Senate Banking, Housing and Urban Affairs Committee

Hearing on the Swiss Banks and the 1946 Washington Accords

Good morning. My name is Steven Newman, and I am the First Deputy Comptroller of the City of New York. Comptroller Alan Hevesi, who regrettably could not be here today, has asked me to present oral and written testimony to the Committee on Banking, Housing and Urban Affairs.

On behalf of Comptroller Hevesi, I want to thank Senator D'Amato for holding today's hearing on "The Swiss Banks, the 1946 Washington Accords, and Current Developments in Holocaust Assets Restitution." Senator D'Amato has been at the forefront of the battle for justice for victims of the Holocaust and their heirs since Edgar Bronfman took up the challenge to confront the Swiss banking system and the Swiss nation for moral and financial restitution. It is only a matter of time before restitution is achieved, but for the elderly Holocaust survivors, time is of the essence.

In 1996, shortly after reading the documents uncovered by Sen. D'Amato's initial hearings, Comptroller Hevesi wrote to the chairmen of the three major commercial Swiss banks⁽¹⁾ and to the President of Switzerland to express his concerns about the matters brought forth by the Senator's investigations. Even then it was obvious that the Swiss government had a primary role in resolving the issue of the return of stolen property, although until the release of the Eizenstat and Bergier reports the magnitude of the Swiss government's involvement could only be imagined.

In May 1997, Comptroller Hevesi and I visited Switzerland and met with the chairmen of the boards of Credit Suisse, Union Bank of Switzerland and Swiss Bank Corporation, companies in which the New York City retirement systems own several hundred thousand shares of stock. These meetings gave us a better understanding of the interrelated issues of the dormant accounts, unclaimed assets, and the need for restitution. We also met with officials of the Swiss Federal Council, Swiss Federal Banking Commission and officers of the Swiss National Bank. We believed then, as we do now, that it is appropriate and prudent for public finance officers and pension fund trustees to monitor this issue, track the progress made by the Swiss bankers and government in their efforts to resolve it and to share information about related local initiatives.

As a result of those meetings and subsequent conversations with Edgar Bronfman and Israel Singer, Secretary General of the World Jewish Congress, Comptroller Hevesi established an informal informational clearinghouse, or as we call it a "network," of over 800 state and local government finance officers, to share information. Our office publishes a quarterly newsletter, the Swiss Monitor, which is sent to over 4,000 readers. Interest in this issue among local finance officers, legislators and other public officials, was so widespread, that on December 8, 1997, we convened an International Conference on The Recovery and Return of Dormant Holocaust-Related Swiss Bank Accounts and Hidden Assets in New York City. It was a highly successful, well attended, all-day conclave, in which you, Senator D'Amato, played a key role, and for which we thank you again.

At the conclusion of the Conference, two important decisions were reached. At the request of Edgar Bronfman, the public finance officers in our network agreed to a 90-day moratorium on sanctions against the Swiss. At the time, Mr. Bronfman believed that the Swiss were prepared to begin serious, formal negotiations to resolve the issue of the hidden assets of World War II. Second, an Executive Monitoring Committee was established, so that the progress of the formal talks, and the equally important informal and back channel efforts, would be monitored by five public finance officers. The Executive Monitoring Committee's members are Denise Ducharme, President of the National Association of Unclaimed Property Administrators, Matt Fong, Treasurer of the State of California, Barbara Hafer, Treasurer of the Commonwealth of Pennsylvania, and H. Carl McCall, Comptroller of the State of New York. Alan Hevesi chairs the Committee.

While negotiations and talks neared the end of the 90-day deadline, the Committee held an all day series of private presentations on March 26, 1998, hearing from representatives of the World Jewish Congress, the Swiss Jewish community, the State of New York Banking Department, Senator D'Amato's office, the class action attorneys, the Swiss banks, the Israeli government, the Swiss government and the United States government. At the conclusion of this meeting, the Committee determined that the moratorium on sanctions should remain in place as good faith negotiations seemed to be heading towards a fair and equitable conclusion.

