An 11-month federal investigation into allegedly fraudulent Holocaust reparation claims resulted in the announced arrest this week of 17 Brooklyn residents — including six insiders — on charges that they bilked the Claims Conference out $42.5 million.
In unsealing the criminal charges, Manhattan U.S. Attorney Preet Bharara said the fraudulent scheme had been going on since the German government began paying pensions to survivors in 1994. The fraud also extended to one-time hardship payments paid to individuals from the former Soviet Union and other Eastern European countries who could show they lost their homes in the Holocaust.
As part of the scam, the group allegedly took out ads in Russian-language newspapers seeking individuals who could provide documents showing they were alive or had lived in the affected regions.
The scam — which involved doctoring birth certificates, passports and other documents needed to authenticate claims — was uncovered by the Claims Conference last November; the group did an internal investigation and then contacted federal authorities.
The Jewish Week broke the story in February, at the time the Claims Conference fired three of its claims processing employees, including the longtime head of the office in New York, Semen Domnitser. Authorities identified him as one of the ringleaders. And they said Dora Grande was responsible for making the forged documents in her home along Brighton West 12th Street in Brooklyn. In one case, it is alleged she used the same photo on the passports of four separate applications.
Other fraudulent claims used the same language and details on their forms.
Among the other employees of the Claims Conference who were arrested — all allegedly received kickbacks to approve the fraudulent claims — was one who had worked there since 1989. Another, Faina Davidson, had worked there since 1991. During one month analyzed, it is alleged that she typically approved applications in just a few days whereas other caseworkers generally spent at least 60 days reviewing an application before approving it.
Perhaps aware that an investigation into the fraud had been launched, she left the country in January. She was arrested when she returned last month. Five of the 17 defendants were arrested last month and have pleaded guilty. The other 12 were arrested Tuesday.
This week’s arrest came coincidentally on the 72nd anniversary of Kristallnacht — the state sponsored destruction of Jewish property in Germany and Austria — which many historians consider the start of the Holocaust in Germany.
In criminal complaints filed by Bharara’s office, it is alleged that several of those who fraudulently applied for the reparations had cooperated with federal authorities. The complaint said the organizers of the fraud had recruited “individuals of the Jewish faith in the Russian immigrant community” to provide copies of their identification documents in return for a promise of money.
Gregory Schneider, executive vice president of the Claims Conference, said it is believed that some of the Jews who provided the gang with their identification are “elderly Jews who acted unwittingly.”
Steps are being taken to prevent a similar fraud from occurring. That includes the immediate closing of the New York office that had processed both pension and hardship claims. Although the New York office will continue to receive claim forms, all claims will now be processed at offices in Germany and Israel. As in the past, the final approval for every claim and the distribution of funds will continue to be based in Germany.
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.
Janice Fedarcyk, the FBI assistant director-in-charge, said each of the 17 defendants “played a role in creating, filing and processing fraudulent claims on behalf of non-qualifying applicants — and dividing up the spoils. Funds established and financed by the German government to aid Holocaust survivors were siphoned off by the greedy, and not paid out, as intended, to the worthy. This was a brazen miscarriage of the compensation programs.”
All 17 were charged with conspiracy to commit mail fraud, which is subject to imprisonment of up to 20 years and a $250,000 fine.
Julius Berman, chairman of the Claims Conference, said the organization was “outraged that individuals would steal money intended for survivors of history’s worst crime to enrich themselves. It is an affront to human decency. … While the stolen funds come to less than 1 percent of total payments, we are determined to uncover every last case of fraud in this coordinated scheme.”
In July, the Claims Conference revealed that 202 people who were receiving quarterly German pensions had submitted fraudulent claims that amounted to about $7 million. The full extent of the crime, however, was not known until this week.
Authorities stressed that the investigation was continuing in an attempt to uncover additional fraudulent claims. Schneider said thousands of other claims filed since 1994 have yet to be reviewed.
The investigation to date found that 4,957 fraudulent hardship payments had been approved for a one-time payment of about $3,600, or a total of about $18 million. In addition, it has uncovered 658 fraudulent pension claims totaling $24.5 million. These fraudulent claims were among the 600,000 processed by the Claims Conference since 1994 that have paid $4.3 billion.
The Claims Conference has suspended pension payments to those who had submitted fraudulent claims and has directed them to repay the money or appeal the decision. To date, 29 people have either repaid money — a total of about $200,000 with the largest amount a $30,000 check — or indicated their intention to do so. Another 74 are appealing the suspension and former New York Supreme Court Justice Herman Cahn will review each of those cases.
The investigation revealed that in the case of the Hardship Fund applications, official documents showing dates of birth were altered to make it appear that the applicants were older than they are and therefore eligible.
Schneider said the continuing investigation would take several more months and that additional pensions would be suspended when warranted.