Two Defendants Plead Guilty In Manhattan Federal Court To Participating In $57.3 Million Fraud On Organization That Makes Reparations To Victims Of Nazi Persecution
Defendants Include Organization Insider Who Processed Fraudulent Applications
Preet Bharara, the United States Attorney for the Southern District of New York, announced that POLINA STAROSELETSKY and ASYA GALINDO pled guilty today in Manhattan federal court to conspiring to defraud programs administered by the Conference on Jewish Material Claims Against Germany, Inc. (the “Claims Conference”), established to aid the survivors of Nazi persecution, out of more than $57 million. STAROSELETSKY was arrested in November 2010, and GALINDO was arrested in October 2011, as part of an ongoing investigation that has resulted in charges against a total of 31 defendants, 10 of whom were former Claims Conference employees, including a former director. STAROSELETSKY pled guilty before U.S. District Judge Thomas P. Griesa, and GALINDO pled guilty before U.S. Magistrate Judge Sarah Netburn.
Manhattan U.S. Attorney Preet Bharara said: “The sad drumbeat continues in this appalling, multi-million dollar fraud scheme against an organization dedicated to providing aid to victims of the Nazis, with 25 of the 31 defendants charged now having pled guilty. We will continue to aggressively prosecute each and every individual who allegedly played a role in this fraud, and we will not stop until justice is served.”
According to the Complaints and the Indictment filed in Manhattan federal court:
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 for payments under the funds.
As part of the charged scheme, a network 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, and at least one person was not even Jewish. Some members of the conspiracy 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 lived in hiding or under a false identity for at least 18 months; lived in a Jewish ghetto for 18 months; or 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 obtained 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.
While employed as a caseworker in the Article 2 Fund program at the Claims Conference, STAROSELETSKY knowingly processed fraudulent applications in return for payments from her co-conspirators. In addition, after she was no longer employed by the Claims Conference, STAROSELETSKY passed materials, including identification documents, to a co-conspirator still employed at the Claims Conference to support fraudulent Hardship Fund applications.
GALINDO recruited individuals to provide identification documents that were subsequently used in connection with the preparation of fraudulent Hardship Fund and Article 2 Fund applications, in exchange for a portion of the money paid out to those applicants.
With today’s pleas, a total of 25 defendants charged in the scheme have pled guilty, including seven former Claims Conference employees. Charges remain pending against the remaining six defendants in the case, who are presumed innocent unless and until proven guilty.
STAROSELETSKY, 50, of Brooklyn, New York, and GALINDO, 73, of Sherman Oaks, California, each face a maximum sentence of 20 years in prison. STAROSELETSKY and GALINDO are scheduled to be sentenced by Judge Griesa on August 14 and August 27, 2013, respectively.
Mr. Bharara praised the investigative work of the Federal Bureau of Investigation (“FBI”). He also thanked the Claims Conference for bringing this matter to the FBI’s attention and for its extraordinary continued cooperation in this investigation, which he noted is ongoing.
This case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorney Christopher D. Frey and Special Assistant U.S. Attorney Rebecca Rohr are in charge of the prosecution.