New York—After years of controversy and asking who knew what when and how much money disappeared, the 2009 revelation of fraud at the Conference on Jewish Material Claims Against Germany (Claims Conference), has resulted in conviction of 31people who embezzled approximately $57 million in German monies meant for restitution for Holocaust survivors. Of the accused, 28 pled guilty, and acknowledged wrong doing. Three among them the man held responsible for the scheme, went on trial recently in the Southern District of New York in U.S. v. Domnitser et.al. and were convicted on May 8, 2013. Sentencing is set for September 10.
Preet Bharara, United States Attorney for the Southern District of New York who specializes in white collar crime, announced charges against participants for a “scheme that defrauded programs established to aid the survivors of Nazi persecution. Out of the 31 defendants, five were employed by the Claims Conference, the designated administrator of the funds. U.S. Assistant District Attorneys Rebecca Rohr and Christopher D. Frey of the Southern District’s Complex Fraud Unit secured the convictions.
Judge Thomas Griesa heard the case. One of the accused, Esfira Bas, pled guilty and was turned, hoping that the government would offer her a lesser sentence. She said that “The recipients all knew they were not eligible. Some were born after the war,” and she admitted getting kickbacks. She swore she was telling “telling complete truth…I don’t want to go to jail.”
When asked if she considered how her part in perpetrating the fraud would affect Holocaust survivors, she responded “I did not think about it.”
According to the indictment, insiders were charged and convicted of having “knowingly approved nearly 5,000 fraudulent applications” resulting in the theft of more than $57 million money intended for survivors of the Holocaust in exchange for kickbacks. They “systematically defrauded the Article 2 Fund and Hardship Fund programs for over a decade.”
The scam involved doctoring birth certificates, passports and other documents needed to prove eligibility. The Claims Conference discovered the fraud in 2009, and after an internal investigation contacted the FBI. Among those now convicted is the former Claims Conference Director of Hardship and Article 2 Funds, Semyon Domnitser, convicted of conspiring to defraud Germany. He worked at the Claims Conference for more than fifteen years before he was terminated.
The investigation discovered that one employee typically approved “applications” in just a few days while other caseworkers generally spent at least 60 days reviewing an application before approving it. Greg Schneider, the current Chief Executive appointed in 2009, said his curiosity was piqued when he noticed the undue haste used in processing certain applications, and started his initial investigation, that revealed 4,957 fraudulent claims for one-time hardship payments of about $3,600, totaling about $18 million and 658 fraudulent pension claims totaling $24.5 million.
Official documents, most with altered birth dates making applicants seem older and therefore eligible for payment, had been submitted. Manhattan U.S. Attorney Preet Bharara said the fraudulent scheme had been going on since the German government began paying pensions to survivors in 1994. In November 2009, Berman informed his Board of Directors, saying “this fraud was a sophisticated, complex operation, perpetrated by a number of individuals working in collusion. They exploited detailed knowledge of Claims Conference procedures to organize fraudulent claims.”
It is not clear why it took so long to discover the fraud. Was the timing linked to the new Claims Conference administration, or was it time to “clean house?” JLBC’s attempts to speak with Greg Schneider were rebuffed. Amy Wexler at the Claims Conference said, “We don’t provide comment on personnel, however, if you need additional information regarding the fraud and those indicted, you can contact the U.S. Attorney’s office.”
“Outrageous,” said Julius Berman, Chairman of the Board of the Claims Conference during an interview with JLBC prior to the trial. The situation, he said, constituted “a fraud, no question…The arrangement with the German government is that they will pay every individual who can prove presence in a qualifying situation… The qualifications were clear. Qualifications had to be met. The fraud was that there was phony evidence.”
Following the reading of the verdict, Bharara called Domnitser’s and the two co-conspirators’ crime “an unconscionable fraud against the Holocaust Claims Conference….We said we would not stop until we brought to justice those who committed these unthinkable crimes and today our objective was accomplished.”
Roman Kent, a survivor of Auschwitz, is the treasurer of and with Ambassador Stuart Eizenstat is a chief negotiator, for the Claims Conference. Until the trial was over, he refrained from comment. Kent is a survivor of Aushwitz, and he did say that the Claims Conference continues to fully cooperate in bring to justice those who have committed this complex fraud.
In an exclusive interview, Kent told JLBC, “The Claims Conference is doing as much as it can. The needs of the survivors are more than the Claims Conference can handle, but,” he continued, “without the Claims Conference the situation of the survivors would be desperate. The only way they get home care is because we spend a few hundred million dollars for that, or they wouldn’t have any at all.” Kent defended the Claims Conference’s activity, saying it “is doing whatever it can to secure money for the survivors and particularly for the needy survivors… I can say I don’t see any other Jewish organization that is doing what the Claims Conference is doing.”
JLBC asked Roman Kent how the fraud could have continued for 15 years. “We are living in an age when even banks and financial institution look for the best way to be safe in cyberspace. Criminals work around the safety systems. You can try to prevent (crime) but criminals find a way around it.”
When asked about another controversial issue, the restitution of properties from East Germany, Kent and returning property to legitimate heirs, he said “According to German law, if they did not file a claim they have no real property.” He says the Claims Conference “spent millions in research to try to save the properties” and “if the Claims Conference found a legitimate heir, they gave the property back.”
“On the other hand, the Germans would say ‘you are out of luck.’” Kent says more than 10,000 heirs received property; the Claims Conference received “a small percentage” for its work… and added that according to German law, “they would have gotten nothing.”
Martin Stern, a British-Israeli from Jerusalem, who won the first Holocaust-era insurance case against Generali, the Italian insurance company, counters Kent’s claim and says that records were held back until after the deadline for property claims had passed. Said Kent, “He’s entitled to his way of thinking; I don’t have to agree with him.”
JLBC also asked Kent about the compensation received by former Claims Conference executive Gideon Taylor, who was Chief Executive while much of the criminal activity was taking place. In 2006 by The Jewish Chronicle in London said his 2004 earnings came to $437,811 USD.
Kent said that he himself was uncomfortable with the salaries of the executives, and “wrote a letter acknowledging that the salaries are large, particularly in light of the fact that they claim to work for the Jewish people.”
He told JLBC, “We cannot fight the avalanche. When people like this compare themselves to businessmen it doesn’t work. …When you work for a non-profit, your salary should be not be comparable to salaries of private enterprises….” Kent suggested that “It is up to the press to stop these extraordinary salaries.” Staff salaries at the Claims Conferenece are said to be low compared to executive compensation.
Kent is also deeply critical of lawyers who have handled Holocaust survivors’ claims. “Each one who has touched the survivors has made millions.” For example, in 2001 lawyers pocketed more than $59 million in legal fees from the multibillion-dollar slave and forced labor settlement with German corporations. The surviving slave laborers themselves— primarily Eastern Europeans forced to work in Nazi war factories, received approximately $2,500 apiece. Jews and Sinti-Roma received about $7,500 each.
Said Kent, “I don’t like what I see. We, as parents, are always trying to leave the world a little better for our children and grandchildren. I am sorry to say, we have not done that. Fraud is committed in the highest places.”
By Maxine Dovere