Opinion
Nos. CV-96-4849 (ERK)(MDG), CV-99-5161, CV-97-461.
June 1, 2004.
Burt Neuborne, New York University Law School, New York, NY, lead class counsel.
Samuel J. Dubbin, Dubbin Kravetz, LLP, Coral Gables, FL, for Holocaust Survivors Foundation-USA, Inc.
Roger M. Witten and Christopher P. Simkins, Wilmer Cutler Pickering, LLP, Washington, DC, for defendants Credit Suisse and Union Bank of Switzerland.
AMENDED MEMORANDUM ORDER
This memorandum and order amends and supersedes In re Holocaust Victim Assets Litigation, 302 F.Supp.2d 59 (E.D.N.Y. 2004).
On August 2, 2000, I approved the historic settlement in this case. See In re Holocaust Victim Assets Litig., 105 F.Supp.2d 139 (E.D.N.Y. 2000). On July 26, 2001, when the Second Circuit affirmed my decision, the settlement became final. See In re Holocaust Victim Assets Litig., 14 Fed.Appx. 132 (2d Cir. 2001). Since then, we have distributed the following sums from the settlement fund: $160,086,140 to 2,021 claimants in the Deposited Assets Class in connection with 2,191 bank accounts found by the Claims Resolution Tribunal ("CRT") to have belonged to victims of the Holocaust; $230,677,900 to 159,088 surviving members of the Slave Labor Class I; $95,000 to 95 members of the Slave Labor Class II; $8,181,775 to 3,053 surviving members of the Refugee Class; and $205,000,000 to needy survivors of the Holocaust through application of the cy pres doctrine to the Looted Assets Class. Indeed, we have succeeded on a great many fronts.
What compels me to write is that over the past year-and-a-half, the bank defendants have filed a series of frivolous and offensive objections to the distribution process, and most recently to Special Master Judah Gribetz's Interim Report on Distribution and Recommendation for Allocation of Excess and Possible Unclaimed Residual Funds (hereafter "Interim Report"). These objections bring to mind the theory that, "if you tell a lie big enough and keep repeating it, people will eventually come to believe it." The "Big Lie" for the Swiss banks is that during the Nazi era and in its wake, the banks never engaged in substantial wrongdoing.
The banks have repeatedly insisted that they never engaged in "systematic document destruction" and that they should not be assigned blame for any difficulty we have in distribution. See Letter from Roger Witten to Michael Bradfield, dated April 18, 2003; Letter from Roger Witten to Judge Edward R. Korman, dated May 16, 2002; Response of Defendants UBS AG and Credit Suisse Group to Special Master's Interim Report and to Declaration of Burt Neuborne, dated December 16, 2003 (hereafter "Response"). They claim that during the Nazi era, they did not engage in widespread forced transfers of customers' assets to the Nazis, as "[i]n the vast majority of cases, the circumstances of closure are just unknown." Witten Letter, dated May 16, 2002, at 3. And they claim that the allegations that they engaged in massive destruction of Nazi era bank records in the post-war era "are incorrect and could be characterized as malicious in light of specific conclusions to the contrary in the ICEP and Bergier Reports." Response, at 14. They continue: "As we have previously and repeatedly advised the Court and its Special Masters, the ICEP Report and the Bergier Report confirm that the banks never engaged in systematic document destruction and certainly did not do so in any effort aimed at hiding assets belonging to victims of Nazi persecution." Id. The bank defendants' statements are not merely incorrect; they are detrimental to the process of justice. These statements continually distort and obscure the truth, and now that they form the basis of the bank defendants' response to the Special Master's Interim Report, I am forced to address them.
