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October 12, 2011
NEW YORK, October 12, 2011 — The Conference on Jewish Material Claims Against Germany (Claims Conference) expressed its gratitude to the FBI and U.S. Attorney’s Office for the Southern District of New York (USAO-SDNY) for the arrests announced today relating to the organized fraud perpetrated against programs that issue payments to Jewish Holocaust victims.
Based on extensive information originally reported beginning in December 2009, federal authorities announced charges against an additional nine individuals for their involvement in creating and submitting fraudulent documents attesting to eligibility for Holocaust-related compensation payments.
No Holocaust victims were deprived of any funds because of the crime.
The Claims Conference pledged its full cooperation in continuing to work with federal authorities in bringing to justice those who have perpetrated a sophisticated and complex fraud to unlawfully obtain funds.
The USAO-SDNY and FBI emphasized the Claims Conference’s close and coordinated work with federal authorities. Manhattan United States Attorney Preet Bharara “thanked the Claims Conference for bringing this matter to the FBI’s attention and for its extraordinary continued cooperation in this investigation, which he noted is ongoing.”
Mr. Bharara stated, “We again thank the Claims Conference for their outstanding ongoing assistance in identifying the participants in this scheme.”
“It defies imagination that people would participate in such a despicable scheme,” said Claims Conference Chairman Julius Berman. “This was a calculated, organized, complex fraud and we have tremendous trust in the U.S. Attorney’s Office that those responsible will be 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, which immediately launched a federal investigation into the fraud. Over the past 22 months, the Claims Conference has collaborated with law enforcement officials in uncovering the complex and sophisticated scheme. Their investigation led to the arrests last year and today.
In November 2010, it was announced that 17 people had been arrested relating to the fraud scheme, with two more arrested in January 2011, one in August, and one last week. Of the total of 30 people arrested as of today, 11 were former Claims Conference employees.
“We continue to work closely with law enforcement officials and we thank them for their continuing tenacity in pursuing this matter,” said Mr. Berman.
“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 the care and support they so desperately need at this stage of their lives,” said Roman Kent, Chairman of the American Gathering of Jewish Holocaust Survivors and Claims Conference Treasurer.
Two of the former employees arrested today were terminated in November 2010 and three had been terminated in 2006 or earlier. None of those arrested today are current employees of the Claims Conference.
The Claims Conference has taken numerous steps to strengthen its safeguards against fraud. Processing procedures have been revamped, and the processing of certain claims was shifted from New York to other offices. Currently, Deloitte is conducting an independent review of all processing procedures. All aspects of the investigation and subsequent activities have been coordinated with the German government.
Since discovering the scheme, the Claims Conference has reviewed thousands of files, once case at a time, to identify fraudulent applications. Upon unearthing documents confirming fraud, the Claims Conference suspended suspected improper payments. Legitimately eligible claimants to the affected programs are being paid.
Federal authorities stated that to date, 1,112 pensions under the Article 2 Fund are thought to be fraudulent, with a total value of approximately $45 million. In addition, authorities stated that to date 3,839 one-time payments under the Hardship Fund are thought be fraudulent with a total value of approximately $12.3 million. Approximately 1 percent of all processed applications are thought to be fraudulent. In total, more than 600,000 individual claims under these programs have been processed through the years by the Claims Conference with total payments exceeding $4.5 billion.
The Claims Conference, as the victim of this fraud, intends to exercise its full rights under the 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 to recipients of payments due to the fraud, 626 people have repaid funds or agreed to do so thus far for a total of $4.7 million. Of that amount, $1.7 million has been paid and another $3 million has been agreed to be paid in installments.
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 retired New York Supreme Court Justice, is adjudicating appeals submitted by persons of whom the Claims Conference has asked repayment of funds.
The Hardship Fund, established in 1980, makes one-time payments of €2,556
(approximately $3,500). The Article 2 Fund, established in 1992, makes monthly payments of €300 (approximately $400). Both programs were established through Claims Conference negotiations. More information is available at www.claimscon.org.
The Claims Conference will not waver in its commitment to assist Jewish victims of Nazism, and will not allow a criminal scheme to stop it from this work.