Brooklyn Woman Pleads Guilty in Manhattan Federal Cout to Participating in $57.3 Million Fraud on Organization That Makes Reparations to Victims of Nazi Persecution
Preet Bharara, the United States Attorney for the Southern District of New York, announced that Zlata Blavatnik, a former clerk employed at the Conference on Jewish Material Claims Against Germany Inc. (the “Claims Conference”), pled guilty today in Manhattan federal court to conspiring to defraud programs administered by the Claims Conference and established to aid the survivors of Nazi persecution out of more than $57 million. Blavatnik was arrested and charged in October 2011 as part of an ongoing investigation that has resulted in charges against a total of 31 participants, 10 of whom were former Claims Conference employees, including a former director. She pled guilty today before U.S. Magistrate Judge Henry B. Pitman.
According to the complaints and the indictment to which Blavatnik pled:
The Claims Conference, a not-for-profit organization that 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 for payments under the funds.
As part of the charged scheme, a web of individuals 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.
The Hardship Fund pays 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. 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 Claims Conference 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 are fraudulent. Those cases have resulted in a loss to the Claims Conference of approximately $45 million.
Blavatnik, a Claims Conference clerk, was charged with knowingly collecting documents from ineligible applicants to be used in connection with submitting fraudulent applications in their names to the Hardship Fund program in return for payments from the applicants. Blavatnik is the 12th of the 31 defendants charged in the scheme to plead guilty. Charges remain pending against the remaining 19 defendants in the case, who are presumed innocent unless and until proven guilty.
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Blavatnik, 64, of Brooklyn, New York, faces a maximum sentence of 40 years in prison. She is scheduled to be sentenced by U.S. District Judge Thomas P. Griesa on October 25, 2012 at 4:30 p.m.
According to the complaints and the indictment to which Blavatnik pled:
The Claims Conference, a not-for-profit organization that 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 for payments under the funds.
As part of the charged scheme, a web of individuals 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.
The Hardship Fund pays 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. 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 Claims Conference 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 are fraudulent. Those cases have resulted in a loss to the Claims Conference of approximately $45 million.
Blavatnik, a Claims Conference clerk, was charged with knowingly collecting documents from ineligible applicants to be used in connection with submitting fraudulent applications in their names to the Hardship Fund program in return for payments from the applicants. Blavatnik is the 12th of the 31 defendants charged in the scheme to plead guilty. Charges remain pending against the remaining 19 defendants in the case, who are presumed innocent unless and until proven guilty.
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Blavatnik, 64, of Brooklyn, New York, faces a maximum sentence of 40 years in prison. She is scheduled to be sentenced by U.S. District Judge Thomas P. Griesa on October 25, 2012 at 4:30 p.m.
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