Simply put, the Swiss banks' objections to the Interim Report are based on an egregious mischaracterization of historical accounts. In Part I, I turn to these accounts to set the record straight. In Part II, I address the banks' claim that the CRT presumptions are inappropriate because the banks never engaged in widespread document destruction or any other systematically deceptive behavior toward victims of Nazi persecution. In Part III, I address the banks' objection to the publication of dormant accounts not previously designated as "probably" related to the Holocaust and their objection to providing the CRT with unfettered access to the records of all dormant accounts of which we possess records through a consolidated Total Accounts Database ("TAD"), objections premised on the same mischaracterization of historical accounts.
Part I: Decades of improper behavior by the Swiss banks
In the mid-1990s, the treatment of Holocaust victims by Switzerland and its financial industry emerged as a source of increasing controversy. The Swiss Parliament and the Federal Council responded by establishing the Independent Commission of Experts Switzerland — Second World War ("ICE" or "Bergier Commission"). The Swiss Bankers Association ("SBA"), the World Jewish Restitution Organization and the World Jewish Congress established the Independent Committee of Eminent Persons ("ICEP" or "Volcker Committee"). The Bergier Commission "was mandated to conduct a historical investigation into the contentious events and incriminating evidence" of Switzerland's conduct during the Second World War and the post-war period. See Independent Commission of Experts Switzerland — Second World War, Final Report, at 5 (Zurich: Pendo Verlag GmbH 2002) (hereafter "Bergier Report"). It employed historians, researchers and economists in an effort to "`obtain the historical truth' and to examine and report on `the role of Switzerland, particularly that of the Swiss financial center, as well as on the manner in which Switzerland dealt with this period of its history.'" Interim Report, at 36 n. 53 (quoting Swiss Federal Council Decree, December 19, 1996, "Historical and Legal Investigation into the Fate of Assets which Reached Switzerland as a Result of the National-Socialist Regime: Appointment of the Independent Commission of Experts," available at www.uek.ch). The Volcker Committee pursued a more focused objective, "conduct[ing] what is likely the most extensive audit in history, employing five of the largest accounting firms in the world at a cost of hundreds of millions of dollars to defendants." In re Holocaust Victim Assets Litig., 105 F.Supp.2d at 151. Its auditors had two major goals: "(a) to identify accounts in Swiss banks of victims of Nazi persecution that have lain dormant since World War II or have otherwise not been made available to those victims or their heirs; and (b) to assess the treatment of the accounts of victims of Nazi persecution by Swiss banks." Independent Committee of Eminent Persons, Report on Dormant Accounts of Victims of Nazi Persecution in Swiss Banks, 1-2 (Berne: Staempfli Publishers Ltd. 1999) (hereafter "Volcker Report").
The investigations faced challenging odds. "There were approximately 6,858,116 accounts that were [open or] opened in Swiss banks between 1933-45. Of these, no records existed for approximately 2,757,950 accounts, `an unfillable gap . . . that can now never be known or analyzed for their relationship to victims of Nazi persecution.'" In re Holocaust Victim Assets Litig., 105 F.Supp.2d at 155 (quoting Volcker Report, Annex 4, ¶ 5). Nonetheless, the Volcker Committee, which released its findings on December 6, 1999, succeeded in initially identifying nearly 54,000 accounts that it believed either "probably" or "possibly" belonged to victims of Nazi persecution. The number of accounts was subsequently reduced to 36,000 by a "scrubbing" process that I discuss later. Whatever the number, the Volcker Committee's estimates were clearly conservative. Indeed, the Bergier Commission recognized that the Volcker Committee's findings "constitute[d] only part of the total." Bergier Report, at 446. This is why, in my order approving the settlement in this case, I wrote:
A fair and efficient claims process in connection with the Deposited Assets Class must build on the fact that the Volcker Committee's auditors, despite the massive destruction of relevant records over the past 60 years, were able to identify the approximately 54,000 Swiss bank accounts [then deemed probably or possibly belonging to Nazi victims].In re Holocaust Victim Assets Litig., 105 F.Supp.2d at 154 (emphasis added). The words "build on" were not chosen lightly. I recognized then, as I do today, that the Volcker Committee had only begun to identify and reveal the scope of the Deposited Assets Class. The Bergier Commission, which announced its final conclusions on March 22, 2002, helped complete the historic picture. A deep understanding of its findings is necessary to comprehend why the defendants' recent submissions are both baseless and deceptive.
