New arrests, fresh guilty pleas and a growing number of witnesses co-operating with the FBI have bolstered an investigation into a multimillion dollar fraud at the Conference on Jewish Material Claims Against Germany.
Many in the Russian-speaking community were stunned when 17 of their members — six Claims Conference employees in a New York processing office and 11 accomplices — were arrested last November on charges relating to a fraud that siphoned an estimated $42.5 million from Holocaust funds. At the time, five of the accused pleaded guilty.
Since then, two more people have been arrested, four suspects have pleaded guilty and an undisclosed number of witnesses have provided information, helping the FBI and prosecutors build an even stronger case against the accused. Meanwhile, continuing investigations by the Claims Conference indicate that the amount stolen from Holocaust funds actually totals about $50 million.
The scheme, which was uncovered in 2009, was led by Russian-speaking Claims Conference employees who rubber-stamped hundreds of fraudulent claims over more than a decade. They were aided by so-called “recruiters” who gathered documents from hundreds, perhaps thousands, of members of the Russian-speaking community and then had them altered, or in some cases forged, so that they would comply with compensation requirements set by the German government.
It is still unclear whether all those whose documents were used realized that they were committing a crime.
Claims Conference employees relied upon accomplices to find people in the Russian-speaking community who had documents, such as birth certificates, that could be altered easily. The two most recent arrests were of Moysey and Dora Kucher, who were detained in January on suspicion of defrauding the Article 2 Fund of tens of thousands of dollars. The fund was set up to compensate Jews who were in hiding or imprisoned in Nazi-occupied territory during World War II. It paid out monthly pensions of about $400 and was eligible to only the poorest survivors.
Like many of their co-defendants, the Kuchers gathered documents from people who responded to newspaper advertisements or who were referred by friends, court papers say. They submitted numerous claims and, in return, demanded that the first check from the German government, a backdated payment, be paid as a fee. In at least three cases, according to court documents, witnesses handed over payments of between $13,000 and $18,000.
At the time of the November arrests, only one Claims Conference employee, Faina Davidson, pleaded guilty to the fraud. Since then, four more people have pleaded guilty, including another Claims Conference worker, Liliya Ukrainsky. Semen Domnitser, director of the Article 2 Fund and another pillaged account, the Hardship Fund, continues to maintain his innocence, as do three other Claims Conference employees and six other defendants.
The U.S. Attorney’s Office declined to comment on the progress of the case. But Arkady Bukh, a lawyer in the Russian-speaking community, said that because many beneficiaries of the funds who have been cast under suspicion are elderly and poor, they are co-operating with the FBI in the hope of a more lenient sentence.
Although fewer than 20 people have been charged, the Claims Conference has identified about 4,800 claims it believes to be fraudulent. Bukh said he represented six people, including one “recruiter” and a handful of people who had not been arrested but who are co-operating with the FBI in the hope that they will not be charged. “We don’t anticipate any trials,” Bukh said.
The fallout from the fraud is still far from over. Of the 4,800 claims identified by the Claims Conference, almost 4,000 were made under the Hardship Fund — one-off payments of about $3,500 totaling about $14.3 million. The Claims Conference is about to send letters to those people, demanding that they return the money.
The Claims Conference has also identified 875 suspicious Article 2 Fund pensions, which have been frozen. A spokesman said that 62 people had agreed to return money, totaling $2.2 million. Another 427 claimants, with pensions totaling $17.5 million, are appealing the suspension. Separately, about 800 people have been sent questionnaires seeking to verify their claims.
In the wake of the fraud, the Claims Conference shut down its New York processing office and transferred the work to offices in Germany and Israel. Internal assignments have been altered to prevent collusion among employees, and application and processing procedures have been tightened.
The Claims Conference has also hired Deloitte & Touche to carry out a full audit of the organization’s procedures, which will be shared with the German government. Despite the fraud, Germany recently agreed to increase its support for survivors over the next few years, with funds totaling $560 million.
Elie Rubinstein, executive director of The Blue Card, a fund that helps the poorest Holocaust survivors, praised the Claims Conference for communicating clearly with the Russian-speaking community about why regulations have been tightened.
Nevertheless, he said that many survivors were concerned at being asked to provide even more personal information and at having to share such information, including Social Security numbers, with an organization whose security has been breached once already. Worse, he said, some survivors, particularly those who are older and in ill health, found the entire process traumatic.
“For some survivors it’s psychologically very difficult to have to prove their name [and their details again] just because some agencies don’t believe they are a survivor,” he said.
Contact Paul Berger at firstname.lastname@example.org