It is within this context that this morning's hearing is especially important and timely. The formal negotiations to resolve the issues of justice and restitution, that I have just described, are at an impasse and it is our hope that today's hearing will help re-start those negotiations. But when negotiations between the class action attorneys, the World Jewish Congress and the Swiss resume, there should be another face at the table...one that has been missing since Under Secretary of State Stuart Eizenstat began his Herculean efforts to resolve the issue of dormant and looted Holocaust-related assets. The empty chair is the one being held for the Swiss government. There is no doubt that negotiations resulting in a "global resolution" of all claims can only be achieved when they are sitting face to face with the others at the negotiating table.

The Swiss government now tells us "the clear position of the Swiss Government is and will remain that they will not take part in any "global settlement."⁽²⁾ But that is not what we've been told in the past. This hard line position contradicts earlier statements made by representatives of the Swiss government concerning their role in a comprehensive settlement.

For example, in January 1997, Reuters reported the remarks of former Swiss President Jean-Pascal Delamuraz shortly after the creation of the Bergier Commission. In part, the Reuters story said:

"Switzerland's economics minister...repeated his view that it was not the right time to set up a compensation fund for Jews who might be entitled to money left in Swiss banks after World War II. Delamuraz repeated Berne's stance that any compensation should await the findings of a nine-member panel named two weeks ago to investigate the Swiss financial role in World War Two."

Writing to Judge Edward R. Korman, on June 3, 1997, the judge in the class action lawsuit, Swiss Ambassador to the United States Alfred Defago argued:

"...as a practical matter, the lawsuits could interfere with the international efforts Switzerland is pursuing in consultations with relevant groups representing Holocaust survivors and their families, as well as with the Government of Israel and the United States...The Government of Switzerland wishes to inform the Court about...efforts undertaken after the War, and currently underway in Switzerland, to provide assistance to victims of the War and the Holocaust."

At our December 8, 1997 Conference, Ambassador Thomas Borer, Switzerland's point man on this issue, describing the Swiss government's response to the issues of dormant accounts, hidden assets and conduct during the War, emphasized the following:

"...I can assure you that we are firmly determined to publicly examine Switzerland's role as a financial center during the war years. As you can see, we are seeking to establish the truth and to bring justice for the victims and their descendants of the worst tragedy in the history of mankind."

And at the March 26, 1998 meeting of the Executive Monitoring Committee, a joint Swiss-U.S. Statement on Sanctions was distributed by the State Department saying:

"The Governments of the Swiss Confederation and the United States of America share a continuing commitment to addressing openly all issues related to the Holocaust, and bring justice to its victims."

Now, the Swiss government tells us it had no intention of participating in a global settlement. Therefore, we ask them, what is the meaning of these statements?...what is the meaning of justice, if it is not restitution?

On July 1, 1998, the Executive Monitoring Committee met again and determined that the moratorium on sanctions against the Swiss, adopted on December 8, 1997, and extended on March 26, 1998, would be lifted. We realized that the diplomatic solution advocated by the State Department had been tried and had failed. The Swiss government has to be at the table.

Early last week, Mathis Cabiallavetta, chairman of UBS, urged the Swiss government to take an active role in resolving the impasse. "Big Swiss banks alone cannot master a conflict that has swelled to include Switzerland's overall role as a wartime financial centre," Mr. Cabiallavetta said on July 12th. Yet, the Swiss government remains paralyzed by a vocal minority in Switzerland, preventing it from fully appreciating the magnitude of this issue, even as its own Bergier Commission reported unambiguous findings of the significance of the World War II gold trade conducted by the Swiss National Bank.

Accordingly, on July 2, my principal, New York City Comptroller Alan Hevesi, along with New York State Comptroller Carl McCall, announced a series of phased, selective sanctions that will be implemented beginning September 1, 1998.

Both the State and City programs are similar.

Allow me to describe the City of New York's prudent and cautious approach:

• If a settlement has not been reached by September 1, 1998, our office will bar overnight investments with Swiss banks, bar Swiss banks from new letter of credit arrangements and will bar Swiss investment firms and banks from underwriting or supporting new variable-rate debt transactions.
  
  
• By November 15th, if an agreement has not been reached, our office would recommend the New York City pension funds exclude Swiss investment managers from investment manager searches and bar our existing money managers from executing trades through Swiss brokerage and securities firms.
  
  
• By January 1, 1999, we would recommend the pension funds terminate contracts with Swiss money managers. We will also ask the New York State legislature and the New York City Council to pass laws barring Swiss companies from selling goods and services to the State and City of New York. I might add, that in contemplation of this request, Sheldon Silver, the Speaker of the New York State Assembly, announced on July 15th, plans for legislation that will enact such a sanction.
  