The Nazi era and post-war actions by the Swiss banks are perhaps best summarized by the concise statement of Bergier Commission member Helen Junz. In a monograph prepared for Special Master Bradfield and appended hereto, she wrote: "[T]he Swiss banks acted with an eye to their own bottom line." Helen B. Junz, Bergier Commission: Analysis of Swiss Bank Behavior, at 2. "[T]he banks systematically put aside the interests of the clients they had so ardently solicited with assurances that their assets would be kept safe for them and theirs, in favor of business interests they perceived at that moment to be more promising." Id. Perceived economic self-interest not only dominated the banks' actions during the war; it drove the banks to act against their clients' interests for decades thereafter, leading to the dormancy and elimination of an unknowable number of accounts once held by victims of Nazi persecution.
A. The Nazi era
In the 1930s, as the threat of National Socialism rose, many Europeans began to turn to Swiss financial institutions for asset protection. Known for stability and secrecy, the banks purported to provide a safe haven for customers' savings. "The greatest influx of capital [during this period] came from France," as the French began to fear increased taxes and changing exchange rates. Bergier Report, at 258. But the French were not alone in turning to the Swiss banks. "The increasing persecution of, and discrimination against, certain population groups practised by the Nazis in Germany and in other areas of Central Europe led these people to attempt to protect their assets from usurpation by transferring them abroad, notably to Switzerland." Id. As Germany instituted ever stricter controls on capital flow, the allure of Swiss banks only grew.
Swiss banks proved less of a safe haven than many of their customers had hoped. While not every Swiss bank acted in the same way on every occasion, the Bergier Commission's findings reveal that in general the banks placed their own perceived economic self-interest ahead of their customers as a matter of policy. The most glaring example of this was the practice of engaging in questionable account transfers during the Nazi era. Time and time again, banks completed transfer orders which they knew were requested only because of Nazi persecution, and which they suspected were not in their customers' best interest. An example that reflects the concerted policy of the Swiss banks is described by the Bergier Commission as follows:
After overrunning Poland in September 1939, the new ruling [Nazi] power endeavoured to acquire Polish assets deposited in Switzerland. As early as 20 November 1939, the Polish bank Lodzer Industrieller GmbH asked Credit Suisse to transfer assets deposited with it to an account at the German Reichsbank in Berlin. The bank saw a fundamental problem in this procedure and asked its legal affairs department to examine the matter. The latter recommended not complying with the request since the customer's signature had most likely been obtained under duress by the occupying authorities. A further reason for refusing the request was that it had come from Berlin and contained incorrect information about the amount deposited with Credit Suisse. The legal affairs department also pointed out that for Poland, German foreign exchange regulations represented a war measure taken by an occupying force and that Switzerland had not yet recognized the new political situation. Managing Director Peter Vieli subsequently discussed the issue with Rudolf Speich, his counterpart at the Swiss Bank Corporation. The latter contacted the Reichsbank, which agreed that in view of the unclear constitutional situation in Poland, Swiss banks were not obliged to comply with requests from German administrators ( Reichskommissare). Nevertheless, according to a file note `the directors of the Reichsbank and Dr. Speich were of the opinion that duly signed requests from customers for their assets held in Switzerland to be transferred to an account with the Reichsbank must be executed since absolutely no justification could be found for not doing so.' Although there were legal and moral objections to transferring the funds, the consideration that they `still had important interests in Germany, and should avoid friction and unpleasantness whenever possible' prevailed at CS [Credit Suisse]. They complied with the request and opted for the principle of carrying out legally signed orders even when they were not received directly from customers, but via the Reichsbank in Berlin. Their comportment in Poland was in this respect typical of how the banks dealt with the assets of Nazi victims: as a rule, they complied with transfer orders from foreign customers without properly checking whether the signatures they bore had been obtained under duress by the Nazi authorities and whether the orders were in fact in the customer's interest.
