NEW YORK – The first sign that something was amiss at the Conference on Jewish Material Claims Against Germany happened to fall on an ominous date on the Jewish calendar: November 9, 2009, the anniversary of Kristallnacht.

Greg Schneider had been at the helm of the Claims Conference, which administers the distribution of billions of dollars in Holocaust reparations from Germany, for less than five months when a telephone operator responsible for talking to survivors and entering data noted something highly unusual.

An application for payment from Germany’s Hardship Fund, which grants onetime payouts of 2,556 Euro – approximately $3,150 today – to Jews who fled the Nazis as they swept eastward through Europe, had been approved in less than three weeks. The process normally takes months.

A senior staffer was called, and the application was brought to Schneider. He found it curious but didn’t think too much of it until a week later, when a similar irregularity cropped up on another submission. Schneider’s heart dropped.

He summoned the senior staffer, whom I’ll call M., into his office, and the two began feverishly reviewing applications.

They stayed up all night searching for patterns and outliers among thousands of claims, scrutinizing dates of birth, places of residence, wartime experiences and Claims Conference caseworkers. The more anomalies they found, the more nervous Schneider became.

By morning it was clear that they had stumbled onto a massive fraud, in all likelihood perpetrated by their own employees.

Schneider, now 45, immediately phoned the chairman of the Claims Conference board, Julius Berman, a prominent member of New York’s Jewish community and an attorney at the law firm Kaye Scholer.

“Listen, we’ve got a problem,” Schneider told Berman. “It’s not me and it’s not [M.], but I can’t be sure of anyone else.”

Over the next couple of days, Berman, Schneider and senior leaders at the Claims Conference tried to figure out a game plan. If word were to leak that the organization had allowed millions of dollars to be fraudulently obtained from Germany in the name of Holocaust survivors, it could jeopardize the Claims Conference’s entire operation, its relationship with the Germans and the distribution of hundreds of millions per year to Holocaust survivors around the world.

The disclosure could sully the whole Jewish effort to recoup compensation for Jewish suffering at the hands of the Nazis.

The Claims Conference had been leading that effort, with varying success, since 1951, when the organization was founded by the Israeli government and a consortium of Jewish organizations to represent the Jewish people in negotiations with Germany and Austria for Holocaust reparations. Never in the six-decade history of the organization had theft of this scale ever been discovered.

“I was petrified somebody would find this out before we could make it clear that we were on top of it,” Schneider told JTA. “I insisted we go to the authorities immediately.”

Berman says he didn’t want the organization to fall into the “Nixon trap.”

“We would never be able to recover from someone charging that we tried to cover up,” he said.

But the lawyers retained by the Claims Conference immediately after discovering the fraud counseled a different path: Wait a bit and see what else could be turned up in order to build a convincing enough case for federal investigators to get involved.

From farm to (negotiating) table If things had gone a little differently for Schneider, he might have been a chicken egg farmer in rural New England rather than the head of the organization that oversees billions of what many Jews describe as “holy money.”

They almost did.

Raised on a family farm in Fitchville, Connecticut, in the sparsely populated southeastern corner of the state, Schneider came from a family that had been breeding chickens for four generations.

His Russian-born great-grandfather, Nathan Kofkoff, had gone to Connecticut in the early 20th century, part of a mass movement of urban Jews who were encouraged to leave the city and move to the country to farm rural plots of land.

The program was fueled by interest-free loans from the Baron de Hirsch Fund, which sought to promote agricultural work for America’s Jewish immigrants.

Within a few years, the vast majority of the newly minted farmers had failed and returned to the city, but the Kofkoffs found a market for their eggs and they stayed.

That decision might have made Schneider heir to a vast family fortune had his paternal grandfather, Abe Schneider – a Brooklyn boy who married into the family and moved up to the farm – gone into the egg business.

But Greg Schneider’s city-boy granddaddy was too weak to haul the chicken feed and instead opened up a plumbing supply store in town. Abe’s brother-inlaw – Greg’s great-uncle – took over the business, eventually turning it into one of America’s largest egg producers. With annual revenues of $50 million to $100m. and a production run of 12 million eggs per week, the Kofkoff Egg Farm conglomerate was sold a few years ago to Land O’Lakes, one of the largest dairy companies in America.

