Charges: Employees stole $42M from NYC Holocaust fund

A gang of fraudster employees and Brooklyn thieves ripped off more than $42 million from a New York City-based fund for the relief of Holocaust victims in a brazen scheme that lasted 16 years, according to charges filed Tuesday in federal court in Manhattan.

The crew of 17 supervisors, workers, recruiters and document forgers created and approved phony applications for nearly 5,000 hardship payments and 658 pensions in what U.S. Attorney Preet Bharara called "perverse and pervasive" fraud against the Holocaust Claims Conference, a Jewish charity funded by reparations payments from the German government.

"If ever there was a cause that you would hope and expect would be immune from base greed and criminal fraud, it would be the claims conference, which every day assists thousands of poor and elderly victims of Nazi persecution," Bharara said. "Sadly, those victim funds were themselves victimized."

The ringleader was identified as Semen Domnitser of Brooklyn, an employee at the organization since 1994, who in 1999 became director of the two funds that the government says were ripped off - the Hardship Fund, which makes $3,600 payments to people who became refugees to flee Nazi persecution, and the Article 2 Fund, which provides monthly pensions to poor survivors of Nazi repression.

Domnitser was allegedly assisted by five subordinates, who approved phony applications, recruiters who collected identification documents that could be altered and used in fraudulent applications, a law firm employee who assisted in soliciting and submitting phony applications, and a document forger who altered birth and other records to create the illusion that people qualified for the funds.

The scam, according to the charges, included the fabrication of stories of persecution and flight, and records from outside sources to verify those stories. Many recipients of fraudulent funds were born after World War II, and at least one was not Jewish, prosecutors said.

Recipients of funds kicked back a portion - sometimes 50 percent or more - of their awards to the fraud ring. Bharara said some recipients were unknowing dupes, and others are still under investigation. No one whose only role was receiving benefits based on a phony application has been charged.

The fraud, after apparently escaping audits for more than a decade, was discovered last year by the Holocaust Claims Conference - also known as the Conference on Jewish Material Claims Against Germany - and executives there alerted the FBI after an internal investigation.

Greg Schneider, an executive vice president of the group, said the fraud, while substantial, represented about 1 percent of the funds that the group has been distributed. In total, the group has processed more than 456,000 hardship applications and more than 176,000 applications for pensions. Payments have been suspended to all applicants determined to be fraudulent.

Schneider said all employees connected to the alleged scam have been fired. "It's disgusting, disgusting that anyone would steal this money," he said.

Bharara said four of the individuals implicated in the scheme have pleaded guilty and are cooperating with prosecutors.