Bergier Report, at 276-77 (emphases added) (footnote omitted). The two major banks in this example (Credit Suisse and Swiss Banking Corporation) consulted with one another and together decided to disregard the legal advice of Credit Suisse's legal department. It is possible to imagine situations where a bank's decision to order a forced transfer would have been morally justified as a way to protect a client's life, but that was clearly not the case for these banks. These banks did not decide to order forced transfers because they thought it would serve their clients well — they did so to "avoid friction and unpleasantness" with their business interests in Germany. Unpleasantness for their clients was not even a consideration.
"The question which arises is not whether [the Swiss banking industry] should or could have maintained its [business contacts with Nazi powers], but rather how far these activities went: in other words, where the line should have been drawn between unavoidable concessions and intentional collaboration." Bergier Report, at 497. The banks drew a line quite near intentional collaboration. They made a collective decision that long-term economics counseled in favor of authorizing transfers to Germany, and, as Helen Junz explains, "[t]he focus on Germany as a desirable business partner persisted beyond the period when Swiss business believed in a Nazi victory as there was a widespread conviction that the German economy would either survive or quickly regenerate after the war." Junz, at 3. This policy constituted a clear violation of the banks' fiduciary duty to their account holders — individuals who were being persecuted daily.
The dearth of records makes it difficult to determine the overall impact of improper transfers by the Swiss banks during the Nazi era, but the Bergier Report provides some estimates. The Bergier Commission cited as an "example" that, between 1933 and 1939, Credit Suisse transferred about 8 million francs worth of securities to the Deutsche Bank; the Zurich office of the Swiss Banking Corporation transferred over 6 million francs worth of securities in accordance with the 1936 German Law on Compulsory Deposits; and the Swiss Banking Corporation sold 8 million francs worth of securities on behalf of German customers who were likely forced to transfer the proceeds to German banks. Bergier Report, at 275. These transfers alone total 22 million francs. Assuming conservatively that these francs were measured in 1945 and using the CRT's 2003 multiplier of 12 and an exchange rate of 1.35 Swiss francs to the dollar, this sum, undoubtedly a small fraction of the total forced transfers by Swiss banks during the war, would correspond to over $195 million today.
Perhaps more significantly, forced transfers continued throughout the duration of the war even though the Swiss courts recognized that they were illegal under Swiss law. Id. at 276 (finding that when opponents of forced transfers had been "able to take legal action in Switzerland, the requests made by the [Nazi authorities] were rejected by the judges and the blocked assets were deposited with the court."). The Bergier Commission member Helen Junz explained that, "[a]lthough there are documented cases where banks acted to safeguard clients' assets — by moving them to numbered accounts or into other-named accounts — current evidence shows that the cases in which accounts were released predominated." Junz, at 2 (emphasis added). She also notes that independent researchers Barbara Bonhage, Hanspeter Lussy, and Marc Perrenoud "estimate that in this way the major banks released some SF 200 million worth of deposits and securities to the German banks and/or the Reichsbank." Id. (citing UEK study, no. 15, Nachrichtenlose Vermogen bei Schweizer Banken). Again using the CRT's conservative conversion rate, this sum would equal over $1.7 billion today.
Of course, as the forced transfer discussed earlier demonstrated, the banks had a choice. They could have chosen to adhere to their fiduciary obligation and refused to honor transfers requested under duress. They could have frozen customer assets or otherwise blocked transfers as a matter of policy. Their failure to do so is revealing. As study number 15 prepared for the Bergier Commission explained:
An effective protection of customers' assets might have only been possible through a general blockage/freeze. Because public opinion would have likely welcomed a freeze of German and Austrian assets in 1933 and 1938, respectively, and because [Swiss] courts hindered the forced transfers when they were called in to decide such cases, it is very hard to understand today why Swiss politicians and banks did not vehemently take steps against the implementation of the German laws forcing the repatriation of foreign-held assets — either through a freeze or through some other effective intervention.
