Contrary to his earlier claims, one of American Jewry’s most prominent leaders was warned about a serious Holocaust compensation scam more than eight years before the fraud became public.
Julius Berman, who is chairman of the Conference on Jewish Material Claims Against Germany, then directed his own inquiry into the fraud allegations but failed to act on the fraud taking place. He also kept news about the allegations and his actions from his fellow board members at the Claims Conference, where the fraud was occurring.
Documents obtained by the Forward show that Berman, the Claims Conference’s top lay leader, personally directed an early investigation into the fraud at the organization, which processes restitution claims for Holocaust survivors. The fraud ultimately netted its participants $57 million in German government funds meant for needy survivors.
The documents obtained by the Forward contradict a May 15 statement by Claims Conference spokeswoman Hillary Kessler-Godin that laid responsibility for the group’s failure to stop the fraud early exclusively on the shoulders of Karl Brozik, its former director in Germany, who died in 2004. It was Brozik, said the spokeswoman, who led the investigation into detailed allegations about the scheme that the group received in an anonymous letter in June 2001.
The Claims Conference failed to pursue the early tipoff, disclosed by the Forward on May 14, even though a staffer’s preliminary investigation of the letter’s charges supported its allegations. Semen Domnitser, a Claims Conference employee, was convicted on federal fraud charges on May 8 of this year as the scheme’s ringleader.
The documents obtained by the Forward establish that Gideon Taylor, then the Claims Conference’s executive vice president, worked together with Berman on his own separate follow-up investigation. In a fax Berman sent to Taylor on Sept. 5, 2001, from the law firm Kaye Scholer, where he was a senior partner, Berman cited the anonymous letter and its allegations, and wrote:
“You will recall that … I arranged for Ryan Tan, a paralegal in this office, to interview Mr. Domnitser and, then, review the relevant files.”
“I am sending along to you his report. As of this point, it is still in draft form, and I await your comments prior to the finalization.”
Neither Berman nor the Claims Conference responded to requests for comment on this latest in a series of revelations calling into question the Claims Conference’s handling of the $57 million fraud scheme, which went on for a total of 15 years. After the Forward made these requests, the news agency JTA published details of the Kaye Scholer report and a response from Taylor.
“The report indicated that there should be specific follow up on allegations about the improper processing of five cases involving Claims Conference staff members,” Taylor wrote in an email to JTA. “Karl Brozik subsequently indicated to me that no further action regarding the New York staff was required concerning the issues in the report.”
Thirty-one individuals, including Domnitser and almost a dozen other former Claims Conference employees, have pleaded guilty or been convicted in connection with the fraud.
Back in 2001, after asking Domnitser to explain applications for compensation containing false statements and apparently fraudulent documents, Claims Conference officials concluded that there was no wrongdoing. Berman’s separate investigation, which followed, also yielded no results. This allowed the fraud to continue until November 2009, when a Claims Conference employee discovered two highly dubious applications within a few weeks. The Claims Conference then hired the law firm Proskauer Rose to investigate further, and a few weeks later contacted the FBI. By that time, the fraud involved thousands of phony applicants whose claims were validated by Claims Conference employees in on the scheme.
Following the Forward’s recent report on the early tipoff, the Claims Conference sought to distance its current leadership from the events, placing the blame for the failed investigation solely on the now-deceased Brozik.
“Dr. Brozik in Germany accepted [Domnitser’s] explanations for the cases cited in the anonymous letter,” Kessler-Godin said in her prepared statement.
The new documents largely refute these claims by making clear that Berman, who still serves as the chairman of the Claims Conference board, had firsthand knowledge of the early warning and launched his own inquiry, which failed to prevent the scheme, without informing the board.
Yet in a July 2012 interview with JTA, Berman, when asked about his oversight responsibility during the fraud’s years-long duration, said, “I feel no fault at all. … It’s the kind of process that I had nothing whatsoever to do with instituting.”
Calling the controls that the Claims Conference had in place to prevent fraud “reasonably adequate,” Berman compared the 2009 discovery of the fraud to the attacks of 9/11, which were impossible to anticipate “until it happens once. … Then you’re on notice that something you never foresaw can happen.”
In addition to his chairmanship of the Claims Conference, Berman, one of the Jewish community’s most active leaders, has served in a leadership capacity with the Conference of Presidents of Major American Jewish Organizations, the Orthodox Union and Yeshiva University’s rabbinic seminary, among other posts.
Asked to comment on the new disclosure about Berman’s earlier role, Andrew Baker, the Conference’s vice president, said, “On the one hand, anyone would tell you, ‘Goodness, if we could have known about this fraud 12 years ago, so much could have been prevented.’ On the other hand, they did make an effort to find out, to track it down.”
Baker noted that as a member of the board he was not briefed on the initial tip or on Berman’s inquiry, although Baker noted that the board only meets once a year and “these are people who are not connected on a day-to-day basis.”
Meanwhile, the Forward’s initial disclosure of the 2001 letter has triggered demands within the Claims Conference board of directors to investigate how the early warning was examined.
“Was the existence of the aforementioned letter … ever disclosed to the board of directors?” asked Ronald Lauder, president of the World Jewish Congress, in a letter to Berman.
Shortly after, Berman informed Claims Conference board members of his decision to set up a committee, headed by Chairman of the Executive Reuven Merhav, to “formulate an appropriate course of action for the Conference with respect to the issues surrounding the 2001 letter.”
Merhav, a former director general of the Israeli foreign ministry, told the Forward he will begin work on the investigation next week, after setting up a three-person team that will not include Berman. “We will not leave a stone unturned,” Merhav said.
But meanwhile, pressure has been mounting on the Claims Conference to launch an independent investigation. Natan Sharansky, chairman of the Jewish Agency for Israel and a member of the Conference board, has demanded that a probe be carried out by a “public independent committee” into how the Claims Conference dealt with the 2001 fraud scheme tipoff.
Sharansky made his call in a recent letter to Berman, according to a May 22 report in the Jerusalem Post. Sharansky recommended that the investigators be individuals “who are not connected to either the Board of the Directors or the beneficiaries…so that the public trust in this important organization not be damaged,” a spokesman for Sharansky told the Post.
The WJC has also made clear it is following up on the issue. Lauder, a Conference board member, announced the formation of a WJC task force. It will examine all questions raised regarding the Merhav investigation and the early warning of the fraud to Claims Conference officials. “We are awaiting both the response to our questions and the recommendations Reuven Merhav’s team is going to make,” said Menachem Rosensaft, the WJC’s general counsel.