FBI Expands Probe Of Fraud At Holocaust Claims Conference

The thieves were good — very good.

So good, in fact, that they were able to change crucial data on official documents for more than a decade without raising the attention of experts at the New York-based Conference on Jewish Material Claims Against Germany and even the German government.

Take a birth certificate, for instance. They were able to change not only the date of birth but also the place of birth. As a result, over the last decade they are suspected of stealing more than $7 million from the Article 2 Fund established in 1995 by the German government to provide quarterly pensions to eligible Holocaust survivors.

To qualify, a person had to have been confined to a concentration camp for at least six months or in hiding, living under false identity or in a ghetto for at least 18 months.

The fraud might have continued unnoticed had the perpetrators not gotten even greedier. While little has been disclosed about the thieves, including whether or not they are Jewish, they are believed to be primarily men and women from the former Soviet Union who now live in Brooklyn.

In December, when they applied for what is known as the Hardship Fund, a one-time payment of approximately $3,500 to compensate Jews who were forced to flee east during the Holocaust and who remained in Soviet-bloc countries after the war (making them previously ineligible for German reparations), the thieves submitted materials that raised the suspicions of the Claims Conference.

The Claims Conference called in the Federal Bureau of Investigation and mounted a thorough check of every Holocaust-era reparation program the Claims Conference has administered over the years for the German government.

Three of the 10 employees who processed Hardship Fund applications were immediately fired. One of them, the supervisor of that fund, was also the supervisor of the Article 2 Fund. It is not known if the employees were complicit in the fraud; there have been no further firings.

It was the widening investigation that led in March to the discovery of the pension fraud.

“We used the same tell-tale characteristics” uncovered in the Hardship Fund fraud to discover the pension fund fraud, according to Greg Schneider, executive vice president of the Claims Conference.

Not only is the work of the New York office under scrutiny, but the work of the group’s offices in Germany and Israel were also being checked.

“We are reviewing hundreds of files to identify which, if any, additional claims are fraudulent,” Schneider said. “Further, the Claims Conference has put in place additional comprehensive and strict guidelines to further safeguard its compensation programs and ensure that it will not be again the victim of such a scheme.”

To date, the fraud appears to be confined to the New York office, he said.

Roman Kent, treasurer of the Claims Conference, said no arrests have yet been made.

Although the federal investigation is still under way, it is believed the thieves tripped up when they decided to take advantage of a recent expansion of the Hardship Fund, which for the first time included Jews who were in Leningrad at any time during the Nazis’ 900-day siege of the city or who fled during that time — from September 1941 through January 1944.

As soon as the program was expanded, the Claims Conference witnessed a surge in applications. Germany paid 7,000 claims in 2008 — 18,000 last year. But after The Jewish Week reported in February that the Claims Conference had called in federal authorities to investigate irregularities, the number of new applications dropped off appreciably.

Two employees processing Hardship Fund claims caught the thieves’ apparent mistake in December. One noticed what appeared to be fraudulent documentation submitted to prove an applicant’s eligibility. Two weeks later, another claim arrived from a different individual but with the same type of documentation fraud.

After a forensic audit confirmed the group’s suspicions, federal officials — including the FBI — were immediately called in, and the three Hardship Fund employees were then fired.

The pension fund fraud was discovered in March but is just now coming to light because of a letter dated July 1 to 202 people whose paperwork submitted to verify their eligibility for Article 2 Fund pension payments was suspected of being fraudulent. In lieu of receiving their quarterly pension check, these individuals received letters saying their payments had been stopped because of suspected fraud.

“The Claims Conference has obtained documents which demonstrate that the information in your Article 2 Fund application was not accurate,” the letter said.

It notified them by certified mail that the authorities had been informed of the suspected fraud and it demanded within 90 days a return of all the money they had received. They are entitled to appeal.

Schneider said Tuesday that a “handful” of people have contacted his office to learn how they could return the money.

The Claims Conference noted that the New York office alone approved 20,325 pension applications out of the total 106,761 approved from 78 countries since the program began.

Schneider issued a statement saying his office is “vigorously investigating this issue, leaving no stone unturned. We are devoting our full energy and resources to helping the authorities bring to justice those who have committed this fraud.

“It is particularly outrageous that this criminal scheme was perpetrated on an organization that pursues obtaining some measure of justice for those who suffered unimaginable persecution during the Shoah. The Claims Conference remains steadfast in its mission to assist Jewish victims of Nazism, and will not allow a criminal scheme to deter it from this work.”

Schneider stressed also that “no Holocaust survivors” lost any money and that there had not been a failure of standard operating procedures.

“This was an organized, complicated fraud by people from the outside who were submitting falsified documents,” Schneider said. “Even though we were following all the rules, there was no way to identify them as falsified documents. You look at the file and cannot tell.”

The investigation has led the Claims Conference to be extra scrupulous in approving any Hardship Fund applications, according to Julius Berman, chairman of the organization.

“We have paid only claims we were certain about,” he said.

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