Though Schneider’s grandparents had quit the egg business, they never left the farmstead. When Schneider’s father, Raymond, married a New Yorker – the daughter of Orthodox Jewish Hungarian immigrants whose families had stayed behind in Europe and were murdered by the Nazis – she joined him in Connecticut.

It was an alluring new life for Schneider’s mother, Roslyn, who sought to escape the urban, Orthodox setting of her youth and embrace her new husband’s largely secular, rural life.

By the time Greg was born, however, the family had begun embracing a more observant Jewish lifestyle. While his two older siblings had attended public schools in Connecticut, where the name Schneider stuck out like a piece of pickled herring in a shrimp cocktail, the much younger Greg was sent to a Conservative Jewish day school even though it was more than an hour’s commute each way by car.

It was a group trip to Israel at age 15 with the Conservative movement’s youth arm, United Synagogue Youth, that Schneider credits with sparking his yearning for a Jewish path.

“After a few days in Israel, I felt more at home and more connected than I did in 15 years on the farm,” Schneider said. “I didn’t fit in with that farm life. I always knew I wanted to do Jewish.”

But he didn’t want to be a rabbi. He wanted to lead a major Jewish organization.

So he went to Brandeis for college, earned a master’s degree in Jewish professional leadership, interned at the Boston Jewish federation and married an Orthodox Jewish woman from Brooklyn.

Schneider’s Jewish career then took a detour: He ran a board-games company that he and a partner launched. They struck it big with a 1991 game called Rhymation that became a best-seller at FAO Schwarz, the New York toy company.

Today, vintage copies of Rhymation – its trademarked slogan, “The rhyming sensation that’s sweeping the nation,” is a Schneider original – are selling for $200 on eBay. The slogan still makes Schneider grin – and cringe.

But Schneider gradually returned to the professional track he envisioned, attending Harvard to get a master’s in public policy at the Kennedy School and then moving to New York in 1995 to take a job at the Claims Conference.

He started off as an assistant to the founding chief of the organization, Saul Kagan, and eventually worked his way up to chief operating officer – the organization’s No. 2. In July 2009, when the top post was vacated by Gideon Taylor, the organization’s board chose Schneider as his successor.

At age 42, he finally had landed his dream job.

Then came the fraud.

Days of reckoning For the first few weeks after discovering that the Claims Conference was being cheated, Schneider barely slept. Never very polished-looking – Schneider’s shirts appear perennially rumpled and his lightbrown hair grows unkempt as the day progresses – he appeared more disheveled than usual.

In an instant, his job had changed from convincing Germany to increase its assistance to aging survivors to trying to prevent the entire edifice of the Claims Conference from collapsing under the weight of a fraud of unknown magnitude.

Separating credible claims from fake ones was a mammoth task, and it wasn’t immediately clear whether the Claims Conference was dealing with hundreds of scammers or a small group of corrupt insiders. The only thing for sure was that the crooks had been at it for years.

Uncertain of the extent of the conspiracy among his staff, Schneider had to make sure that no employees discovered the internal investigation.

“There were many horrible parts, but that pretending was horrendous,” Schneider recalls. “We had 100 people working on this fund worldwide, and every one of them had to be lied to.”

On December 5, 2009, Schneider abruptly halted all payments to survivors from the Hardship Fund. He told his staff at the Claims Conference offices in New York, Germany and Israel that the monthly wire transfers were delayed because of a computer problem. In truth, he had to make sure that no new checks were issued to fake claimants.

By this time, more than $5m. in fraudulent payments had been discovered.

On December 18 of the same year, about a month into the internal investigation, the Claims Conference and its lawyers from the firm Proskauer Rose were ready to go to the FBI. Schneider flew to Berlin to inform his interlocutors at the German Finance Ministry, and the organization’s lawyers took their dossier of evidence to the US Attorney’s Office.

FBI investigators instructed the Claims Conference not to tell anyone else.

Gradually, the mechanics of the fraud began to come into focus.

A group of corrupt Russian-speaking employees of the Claims Conference had hired recruiters to canvass the Russian-speaking community in New York for immigrants to provide birth certificates, passports and other identifying materials.

