Preet Bharara, the United States
Attorney for the Southern District of New York, announced that Zlata Blavatnik,
a former clerk employed at the Conference on Jewish Material Claims Against
Germany Inc. (the “Claims Conference”), pled guilty today in Manhattan federal
court to conspiring to defraud programs administered by the Claims Conference
and established to aid the survivors of Nazi persecution out of more than $57
million. Blavatnik was arrested and charged in October 2011 as part of an
ongoing investigation that has resulted in charges against a total of 31
participants, 10 of whom were former Claims Conference employees, including a
former director. She pled guilty today before U.S. Magistrate Judge Henry B.
Pitman.
According to the complaints and the
indictment to which Blavatnik pled:
The Claims Conference, a not-for-profit
organization that 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.
As part of the charged scheme, a web of
individuals systematically defrauded the Article 2 Fund and Hardship Fund
programs for over a decade. The Claims Conference first suspected the fraud in
December 2009 and immediately reported their suspicions to law enforcement, which
conducted a wide-reaching investigation.
The Hardship Fund pays a one-time
payment of approximately $3,500 to victims of Nazi persecution who evacuated
the cities in which they lived and were forced to become refugees. Members of
the conspiracy submitted fraudulent applications for people who were not
eligible. Many of the recipients of fraudulent funds were born after World War
II. Some conspirators 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, they kept a portion of the money and passed the rest
back up the chain.
From the investigation to date, the
Claims Conference has determined that at least 3,839 Hardship Fund applications
appear to be fraudulent. These applications resulted in a loss to the Claims
Conference of approximately $12.3 million.
The Article 2 Fund makes monthly
payments of approximately $400 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 involved doctored identification documents in which the applicant’s date
and place of birth had been changed. The fraud 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 Fund
applications were completely fabricated.
From the investigation to date, the
Claims Conference has determined that at least 1,112 Article 2 Fund cases it
processed are fraudulent. Those cases have resulted in a loss to the Claims
Conference of approximately $45 million.
Blavatnik, a Claims Conference clerk,
was charged with knowingly collecting documents from ineligible applicants to
be used in connection with submitting fraudulent applications in their names to
the Hardship Fund program in return for payments from the applicants. Blavatnik
is the 12th of the 31 defendants charged in the scheme to plead guilty. Charges
remain pending against the remaining 19 defendants in the case, who are
presumed innocent unless and until proven guilty.
***
Blavatnik, 64, of Brooklyn, New York,
faces a maximum sentence of 40 years in prison. She is scheduled to be
sentenced by U.S. District Judge Thomas P. Griesa on October 25, 2012 at 4:30
p.m.
Mr. Bharara praised the investigative
work of the Federal Bureau of Investigation (FBI). He also thanked the Claims
Conference for bringing this matter to the FBI’s attention and for its
extraordinary continued cooperation in this investigation, which he noted is
ongoing.
This case is being handled by the
Office’s Complex Frauds Unit. Assistant U.S. Attorney Christopher D. Frey is in
charge of the prosecution.
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