Announcement Regarding Actions by U.S. Attorney and FBI

This post is for historical informational purposes only. Please do not refer to this post for information pertaining to current Claims Conference programs. Visit What We Do for current program guidelines and information. Thank you.

November 9, 2010

Announcement regarding actions by U.S. Attorney and FBI

The Conference on Jewish Material Claims Against Germany (Claims Conference) today expressed its gratitude to the FBI and US Attorney’s Office for the Southern District of New York (USAO-SDNY) for their actions relating to the organized fraud perpetrated against programs that issue payments to Jewish Holocaust victims. Preet Bharara, the United States Attorney for the Southern District of New York, said, “Without the extraordinary cooperation of the Claims Conference in ferreting out this alleged scheme to defraud them, it never would have been exposed. We thank them for their assistance.”

Based on extensive information originally reported to federal authorities by the Claims Conference, the FBI arrested 17 individuals in New York, including former and current employees of the Claims Conference, for their involvement in creating and submitting fraudulent documents attesting to eligibility for Holocaust-related compensation payments.

The Claims Conference said that no Holocaust victims were deprived of any funds because of the crime. It pledged its continued full cooperation to help federal authorities bring to justice those who have perpetrated a sophisticated and complex fraud to unlawfully obtain funds.

“We are outraged that individuals would steal money intended for survivors of history’s worst crime to enrich themselves,” said Julius Berman, Chairman of the Claims Conference. “It is an affront to human decency. As the victim of this complex scheme, the Claims Conference is grateful for the tremendous work of the FBI in investigating it. We hope all those responsible are prosecuted to the full extent of the law.”

Upon discovering apparent fraudulent activity, the Claims Conference immediately retained outside counsel at Proskauer Rose to conduct an independent internal investigation. Within a matter of weeks, in December 2009, the Claims Conference presented evidence to the FBI and the USAO-SDNY, who immediately launched a federal investigation into the fraud. Over the course of the past 11 months, the Claims Conference has fully cooperated with law enforcement officials in uncovering the complex and sophisticated scheme; an investigation that led to today’s arrests.

“We continue to work closely with law enforcement officials and we thank them for their continued tenacity in pursuing this matter,” said Mr. Berman. “While the stolen funds come to less than one percent of total payments, we are determined to uncover every last case of fraud in this coordinated scheme.”

“We will not allow this criminal activity to deter us from our mission of six decades, providing a small measure of justice for Holocaust victims and advocating for their rights as long as necessary,” said Roman Kent, Chairman of the American Gathering of Jewish Holocaust Survivors and Claims Conference Treasurer.

The Claims Conference said that numerous steps have been taken to strengthen its safeguards against fraud. Processing of certain claims has been shifted from New York to other offices and procedures have been revamped. In addition, the Claims Conference has retained Jules Kroll and his firm K2 Global Consulting to review the enhancements and, if necessary, make additional recommendations.

Earlier this year, when the Claims Conference publicly disclosed the fraud, three members of the Claims Conference staff in New York were dismissed in conjunction with the matter. In July 2010, the Claims Conference announced that 202 pensions had been suspended with a total value of $7 million.It was further announced at that time that the investigation was ongoing and additional files were being reviewed.

Since discovering the scheme, the Claims Conference has reviewed thousands of files to identify fraudulent applications, one case at a time. Upon unearthing documents confirming fraud, the Claims Conference suspended suspected illegal payments. Legitimately eligible claimants to the programs are being paid. As of today, 658 pensions are thought to be fraudulent, with a total value of approximately $24.5 million. In addition, 4,957 one-time payments under the Hardship Fund are thought be fraudulent with a total value of approximately $18 million. In total, more than 600,000 individual claims have been processed by the Claims Conference with total payments exceeding $4.3 billion.

The Claims Conference, as the victim of this fraud, intends to exercise its full rights under Federal law and pending the outcome of successful criminal prosecutions, will take steps to aid the USAO-SDNY in obtaining a court order directing the perpetrators to make restitution of the losses incurred as a result of the fraud.

As a result of Claims Conference letters suspending payments from the Article 2 Fund, 29 people have either repaid their illegal pensions or have indicated their willingness to do so.

The Claims Conference said it has informed all affected persons of their right to submit any documents to prove the accuracy of their application and their eligibility. An appeals procedure has been established to review these submitted documents. Justice Herman Cahn, a former New York Supreme Court Justice, will adjudicate any appeals from persons whose payments have been deemed fraudulent.

Payments from all other programs and services that are provided for Nazi victims, such as homecare, were not affected.

The Hardship Fund, established in 1980, makes one-time payments of €2,556 (approximately $3,600). The Article 2 Fund, established in 1992, makes monthly payments of €291 ($411). Both programs were established through Claims Conference negotiations. More information is available at www.claimscon.org.

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.