UEK study, no. 15, Nachrichtenlose Vermogen bei Schweizer Banken, at 166. It is less "hard to understand" when one considers the premium banks placed on "avoid[ing] friction and unpleasantness" with their interests in Nazi Germany. This also explains their willingness to accede to forced transfers even though "the banks during the Nazi period had considerable leeway in determining their response to the Nazi authorities' demand that they cooperate in making their foreign clients comply with Nazi laws and regulations." Junz, at 2 (citing UEK study, no. 15, Nachrichtenlose Vermogen bei Schweizer Banken).
B. The post-war period
After 1945, there was a jump in the number of "dormant" accounts in Swiss banks, accounts for which the banks received no contact from the account holder. See Bergier Report, at 444. This "sharp rise in dormant accounts must have made it obvious that an unknown number of people, the majority of them Jews who had deposited assets with the Swiss banks, had become victims of the Holocaust." Id."To take account of the exceptional situation of mass extermination by the Nazis, the banks would have had to depart from the requirements they usually made before paying out an account." Id. at 448. They did not. Instead, throughout the post-war period, the banks routinely hid the existence of bank accounts from heirs and representatives of Nazi victims. I explain below why the problem of dormant accounts remained a problem for six decades, and why there was, and apparently still is, "considerable reluctance on the part of the banks to admit that there was any problem." Id. at 445.
1. Reasons for stonewalling by the Swiss banks
First, Swiss banks were often aware of the fact that they had made improper transfers during the Nazi era and that they could be held liable if they released information. As noted above, the banks' own legal departments had warned them that authorizing a forced transfer could be understood as a breach of their fiduciary duty, and the Swiss courts had repeatedly affirmed this view. See Bergier Report, at 276. After the war, many surviving account holders or their heirs approached the banks seeking information about accounts, often with valid legal claims. The banks, which had improperly transferred the funds in the accounts to the Nazis, were afraid that they would be called to account for the breach of their fiduciary duties. See, e.g., Albers v. Credit Suisse, 188 Misc. 229, 234, 67 N.Y.S.2d 239, 244 (N.Y.City Ct. 1946) (holding Credit Suisse liable for transferring a client's assets to a German bank pursuant to the client's orders because "above all it knew that the plaintiff was not likely of his free will to transfer property of his located in Switzerland to a bank in German territory controlled by the German government"). Equally important, the problem was not disappearing. "Although assets transferred to the Third Reich were left out of the inventory of unclaimed assets of Nazi victims in Swiss banks, they were nevertheless part of the restitution claims" that had been filed against the banks. Bergier Report, at 443. In sum, former account holders and their heirs were complaining, and access to records could have shown their claims to be legitimate.
Second, the banks received a direct economic benefit from their silence. The Volcker Committee found that, "the problems with dormant accounts appear to be partly a byproduct of the absence of a Swiss escheat law dealing with unclaimed property in banks." Volcker Report, at ¶ 45. "Unlike other countries (such as the United States) where dormant assets are transferred to state governments, in Switzerland dormant assets remain indefinitely with the banks." Id. If no one claimed the assets in an account (or if a bank simply refused to comply with a claim) a Swiss bank could keep the money. The Bergier Report summarized the troubling result:
Unclaimed safe-deposit boxes and safeguard deposits generated income from the fees charged and — in the case of interest-bearing assets — commission earnings. The banks lost nothing if the dormancy persisted; on the contrary, the monies entrusted to them that affected the balance sheet continued to improve their interest balance — particularly as the banks usually stopped paying interest on the dormant accounts.
Bergier Report, at 449.