The conspirators then altered the documents to make it appear as if the immigrants fit the criteria required for Hardship Fund payments, changing dates of birth, places of prewar residence and even photographs. With some deft forgery, a Ukrainian Christian born in the 1950s could be transformed into a Jewish refugee who fled the Nazis and thus was eligible for compensation from Germany.

Inside the Claims Conference, employee accomplices issued quick approvals to the fake applications. Some of the conspirators received as much as $1,000 per applicant for their trouble.

Recruiters got a cut, too, and payment also eventually made its way to those who provided the original documents – many of whom, investigators later discovered, were unaware that they were participating in a fraudulent scheme.

Investigators also discovered that another, much larger German account, the Article 2 Fund, which provides monthly pensions of about $300 to 60,000 Holocaust survivors, had been defrauded.

The ringleader on both counts, according to federal investigators, was Semen Domnitser, the director of the Hardship and Article 2 funds. Domnitser, who through his lawyer declined to be interviewed for this story, maintains that he is innocent.

Even today, it’s not clear who among those whose names appeared in the fraudulent applications were aware that they were participating in a deception and who were unwitting accomplices.

Over the past couple of years, as the Claims Conference has contacted recipients of the ill-gotten gains to return the money, many have complied. The Claims Conference has recovered about $4.3m.; another $3.3m. is scheduled to be returned by recipients in installment plans.

While the FBI probe widened and restitution payments remained suspended, word spread among Claims Conference staff that something unusual was afoot.

One of the suspects, Faina Davidson, left the country. She later pleaded guilty to one count of conspiracy to commit mail fraud.

A senior staff member investigating the theft received a threatening letter. The Claims Conference hired a security guard for the office. Federal investigators arranged for witnesses to wear undercover wires.

Finally, in early 2010, the Claims Conference began confronting employees.

Nobody confessed.

On February 10 of that year, Schneider fired three employees, including Domnitser, and had security guards escort them out of the building.

Schneider then made an announcement to the media. The fraud figure: $7m. and counting.

The ensuing months were a blur. The Claims Conference found that the fraud at the Article 2 Fund dated back at least to 1993 and exceeded $24m. More than 200 suspicious pensions were suspended.

On November 9, 2010, a year to the day after Schneider was handed the first irregular case, the FBI arrested 11 more suspects, unsealed its federal indictment and held a news conference to lay out the case of how Claims Conference employees managed to steal more than $42m.

from the German government in the name of Holocaust survivors.

The next day, the story was on the front page of The New York Times.

As the months wore on, the number of arrests and the total fraud figure have continued to climb. To date, 31 people have been arrested and the figure is now at more than $57m.

Twelve of the 31 people charged in the case have pleaded guilty, four of them ex-Claims Conference employees.

The most recent plea came in June: Zlata Blavatnik, a former clerk at the organization, pleaded guilty to conspiracy to commit fraud. She was charged with knowingly collecting documents from ineligible applicants to be used in the submission of fraudulent application to the Hardship Fund. She faces a maximum prison sentence of 40 years.

The first sentence connected to the conspiracy was handed down last August in US District Court in Manhattan: a year in prison and two years’ probation for a 63-year-old Russian immigrant from Brooklyn named Polina Anoshina who had recruited some 30 people for the scheme. The crime netted her $9,000 and cost the Claims Conference about $105,000 in fraudulent claims. Anoshina’s lawyer called her “a very small part of a very large wheel.”

Two others who have pleaded guilty have been sentenced. Tatyana Grinman was given six months in prison and six months of house arrest. Rozaliya Brodetskaya was given two years’ probation.

The 19 others who have been charged in the case and pleaded not guilty, including Domnitser, are set to face trial beginning January 14.

It still will be some time before the Claims Conference has completed its review of applications and knows exactly how widespread the fraud was. It has found 3,839 fraudulent Hardship Fund applications totaling $12.3m. in fraudulent payments and 1,112 fraudulent Article 2 Fund cases, amounting to another $45m.

“I want all these people to go to prison,” Schneider said. “It makes me sick how they put in jeopardy our programs and our relationships.”

Accountability When the British phone-hacking scandal erupted last summer, the head of Scotland Yard, Paul Stephenson, quickly resigned. It wasn’t because he’d done anything wrong, he said, but because he didn’t want to become a distraction for the agency.

At the Claims Conference, where the fraud went on for at least 17 years, there haven’t been any resignations at the top.

