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U.S. Authorities Charge 17 With Defrauding Holocaust Fund

Participants in the March of the Living at the site of former German Nazi death camp Auschwitz in Oswiecim, Poland, April, 2010

WASHINGTON -- U. S. authorities have charged 17 people with stealing more than $42 million from programs designed established to help impoverished survivors of Nazi persecution.

At a joint news conference with FBI officials on November 10 in Manhattan, U.S. Attorney Preet Bharara said the money was stolen in a "perverse and pervasive fraud." Authorities say the fraud scheme ran for more than a decade before the Conference on Jewish Material Claims Against Germany tipped off federal authorities.

Six of those charged are employees of the nonprofit, which has offices in New York, Vienna, Israel, and Germany. The organization's executive vice president, Gregory Schneider, said the group was "disgusted" by the intent, and extent, of the fraud scheme that was carried out in its offices for so long.

"We are both sickened and relieved. We're relieved because we first discovered this and brought it to federal authorities in November of 2009, so it's been a year that we've been working with the FBI very closely in bringing this matter to closure," he said. "When you look at what's happened, what they've done, you can't help but be disgusted by this criminal activity."

U.S. Attorney Bharara vowed that the U.S. government "will bring to justice all those who would callously line their own pockets by looting a lifeline for Holocaust survivors."

Faked Documents

The Conference on Jewish Material Claims Against Germany -- also known as the Claims Conference -- provides assistance to victims of Nazi persecution by supervising and administering several funds that make reparation payments. Applications for disbursements are processed by employees in Manhattan, who must confirm that the applicants meet the specific criteria for fund disbursements.

The criminal complaint alleges that staffers of the Claims Conference approved more than 5,000 fraudulent applications for aid and then distributed the assistance funds among themselves and outside co-conspirators.

The fraud was perpetrated on the Hardship Fund and the Article 2 Fund, both of which are funded by the German government. The Hardship Fund gives a onetime payment of approximately $3,600 to mainly poor and elderly victims of Nazi persecution who were forced to leave their homes and become refugees.

The indictment says the defendants in the case recruited "applicants" from places like Brighton Beach in Brooklyn -- known as Little Odessa for its huge Ukrainian population -- and used altered government records and fake identities to carry out the scheme.

The recruited applicants' histories were altered so that they qualified for aid payments -- including new birthdates and made-up stories about surviving Nazi occupations. But the fraudsters got sloppy -- in some cases, several applications carried the same photo or birthdates that occurred after the war had ended.

A Fraud 'Factory'

Many of the defendants' names are Slavic -- the ring leader, Semen Domnitser, for example, and co-defendants Valentina Romashova; Polina Staroseletsky; Liliya Ukrainsky; Raisa Belgorodskaya; and Galina Trutina-Demchuk.

Schneider said the amount involved in the fraud scheme was less than 1 percent of the more than $400 million in funds from Eastern European governments that the Claims Conference distributes annually.

As to how the crimes went undetected for so many years, Schneider said the operation was "very complicated and organized."

"This group of people whose intent was to steal were recruiting people to pretend to be Holocaust survivors. There was a factory manufacturing false documents, and then they had a few people on the inside here, who worked at the Claims Conference. So it was collusion of a whole group of people with criminal intent," he said.

Some of the indicted employees were fired months ago, and some just this week, he added.

Since the charges were announced, the Claims Conference has been contacted by other groups that also administer aid to World War II survivors. Schneider said their messages have been supportive, but there is also the unspoken question: how do they prevent this from happening again?

"It's extraordinarily complicated because you're balancing, on one hand, the interests of legitimate Holocaust survivors -- you want to approve their claims as quickly as possible and make it as easy as possible for them to receive the funds. But on the other hand there has to be secure application process."

For that reason, he said, that the Claims Conference is implementing new procedures "to insure that this can never happen again."