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$40M in Holocaust Reparations Stolen in Massive Fraud Case

"The alleged fraud is as substantial as it is galling."

Seventeen employees of the Conference on Jewish Material Claims Against Germany have been arrested on charges of fraud after $42.5 million meant to help survivors of the Nazi Holocaust were siphoned from the reparations program. Investigators say that in exchange for kickbacks, the employees wrongfully signed off on forged applications.

Federal prosecutors revealed Tuesday that the 17 suspects had allegedly approved over 5,500 fraudulent payouts over the past 16 years, a number of which came from Russian immigrants who claimed their homes had been destroyed during World War II.  NBC New York reports:

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.

According to federal investigators, the alleged scam began in 1994.  When the FBI began investigating the scheme, some of the suspects reportedly offered bribes to witnesses to keep them from cooperating with authorities.

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.

According to the New York Post, five of the 17 people arrested have been busted in the past; four of them are cooperating as witnesses against others involved.

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