2 Swiss Banks to Pay $1.25 Billion in Holocaust Suits

NEW YORK —  Under pressure from a federal judge and state and local officials, two Swiss banks agreed Wednesday to a global settlement requiring them to pay $1.25 billion in compensation for unreturned Holocaust-era assets after months of frequently bitter negotiations.

The dramatic settlement of massive class-action lawsuits was announced at the federal courthouse in Brooklyn by Sen. Alfonse M. D’Amato (R-N.Y.), the chairman of the Senate Banking Committee who has held numerous hearings on the issue during the last two years.

The agreement means an end to several cases against the banks, Credit Suisse and UBS, by tens of thousands of Holocaust survivors and an end to threatened sanctions against the banks by about 20 U.S. states and 30 municipalities.

The deal calls for a full release of all claims against the two banks, as well as claims against the Swiss National Bank, several other Swiss banks and the Swiss government.

The announcement came less than six weeks after the Swiss government had said it would pay no more than $600 million, a sum that Jewish groups branded “obscenely low.” The Swiss banks, in turn, had said the demand by Jewish organizations for $1.5 billion was “exorbitant.”

The settlement also came barely a month after representatives of state and local governments from around the country, including California, announced over the objections of the Clinton administration that they would begin exercising sanctions against the Swiss banks.

“This is an attempt to bring about a measure of justice that has been denied for so long,” D’Amato said. “I say ‘an attempt.’ Can you ever really fully bring about justice for someone who has been deprived--or a family deprived--for so many years? But it is . . . a very meaningful attempt to do so.”

It is not clear how soon any of the funds will be distributed to survivors. Key players said that the plaintiffs’ lawyers and leaders of major Jewish organizations would meet soon to decide how to disburse the funds efficiently and equitably.

On Wednesday, the banks issued a formal statement saying that the payments to the settlement fund would be made over three years. The first payment of $250 million is scheduled to be made within 90 days.

One Holocaust survivor, who had been alerted that a big development was in the offing, came to the courthouse to hear the news.

“Justice. It’s justice,” said 73-year-old Holocaust survivor Estelle Sapir outside the courthouse.

Her niece, Jeanette Bernstein, added: “There is vindication in here that finally we can put something to rest and a wrong has been righted, where for so many years the Swiss lived under a certain falsehood, and it has been turned around. The 6 million plus can now rest in peace.”

Three thousand miles away, Rabbi Abraham Cooper of the Simon Wiesenthal Center in West Los Angeles, an organization founded in the aftermath of the Holocaust, said he too was pleased to hear the news. “This is a prototype human rights victory of the American system. We will do our best to see that these funds get to Holocaust survivors as soon as possible.”

Undersecretary of State Stuart E. Eizenstat, who had spearheaded the production of two major government reports on Holocaust-asset issues, said that he was “delighted” by the outcome. “This is a historic and very positive development and a major step forward in our efforts to achieve prompt justice for aging Holocaust survivors.”

Eizenstat emphasized in his formal statement that he hopes the agreement “will end once and for all, now and in the future, threats of sanctions against Switzerland, Swiss banks and Swiss institutions.”

The administration had been worried that sanctions by state and local governments could damage U.S.-Swiss relations, and Eizenstat said recently that he felt that growing pressure on the Swiss banks in this country was generating a backlash in Switzerland.

But Cooper and others said that the settlement showed that pressure by state and local governments had played a critical role in finally producing an agreement.

D’Amato agreed, saying the sanctions imposed by state and local governments “demonstrated that there could be and would be substantial harm and disruption that could be created as a result if there was intransigence [by the banks] that continued.”

Diane Orentlicher, a professor at American University Law School who specializes in international law, said that Wednesday’s announcement “is an acknowledgment of moral responsibility by the banks” that they had profited from the Holocaust, even though no verdict was rendered in the class-action suit against them. “That is critical and long overdue.” She also predicted that the settlement will have an effect on the growing efforts to hold corporations accountable for “their complicity” in human rights violations around the world.

As the threat from Hitler’s Nazi regime became more ominous in the 1930s, tens of thousands of European Jews deposited their money in Swiss banks for safe-keeping, expecting to get it back when the Nazi threat was over. But after World War II ended, both Holocaust survivors and the relatives of those who perished in the Nazi gas chambers were unable to regain the funds--in some instances being told that they needed nonexistent death certificates from the concentration camps in order to prove they were entitled to the money. The plaintiffs in the class-action suits accused the banks of stonewalling.

The banks have conceded that they made mistakes handling the funds but have denied that they deliberately kept them without justification.

On Wednesday, the banks said the settlement “represents a major milestone in our long-standing efforts to ensure that justice is served,” a spokesman for the banks said. “In the eyes of all involved, this agreement represents full financial and moral restitution.”

