An employee of the New York based Conference on Jewish Material Claims Against Germany (the “Claims Conference”) pleaded guilty to defrauding her employers out of $550,000.
Zlata Blavatnik, 65, pleaded guilty to the charge that she had “produced falsified documents for myself” and “helped others in the same office” to make fraudulent “reparation” payments.
A total of 31 people have been charged in connection with the scheme, according to the FBI, including five former employees of the Claims Conference, which administered the programs.
The FBI is charging that, in exchange for kickbacks, those insiders, who were supposed to process and approve only legitimate applications, have knowingly approved nearly 5,000 fraudulent applications, resulting in payouts to applicants who did not qualify for the programs.
Manhattan U.S. Attorney Preet Bharara told reporters: “As I said when the initial charges in this case were announced, my office, working with our partners at the FBI, would not stop until we brought to justice those who are alleged to have stolen more than $57 million from the Claims Conference, thereby diverting money intended for survivors of the Holocaust.”
Bharara thanked the Claims Conference for “their outstanding, ongoing assistance in identifying the participants in this scheme.”
The Claims Conference, a not-for-profit organization which provides assistance to victims of Nazi persecution, supervises and administers several funds that make reparation payments to victims of the Nazis, including “the Hardship Fund” and “the Article 2 Fund,” both of which are funded by the German government.
Applications for disbursements through these funds are processed by employees of the Claims Conference’s office in Manhattan, and the employees are supposed to confirm that the applicants meet the specific criteria required for payments.
According to the FBI, as part of the scheme, a web of individuals—including five former employees of the Claims Conference—systematically defrauded the Article 2 Fund and Hardship Fund programs for over a decade.
The Claims Conference first suspected the fraud in December 2009, and immediately reported their suspicions to law enforcement, which conducted a wide-reaching investigation, resulting in unsealing the charges last October, 2011.
The Hardship Fund makes a one-time payment of approximately $3,500 to victims of Nazi persecution who evacuated the cities in which they lived and were forced to become refugees. Members of the conspiracy submitted fraudulent applications for people who were not eligible. Many of the recipients of fraudulent funds were born after World War II, and at least one person was not even Jewish.
Some conspirators recruited other individuals to provide identification documents, such as passports and birth certificates, which were then fraudulently altered and submitted to corrupt insiders at the Claims Conference, who then processed those applications. When the applicants received their compensation checks, they kept a portion of the money and passed the rest back up the chain.
From the investigation to date, the Claims Conference has determined that at least 3,839 Hardship Fund applications appear to be fraudulent. These applications resulted in a loss to the Hardship Fund of approximately $12.3 million.
The Article 2 Fund makes monthly payments of approximately $400 to survivors of Nazi persecution who make less than $16,000 per year, and either (1) lived in hiding or under a false identity for at least 18 months; (2) lived in a Jewish ghetto for 18 months; or (3) were incarcerated for six months in a concentration camp or a forced labor camp.
The fraud involved doctored identification documents in which the applicant’s date and place of birth had been changed. The fraud also involved more sophisticated deception, including altering documents that the Claims Conference obtains from outside sources to verify a person’s persecution by the Nazis. Some of the detailed descriptions of persecution in the fraudulent Article 2 Fund applications were completely fabricated.
From the investigation to date, the Claims Conference has determined that at least 1,112 Article 2 Fund cases it processed have been determined to be fraudulent. Those cases have resulted in a loss to the Claims Conference of approximately $45 million.
Manhattan federal Magistrate Judge Henry Pitman on Tuesday informed Blavatnik that she was facing a possible 40 years in jail for conspiracy and mail fraud.
But, according to the NY Post, Judge Pitman did not divulge the terms of Blavatnik’s plea deal, neither would the Manhattan US Attorney’s Office release a copy of the plea, which means that Blavatnik is probably cooperating with authorities in return for leniency in sentencing.
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