandal at the Claims Conference continued to have repercussions this week. A spokesman for the German Finance Ministry said his government is considering whether to lodge compensation claims against the Claims Conference to recoup the $42.5 million lost in the fraud, according to Time magazine.
And the German newspaper Der Spiegel quoted a German Finance Ministry official as saying, “It’s as if somebody had robbed the church collection plate.”


A spokeswoman for the Claims Conference said Germany has not yet lodged a compensation claim. But she said efforts have already begun to recover the stolen money. Letters demanding repayment have been sent to the 658 individuals who are said to have illegally received a total of $24.5 million in payments from the Article 2 Fund. The fund was established in 1995 to provide quarterly German pensions to those who were confined to a concentration camp for at least six months or were in hiding, living under false identity or in a ghetto for at least 18 months.

The Claims Conference said it has so far received back about $200,000 from some those who illegally received German pensions.

The other fund ripped off by $18 million is known as the Hardship Fund, which provides one-time payments of about $3,600 to those from the former Soviet Union and other East European countries who could show they were forced to flee their homes to avoid Nazi persecution.

A total of 4,957 individuals are said by authorities to have falsified their applications by changing their date of birth to make it appear they were alive during World War II.

“We typed into a spreadsheet all of the Social Security numbers and the alleged birthdates of about 175,000 recipients and gave them to the FBI,” Schneider said. “By cross referencing them with other federal documents, they were able to determine which were fraudulent.”

Schneider said his organization has not yet sent letters to the nearly 5,000 fraudulent applicants demanding repayment because the FBI has yet to provide their names.

The Claims Conference spokeswoman said that in addition to demanding repayment, her group would pursue “all measures available to us, including seeking a court order to go after the assets of those who defrauded us.”

The two funds were defrauded by a group of 17 individuals. The arrest of 16 of them was announced last week, including the supervisor of the claims processing office, Semen Domnitser, and five of his caseworkers. Four of the 16 are said to be cooperating with the FBI; an arrest warrant has been issued for the 17th person charged, Valentina Romashova.

Claims Conference officials were at a loss to explain this week how about half of its employees in the claims processing office could have been part of the fraud. Schneider said these were people who had been hired years ago, that no one there knew who hired them or what kind of background checks they received. He said it was believed that Domnitser hired them, but that he denies it.

The Claims Conference distributes to Holocaust victims more than $400 million each year on behalf of the German government. Authorities stressed that no Holocaust victims were deprived of any money because of this scam.

The American Gathering of Jewish Holocaust Survivors issued a statement late last week calling on the Claims Conference to appoint “an ombudsman acceptable to the survivor community to advocate on behalf of and represent the interest of the survivors.”


“We are mindful of the anxiety on the part of survivors throughout North America and, indeed, the world, who need to be reassured that the institution that is mandated to represent their interests with respect to the material reparations they are owed by Germany will continue to advocate forcefully and single-mindedly on their behalf,” it said.


Schneider called the request an “interesting idea” that he said would be considered.


“If we think it is warranted, we will take the appropriate steps,” he said.


‘Unimaginable Number Of Calls

Steinberg of the American Gathering said the request by his organization came at an emergency meeting of its executive board last week following an “unimaginable number of calls with expressions of outrage and even expressions of fear.”


“People are angry and some have to be reassured,” he said.

The Claims Conference has set aside $500,000 to handle expenses related to the investigation and the fraud. Some of that money will go to a consulting firm that has been hired to oversee the group’s work in Germany and Israel; the New York processing office for the two funds tainted by scandal was closed last week and seven employees laid off. New applications, however, will continue to be accepted here.

It is alleged that the gang that pulled off this fraud recruited Russian Jews living in Brooklyn by advertising in local Russian newspapers about the Claims Conference and its two special funds for Nazi victims. They would then interview these applicants, changing such things as the date and place of birth on official immigration papers and passports to make it appear the applicants qualified for the funds.

And even those who had been subjected to Nazi persecution had their stories changed to fit the eligibility rules. For instance, the immigration paper of an applicant who lived in a village that was under Nazi rule for 12 months was changed to show that he had lived in a different village because it had been under Nazi rule for more than the 18-month minimum required to receive reparations.

The scam’s sophistication and attention to detail could be seen in the fraudulent applications of two brothers named Frankel (none of the names used here are real). As pieced together by investigators, this is how this particular fraud worked:

Soon after the German pension program was started in 1995, someone named not related to the Frankel brothers, Vladimir Frankel, was helped by one of the fraud gang members to complete his pension application. He was told to leave several boxes blank and to sign the form. The gang member then notified the two Frankel brothers that someone with their last name had just applied for a German pension. The gang member then apparently encouraged the brothers to apply for their own pension claiming to be Vladimir’s brothers.

The gang then helped the Frankel brothers write a family narrative of persecution similar to the one written by Vladimir. In it, the gang wrote that the Frankel brothers had lived in a Nazi-occupied town in Belarus and went into hiding when the Nazis started mass persecutions of the Jews there. Some of the phrases used in all three applications are identical.

The gang also wrote on the Frankel brothers’ applications that Vladimir Frankel is their brother; in the blank spots on Vladimir’s application they wrote the two names of the Frankel brothers and said they were his brothers.

Photo ID

The applications made no mention of the Frankel brothers’ real brother, Victor, because he had received a payment from the Hardship Fund some years earlier by writing truthfully that the family had successfully escaped Nazi persecution.

In addition, the gang attached to all three applications — as well as to at least one unrelated application — a partisan photo identification certificate that purportedly belonged to the applicants’ father to prove they were in hiding.

Schneider said that when the fraud first surfaced a year ago he never would “not have believed in a million years … the sheer magnitude” of the fraud.

“I’m shocked that it involved six people in the office and I’m equally shocked that so many people outside of the Claims Conference were also conspiring to defraud,” he said. “And the fact that I knew some of them made it worse for me personally. … One person could have phoned in an anonymous tip or left me a note [about the fraud]. It didn’t happen and I can never forgive that.”