Negotiators on both sides said that U.S. District Judge Edward R. Korman had played a critical role in forging the complicated agreement.

Korman, 55, had held off for more than a year issuing a ruling on whether the class-action suit accusing the banks of illegally retaining assets of Holocaust victims could go forward. The Swiss banks had urged Korman to dismiss the suit, saying it would complicate ongoing “voluntary efforts” by the banks to account for missing funds.

“The judge kept us here,” said Edward D. Fagan, who represented a major group of victims in the lawsuit. “He just kept us and kept us. He wanted a deal. He did not want people to go through this.”

New York University law professor Burt Neuborne, who did a lot of key brief writing for the plaintiffs, said Korman had been masterful. He said that the judge had supervised about 40 hours of meetings between lawyers for the banks and the victims over the last week.

“He knew both sides’ cases as well as the lawyers themselves, so he was able to reason with us about weak points and strong points,” Neuborne said.

Last week, Korman convened a meeting with plaintiffs and defendants in his chambers at the white marble courthouse.

Subsequently, he met separately with the two sides. After listening to the plaintiffs tell him privately how they reached their figure on damages, he persuaded them to make a presentation on that critical issue to the defense lawyers.

The two sides and the judge then held a dinner meeting Monday night in a private room at Gage & Tollner, a historic Brooklyn restaurant. “We showed them a piece of our hand . . . that was the real breakthrough,” Neuborne said.

More negotiations were held all day Tuesday, breaking off in the evening so that the bank lawyers could confer by phone with their principals in Switzerland. The two sides returned to the courthouse Wednesday. At noon, D’Amato arrived and, according to Neuborne, played a “very creative, constructive role, cajoling” both sides to reach a resolution. By 5 p.m., Neuborne said, the deal was done.

D’Amato said he thought the settlement would “create great pressure on people for a fair accounting in other areas, because if the Swiss banking institutions--which were so powerful and for so long denied any responsibility--are willing to step forward, I think it will be rather difficult for those who have, whether it is works of art or other things, to continue to withhold them.”

Indeed, there are still pending class-action lawsuits against a dozen major European insurance companies stemming from Holocaust-era claims.

Among those offering praise for the settlement was California Treasurer Matt Fong, who announced in July that the state would cease investing money in Swiss banks. “This is a historic day for Holocaust victims and their families. But it is also an important day for anyone who believes in justice.

“I am proud of the role my office and the state of California played in promoting this settlement by adding our voice to the thousands that have called for restitution.”

For all the elation Wednesday, Neuborne said there is still much to do.

“Now the hard part begins,” Neuborne said, referring to the complex process of distributing the massive amount of money.

“I would be surprised if the great bulk of the money didn’t go to individuals,” Neuborne said. He added that he and most of the other attorneys working for the survivors would not be asking for any attorney fees.

Cooper said he expects that within the next few days, major Jewish organizations will meet to discuss a distribution plan. It is possible that some money will go to Holocaust relief organizations as well as to individuals.

Among those expected to participate are the Wiesenthal Center, the B’Nai B’rith’s Anti-Defamation League, the World Jewish Restitution Organization and the World Jewish Congress--whose chairman, Edgar Bronfman, has played a leading role in pushing the Holocaust-asset issue onto the public stage and who, Secretary-General Israel Singer said, had a key part in the negotiations.

Neuborne said he expected that about “$150 million, tops” of the settlement fund would come from accounts located by Paul A. Volcker, former chairman of the Federal Reserve, who has led a special task force investigating Holocaust-era accounts in Switzerland.

The lawyers clearly were jubilant as they stood in the fading light in front of the courthouse near the Brooklyn Bridge.

“The survivors’ concern was they just didn’t want to take the money. It isn’t just about money. By keeping Paul Volcker working, looking for the accounts and disclosing everything he finds. When Paul Volcker starts finding 137 Swiss francs in an account that is 40-some-odd years old and he does that 80-some-odd thousand times, the world is going to know what this is about,” Fagan said.

“The people are finally going to have their understanding of what the process was. They are going to have their understanding of what the Swiss banks did. They are going to have their tacit admission these banks were holding onto sums of money that dwindled down to nothing and they are going to have their monetary justice as well,” he added. And Fagan predicted that there would be more to come:

“This is only the Swiss banks. There are a lot of other banks that were financial criminals, that participated in the rape of the Holocaust victims,” Fagan charged. “The next ones we are turning to are the insurance companies. After that are the German banks and after that the Austrian banks. And if it comes to America and we find there are banks here, we are going to go after them too. We are not stopping until the Holocaust victims have the ability to take back what was taken.”

Goldman reported from New York and Weinstein from Los Angeles.

An audio interview with Rabbi Abraham Cooper, associate dean of the Simon Wiesenthal Center, about the asset settlement is on The Times’ Web site. Go to: http://arstechnica.netblogpro.com/swiss