Scammers pull $42 million fraud job on Holocaust victims' fund

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FBI guys check fingerprints on Holocaust caseA long-running scam by insiders has defrauded a Holocaust survivor's fund out of tens of millions of dollars.

Six employees of the nonprofit group The Conference on Jewish Material Claims Against Germany, along with 11 other conspirators, have been charged in a decade-long scheme to defraud the organization and legitimate Holocaust victims out of more than $42 million, the FBI announced.

Victims of this scheme were "those who had already suffered at the hands of Nazi persecution only to have their experiences exploited again -- this brazen miscarriage of the compensation program is, in its own way, a kind of crime against humanity," the FBI's New York Assistant Director in Charge, Janice Fedarcyk, said in a statement.

The New York-based organization, known as the Claims Conference, has been overseeing German government funds to assist Holocaust survivors for nearly 60 years. The Claims Conference supervises several funds and processes thousands of applications a year.

The two funds allegedly targeted were:
  • The Article 2 Fund, which makes monthly payments of $411 to survivors of Nazi persecution who make less than $16,000 a year and who either lived in hiding or a Jewish ghetto for 18 months or were incarcerated for at least six months in a concentration or forced labor camp.
  • The Hardship Fund, which makes a one-time payment of approximately $3,600 to survivors forced to evacuate their hometowns and become refugees.
Applications by persons living in the U.S. are made to the Claims Conference's Manhattan office, typically by mail. The applicants provide identification documents, along with information about their family and experiences escaping Nazi persecution.

Caseworkers with the Claims Conference verify an applicant's history, often by checking external databases and archives, and sometimes through a personal interview. If approved for payment, a check is mailed to the applicant or electronically deposited into a bank account.

Claims Conference officials became suspicious of possible fraudulent activity within their organization in December 2009 and immediately contacted the FBI, which began investigating.

According to the criminal complaint filed in federal court in the Southern District of New York, here's how the scheme worked:
  • Working with corrupt Claims Conference employees, former employees and other conspirators would recruit people -- some unwitting -- who weren't eligible for the program (mostly Jewish members of the Russian immigrant community) to take part in the fraud.
  • To make applicants appear eligible, identification documents were often altered. For example, a birth date was changed to make it appear that applicants were born during or before World War II. Phony Nazi persecution stories were often created.
  • Fraudulent applications were reviewed and approved by Claims Conference employees in on the scam.
  • Once the applicants received their money, they kept a portion but were instructed to kick back a percentage to Claims Conference conspirators in the form of cash or money order.
Among those charged in the scheme are the former director of the Article 2 and Hardship Funds, other past and present Claims Conference employees, two law firm employees, a notary/document forger, and several other middlemen.
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