“Anxious survivors have flooded our office with calls asking why senior leadership of the Claims Conference didn’t resign in the wake of the fraud on their watch, and why they did not even apologize to the survivor community,” Elan Steinberg, vice president of the American Gathering of Holocaust Survivors and their Descendants and a frequent critic of the Claims Conference, told JTA in late 2011, a few months before his death from cancer in April. “I simply have had no answer for them.”

Berman, who has been chairman of the conference for the last decade or so, says there’s no reason for him to step aside.

“I feel no fault at all,” he said.

“Whether I’m a lay chairman or a CEO, it’s the kind of process that I had nothing whatsoever to do with instituting.”

Calling the controls that the Claims Conference had in place to prevent fraud “reasonably adequate,” Berman said the deception was as impossible to anticipate as the attacks of 9/11. “Until it happens once,” he added. “Then you’re on notice that something you never foresaw can happen.”

Schneider’s predecessor, Gideon Taylor, under whose 10-year tenure the fraud ran undetected, declined to be interviewed on the subject.

“The day I left I made a decision: I’m not going to speak publicly about the Claims Conference because I’ve moved on,” Taylor told JTA. “It is what it is.”

Taylor is now COO of programs at the American Jewish Joint Distribution Committee, which distributes hundreds of millions of dollars in Jewish aid annually around the world – approximately $110m. of which comes from the Claims Conference. The money, designated for aid programs to Jews in Eastern Europe and the former Soviet Union, constitutes slightly less than one-third of the JDC’s total annual budget.

Schneider, who was COO of the Claims Conference when the fraud was happening before he became the organization’s chief executive, said the notion that he should be the one to resign is misplaced and counterproductive. Schneider, whose formal title is executive vice president, says he’s indispensable and that nobody is more committed or better suited to rooting out the fraud.

“There’s too much at stake here,” Schneider told JTA. “It would be detrimental to the organization. It would be detrimental to survivors. The results are more important than the symbolism of a resignation.”

He appears to have the confidence of the US Attorney’s Office, which at practically every news conference related to the fraud makes a point of hailing the Claims Conference’s “extraordinary continued cooperation in this investigation.”

“We again thank the Claims Conference for their outstanding ongoing assistance in identifying the participants in this scheme,” Manhattan US Attorney Preet Bharara said last October 12 at a news conference announcing the most recent arrests in the case – eight additional people.

Perhaps most important, the Germans seem to trust Schneider.

As evidence, Schneider and others point out that since the fraud was discovered, the German government actually has increased its allocations through the Claims Conference – most notably for home care for infirm survivors. In 2009, Germany’s home care funding amounted to 30m. euros. In 2012, the figure will be 126m. euros – approximately $168m. – and Germany has committed to additional funding at least through 2014.

German officials declined to be interviewed for this story.

But Stuart Eizenstat, a former US undersecretary of state who has been a key player in negotiating a number of Holocaustrelated deals and is a regular at the negotiations between the Claims Conference and the German Finance Ministry, says the organization’s relationship with the Germans has weathered the fraud crisis because of confidence and trust built up over decades. Also, he says, because of the steps that Schneider put in place upon discovering the fraud: better internal auditing, improved internal controls and greater transparency vis-à-vis Germany.

Germany, however, has added its own auditors, who now also oversee the flow of funds from Germany through the Claims Conference and on to survivors.

Eizenstat credits the Germans for not using the fraud as a pretext to decrease the financial assistance for Jewish victims of the Nazis.

“Greg is an extremely strong operational person, and that has helped a lot,” Eizenstat said. “But it’s not just on the Claims Conference. It is the Germans’ continued willingness to live up to their obligations and not using excuses to diminish it.”

Though the German Finance Ministry has been loath to discuss the fraud publicly, a ministry spokesman released a brief statement in response to JTA’s inquiries suggesting that Germany is satisfied with how the Claims Conference is addressing the theft.

“The Federal Finance Ministry very much regrets the delays Holocaust survivors may have experienced in receiving financial assistance from the German Federal Government owing to the irregularities at the New York office of the JCC” – the Jewish Claims Conference, the statement said.

“The JCC has been systematically researching its records for signs of irregularities and has taken appropriate steps to reclaim the misappropriated funds. The JCC has also taken disciplinary measures against the employees involved in the irregularities,” the statement said. “The JCC’s internal processes regarding financial assistance to Holocaust survivors have undergone a substantial overhaul.