  
• By July 1, 1999, we would ask the City's $84 billion pension systems to consider divesting all holdings in Swiss stock. Presently, the City's pension funds own $735 million in stock in Swiss companies, including $136.7 million in the Swiss banks. The Silver bill provides for divestment as well.
  
  

This program of actions is a last resort forced upon us by the continuing failure of the Swiss government to participate in the negotiations or even support and facilitate a global agreement, and by the inability of the Swiss banks to bridge the narrow gap between them and the class-action plaintiffs. We recognize that sanctions are a drastic measure and none of us wants to impose them, but a stand must be taken. I need not remind you that the issues involved are over half a century old and that the current round of conversations and negotiations have been underway for nearly two years.

It has been the experience of the New York City Comptroller's Office that "grass-roots" activism by state and local governments can be quite effective in helping resolve some problems traditionally thought of as "foreign policy matters," and that we can be helpful in bringing about change in policy. For example, it is widely recognized that municipal efforts not only compelled South Africa to start the process of dismantling the apartheid regime, but our selective disinvestment campaign led the federal government to reconsider its policy of "quiet diplomacy" and actively engage the white supremacist government to step down. Similar efforts over the past decade by state and local governments concerning fair employment and human rights in Northern Ireland have made both the White House and Ten Downing Street move these issues to the front burner. Our own pension funds keep a watchful eye on corporate American too, assuring ourselves that companies in which we own stock do not participate in the Arab boycott of Israel, in violation of U.S. law.

Today's hearing focuses on the impact of the 1946 Washington Accords on the dormant accounts and gold issues. It is essential to understand the 1946 Accords in order to fully appreciate why the Swiss government and Swiss National Bank are so reluctant to participate in the negotiations, or have the Accords re-examined.

As a result of the May 1997 Eizenstat Report, we now know that the Swiss government deliberately failed to return hundreds of millions of dollars in assets that Nazi Germany had looted from European banks and Holocaust victims.⁽³⁾ After the war, the United States unfroze Swiss assets and hence, lost our leverage to assure that the Swiss properly and fully returned treasures of war to rightful owners. The Bergier Commission's final report puts the total amount of gold transferred to or through Switzerland at around $444 million⁽⁴⁾ In 1946, the Swiss returned $58 million dollars under the Washington Accords, leaving $386 million in gold in Swiss hands. In 1997, the Swiss commercial banks and the Swiss National Bank contributed $140 million to the Special Fund for Holocaust Survivors. The economists in the New York City's Comptroller's Office have calculated that based on the Consumer Price Index, a cost of living adjustment, $386 million in 1945 dollars is now worth approximately $3.442 billion. Based on an actuarial investment rate of return, those moneys would have grown to approximately $30.263 billion.

We encourage this Committee to review the facts and circumstances under which the Swiss government was able to respond to the 1946 talks with token payments that barely addressed the vast sums of money held by the Swiss to this day....money that does not belong to them.

In conclusion, our efforts, and we surmise yours, are not to punish the Swiss or to place blame for conduct of fifty years ago. No country, including the United States, comes to the issues of the Holocaust with clean hands. It is, however, fair and right, to question the conduct of any country in 1998, and to hold accountable such country for its response to newly discovered facts and information that may have been lost, misplaced or suppressed for the past half century.

We believe that there are many ordinary Swiss people of extraordinary goodwill, who want to see the Swiss government do right, and that their voices are not being heard. That is why our program of sanctions are not set to go into effect until September 1, so that the banks and the government of Switzerland, including the Swiss National Bank, have time to reconsider the same information that I have described this morning and hopefully arrive at a new conclusion; one that assures justice and restitution for Holocaust survivors and their heirs. In that connection, we suggest that any action taken by this Committee provides for a delay in implementation. We hope that during this interim period the Swiss will recognize that their current approach is a prescription for failure, and the global economy of the 21st century requires a global solution to the unfinished business of the 20th century.

Notes:

1. Credit Suisse, Union Bank of Switzerland, Swiss Bank Corporation.

2. Letter to Alan Hevesi from Thomas Borer, July 1, 1998.

3. NY Times, May 25, 1997

4. The Economist, May 10, 1997, pg. 49

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