Sad But True Crime: Scam Targeted Holocaust Survivors’ Fund

New York Assistant Director in Charge Janice Fedarcyk, with U.S. Attorney Preet Bharara, announces the unsealing of criminal charges.

For nearly six decades, a not-for-profit corporation known as The Conference on Jewish Material Claims Against Germany—or the Claims Conference—has been overseeing German government funds that assist Holocaust survivors.  So you can imagine our surprise and concern when we uncovered evidence that it had been the victim of fraud.

This afternoon at a New York City press conference, we announced that six corrupt Claims Conference employees in its Manhattan office—along with 11 other conspirators—have been charged in a decade-long scheme to defraud the organization and legitimate Holocaust victims out of more than $42 million.

The Claims Conference supervises several funds and processes thousands of applications a year. The two funds allegedly targeted for fraud were:

The Article 2 Fund, which makes monthly payments of $411 to survivors of Nazi persecution who make less than $16,000 a year and who either lived in hiding or a Jewish ghetto for 18 months or were incarcerated for at least six months in a concentration or forced labor camp; and The Hardship Fund, which makes a one-time payment of approximately $3,600 to survivors forced to evacuate their hometowns and become refugees.

Applications by persons living in the U.S. are made to the Claims Conference’s office in Manhattan, usually by mail. The applicants provide identification documents, along with information about their family and experiences escaping Nazi persecution. Caseworkers with the Claims Conference verify an applicant’s history, often by checking external databases and archives, and sometimes through a personal interview. If approved for payment, a check is mailed to the applicant or electronically deposited into a bank account.

Processing fingerprints during this morning’s arrests.

Claims Conference officials became suspicious of possible fraudulent activity within their organization in December 2009 and immediately contacted law enforcement. Our New York office began an investigation, with the full cooperation of the Claims Conference.

According to the criminal complaint filed in federal court in the Southern District of New York, here’s how the scheme generally worked:

Driven by crooked Claims Conference employees, former employees and other conspirators would recruit people—some unwitting—who weren’t eligible for the program (mostly individuals of the Jewish faith in the Russian immigrant community) to take part in the fraud. To make it appear that applicants were eligible, identification documents were often altered (for example, a birth date was changed to make it appear that applicants were born during or before World War II) and fake Nazi persecution stories were often made up.

Fraudulent applications were reviewed and approved by corrupt Claims Conference employees.

Once the applicants received their money, they kept a portion but were instructed to pay certain “fees” using the rest—which of course ended up in the pockets of the conspirators. These “fees” were usually paid in the form of cash or money order.

Among those charged in the scheme are the former director of the Article 2 and Hardship Funds, other past and present Claims Conference employees, two law firm employees, a notary/document forger, and several other middlemen.

New York Assistant Director in Charge Janice Fedarcyk said that the victims of this scheme were “those who had already suffered at the hands of Nazi persecution only to have their experiences exploited again—this brazen miscarriage of the compensation program is, in its own way, a kind of crime against humanity.”

This case was investigated by the Federal Bureau of Investigation.