An external consultant has been reviewing these changes to ensure that they provide adequate protection against criminal misappropriations in the future.

“The Ministry, the General Consulate in New York City and the German embassy in Washington are being informed about the progress of the investigations and will not comment any further on these cases.”

The question of legacy When I first met Schneider in 2003, it was clear he had greater ambitions than serving as an operational man.

It wasn’t so much that Schneider wanted to run the show – though he did – but that he wanted a place at the table in Berlin, fighting for restitution of a debt that Germany could never repay to survivors and six million murdered Jews even if it had all the money in the world.

In a way, Schneider got what he wanted.

He flies to Europe more often than he visits his parents on the Connecticut farm, his BlackBerry never stops buzzing and he plays a unique role in setting the agenda at one of the Jewish world’s most moneyed organizations.

Yet he still doesn’t look the part of a Jewish leader. When we met late one evening at a Starbucks in Riverdale, New York, the heavily Jewish Bronx neighbor- hood where Schneider lives with his wife and children, he showed up in sneakers and a backward-facing baseball cap. The coffee shop wasn’t far from the Hebrew Institute of Riverdale, the Orthodox synagogue where Schneider and his family worship on Shabbat. Every week at the end of services, Schneider and the other congregants line up for hugs from the rabbi, Avi Weiss.

When Schneider became the Claims Conference’s chief in July 2009, I visited him in his first week on the job to ask what his priorities were for the survivors’ twilight years.

“Home care, so survivors can remain in their own homes,” he said. “Pensions for 8,000 concentration camp survivors who do not receive any. Payment for nearly 100,000 Nazi victims in Eastern Europe and the former Soviet Union who do not qualify for the Hardship Fund because they never left their home countries.

More money for social welfare services that for some survivors will mean the difference between a hot meal and no meal, between seeing a doctor and not seeing a doctor.”

Three years on, Schneider’s record on those goals is mostly positive.

Annual home care funding has increased more than fourfold, with about 55,000 Jewish survivors worldwide now receiving subsidized home care. The Claims Conference has managed to gain recognition and funding by the German government for new classes of survivors, from ghetto survivors who worked as “non-forced” laborers to thousands of Jews who fled the Nazis as they swept through Europe and then settled behind the Iron Curtain. Any Jew who spent time in a concentration camp and has a special hardship is now entitled to a German government pension; until recently, only those who were in the camps for six months or more qualified. The pension amount also has risen slightly.

But then, of course, there’s the fraud.

For a year and a half after it was discovered, not a day went by that Schneider or a member of his staff did not talk with the FBI. Ten full-time staffers were hired to review and reprocess claims dating back a 15 years. Always a magnet for disgruntled survivors, the Claims Conference became even more of a lightning rod for criticism.

And media attention, which has focused more on the theft than on the Claims Conference’s accomplishments, has been a source of great frustration for Schneider.

“I don’t want to talk about the fraud anymore,” he said. “I would like this chapter to be over.”

But investigators are still reviewing claims to separate the fictitious ones from the real ones, and when the remaining defendants go on trial next year, the fraud will be back in the headlines.

In the long run, Schneider says the fraud will be but a footnote of history, with the real story of the Claims Conference – and Schneider’s own legacy there – being the money and assistance it was able to get to aging survivors in their final years.

“There are a huge amount of distractions that could take us off course, but despite the fraud and issues of governance and 15 other things, I feel it is my job to align people back to our core mission,” he said. “This is the last moment of the last generation of survivors. We have to give them the dignity they deserve. We only have a few years left when we can still make a difference.”

This week, Schneider met in Washington with German government representatives to demand more money for survivors.

Even though it was malfeasance by the Claims Conference’s own employees that resulted in more than $57m.

being defrauded from Germany, Schneider is unrelenting when it comes to occupying the moral high ground in negotiations with the Germans.

“The Germans say, when will it ever end? Hasn’t it been enough already?” Schneider said of restitution for Nazi crimes against the Jews.

“The suffering hasn’t ended. The nightmares haven’t ended,” he said of the survivors.

“How can you possibly say enough? It won’t be enough until the very last survivor, and even then it won’t be enough.”

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