Millions of dollars meant to help survivors of the Jewish Holocaust instead were stolen and fraudulently given to thousands of people who were not eligible for the funds, Justice Department officials said.
The FBI said insiders who were responsible for verifying requests to the Conference On Jewish Material Claims instead helped commit a massive fraud. Investigators said in exchange for kickbacks, the employees signed off on bogus applications submitted in part by Russian immigrants who falsely claimed they had lost their homes and belongings during the Nazi era. Seventeen people have been charged in the outrageous swindle.
"The alleged fraud is as substantial as it is galling," U.S. Attorney Preet Bharara said.
Officials said Semen Domnitser was one of the alleged ringleaders who signed off on fraudulent applications from more than 4,000 people. In all, more than $40 million in funds provided by the German government meant for survivors was stolen or is unaccounted for, prosecutors said. Investigators said the Claims Conference first uncovered some of the alleged fraud and alerted the FBI to the ongoing scheme.
One of the funds allegedly ripped off was the "Hardship Fund" which pays approximately $3600 in a lump sum to individuals from the former Soviet Union and other Eastern European countries who can show they lost their homes and were in hiding during World War II. Other victims can claim payments up to $21,000 annually if they can show they lived under harsh conditions during the Nazi-era.
“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, which has offices at 1359 Broadway. “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. "
Investigators said as part of the scam, the group took out ads in Russian language newspapers seeking individuals who could either provide documents that showed they were alive and living in the affected regions. The FBI said the group also submitted similar or duplicate paperwork and photos on different applications for assistance.
"Each of the defendants played a role in creating, filing and processing fraudulent claims on behalf of non-qualifying applicants -- and dividing up the spoils," said Janice Fedarcyk, Assistant Director-in-Charge of the New York FBI.
A home along Brighton West 12th Street in Brooklyn was a center where fake overseas documents were allegedly produced, officials said.
Investigators said the alleged scam has been running since 1994. When some suspects learned the FBI was investigating, they allegedly offered bribes to witnesses in an attempt to keep them from cooperating.
The FBI said 4,957 bogus claims resulted in $18 million being wrongly taken out of one of the reparation funds. The Claims Conference lost another $24.5 million as a result of 658 other fraud cases, officials said.
Domnitser was the official responsible for overseeing case files and making sure they were in order. His approval was needed before any funds could be released for payment to alleged victims, officials said.
Others insiders charged include caseworkers Valentina Staroseletsky, Polina Berenson, Polina Breyter and Liliya Ukrainsky. They could not be reached for comment as they were expected to appear in court later Tuesday. The insiders allegedly paid recruiters to help them find willing participants for the alleged scheme.
A spokesman for the German Mission in New York said they will issue a statement later Tuesday.