Claims Conference Bungled Fraud Warning


Questions were being raised this week about the actions of the Claims Conference in its handling of a 2001 “smoking gun” letter that spelled out details of the fraud that ended up costing the Claims Conference $57.3 million.

The fraud was not uncovered until eight years after the letter was received.

The letter had been sent anonymously to the organization’s office in Frankfurt, Germany. The organization’s associate executive vice president, Karl Brozik, then unwittingly asked that Semen Domnister, the very ringleader of the fraud, investigate the accusations. At the time, Domnitser was director of two German reparation funds, the Hardship Fund and the Article 2 Fund.

In response to Brozik’s query, Domnitser defended the questioned payments and insisted that there was no “elaborate scheme” to defraud the organization.

Domnitser was convicted for fraud last week following a four-week trial.

The anonymous letter was not turned over to the FBI until it was discovered in the Claims Conference files in Germany in early 2010. The FBI had been called in to investigate the fraud in December 2009, one month after a Claims Conference employee noticed falsified applications for German Holocaust reparations.

“He didn’t do an adequate job,” said Abe Biderman, a vice president of the Claims Conference, referring to Brozik, who has since died. “He obviously missed it. If we had realized what was going on, we never would have countenanced it for a second.”

He noted that Greg Schneider, the current executive vice president, ordered an immediate investigation when he learned of the fraud in 2009. Schneider was the assistant executive vice president in 2001, but a spokeswoman for the Claims Conference said he played no role in that investigation, although he did receive a copy of Domnitser’s response.

“There was a mistake in the way this was handled, but it was not Greg’s mistake,” Biderman said.

Copies of Brozik’s letter had also been sent to the then executive vice president, Gideon Taylor, and Saul Kagan, a special consultant to the Claims Conference.

The anonymous letter was used in last week’s trial against Domnitser, as first reported in the Forward. It was first mentioned publicly in November 2010 in the 50-page criminal complaint against Domnitser and other co-defendants.

The complaint said that on June 21, 2001, the German office of the Claims Conference forwarded to Domnitser the anonymous letter it had received claiming that the Hardship Fund “rules were broken for many office employees.” Seven days later, Domnitser wrote back to say that the allegations against the sister of a Claims Conference employee “seem illogical,” and that her actions could have been caused by confusion and were not part of an “elaborate scheme.”

The letter had initially been sent June 6, 2001, to a manager of the Claims Conference office in Frankfurt, Hannelore Diedrich. Although unsigned, it came on the letterhead of a group called the Association of Eastern European Jews in America. The writers said they were a group of “elderly Eastern European Jews living in the U.S.A.” who had applied for a German pension because they were all confined to ghettos or Nazi labor camps during World War II.

“We were all denied life pensions from Article 2 Fund for various reasons” and had received detailed explanations for the rejection, they wrote. “Even though we could not receive money, we understand the rules.”

But they went on to say that it had come to their attention that “rules were broken for many office employees” who had applied for a one-time payment from the Hardship Fund. And it went on to cite specific cases of fraud, including the applicants’ actual computer numbers. In one case, it said the sister of a Claims Conference employee was never in a ghetto, but rather was evacuated during the war and falsified the Red Cross document she submitted.

“If you request this information from the Red Cross, you will see the
real document, not the one included in her case,” it said.

It cited four other specific cases of fraud — claiming in one case that a woman falsified her birth certificate and in another that the person, a Claims Conference employee, was not income eligible.

“We are shocked to learn about this misconduct in Article 2 Fund,” the letter said. “If payment of life pensions to these people are not stopped immediately, we will seek justice in court and we are sure that media sources will be happy to help us. We sincerely believe you will look into this matter and correct this situation.”

Of the five cases mentioned in the letter regarding spouses or siblings of Claims Conference employees, at least three of the employees mentioned were indicted and convicted once the fraud was uncovered in November 2009.