Third, the banks anticipated an indirect economic benefit from stonewalling. Before the war, the Swiss banks had been seen as an attractive repository because of their commitment to secrecy and "private property rights." Many bank officials anticipated that steadfast devotion to secrecy would be critical going forward. The ironic result is that the banks turned on Nazi victims based on the very same principles that had previously led the Nazi victims to turn to the banks. See Volcker Report, at ¶ 48. Helen Junz explains the situation as follows:
The banks quickly realized that post-war political developments were bringing new opportunities to the field of asset management. They were well-positioned, having come out of the war with a stable and convertible currency, but perceived that hewing to their commitment to bank secrecy and protection against cross border compliance with tax and foreign currency regulations of other countries would give them a further material advantage. Compared with the cold-war generated new client potential, the Holocaust survivor clientele held no interest — on the contrary. Basic policies, though not enunciated as such, thus generally aimed — of course with some exceptions — to ignore this clientele.
Junz, at 4. Put differently, "[t]op executives in the banks . . . assumed that they would enhance their appeal to new customer segments by a resolute defence of banking secrecy." Bergier Report, at 457. The "new customer segments" to which the interests of victims of Nazi persecution and their heirs were sacrificed were none other than tax evaders, money launderers, and corrupt foreign dictators who needed a place to hide their assets. See e.g., Jonathan Kandell, Baer Market, Institutional Investor, January 2004, at 94 (recognizing that, after Italy offered blanket amnesty to people with undeclared offshore accounts through a small one-time tax in 2002, it was able to lure $83 billion back to the country, mostly from Switzerland, in just 12 months); In re Estate of Ferdinand Marcos Human Rights Litigation, 94 F.3d 539, 543 n. 5 (9th Cir. 1996); Republic of the Philippines v. Marcos, 862 F.2d 1355, 1363 (9th Cir. 1988) (explaining that Ferdinand Marcos used Swiss bank accounts to hide $1.3 billion of the Philippines' money, and while the banks eventually froze the assets, they fought against returning the assets to the Philippines).
2. The extent of the Swiss Banks' stonewalling
The Swiss banks stonewalled as a matter of course. Because claimants typically lacked information as to the exact location or nature of the items deposited, the banks could routinely "entrench themselves behind banking secrecy" and cite the claimant's inability to sufficiently document a legal entitlement as a reason to deny payment. Bergier Report, at 449. Where the claimants had precise information, the banks turned to still more deceitful tactics. "A situation was reached where even death certificates were being demanded for people who had been killed in the [concentration] camps." Id. Of course, no such documents were issued. It is thus not surprising that, as the Bergier Commission explained,
[t]he unwillingness of the Swiss financial institutions in the immediate post-war period to find the legal owners of unclaimed assets or to support rightful claimants in their search, constitutes the main point of criticism of the banks' behaviour, behaviour already tainted by certain dubious decisions and questionable attitudes in the period between January 1933 and May 1945.Id. at 277.
To illustrate what was likely the most common method of stonewalling, I turn first to a poignant example provided by the CRT award to the heirs of Prof. Dr. Albert Uffenheimer, who at one time had a bank account at the Zurich branch of Credit Suisse. See CRT Awards, Group XXXVII, award number 40, available at www.crt-ii.org. Born in 1876, Dr. Uffenheimer lived in Germany at the time of Hitler's rise. He remained there until 1938, when he fled to England. His wife remained in Germany. In December 1938, bank records show that Dr. Uffenheimer contacted his bank from London and instructed it to pay out the assets in his account (securities valued at 3,000 francs) to the Constance, Germany branch of the Deutsche Bank. The bank complied with the request.
Passing over the complicated moral question of whether completing this transfer was proper or improper, I turn to the far clearer issue of the bank's post-war conduct. The bank received a letter dated May 11, 1949 on behalf of Dr. Uffenheimer's widow requesting information regarding the account. It responded with a letter that stated:
In response to your query of 11 May 1949, we must unfortunately inform you that, pursuant to Swiss legal requirements regarding banking secrecy, we cannot provide information about activities that pertain to the business dealings of our customers during their lifetime, not even to their heirs. In addition, we draw your attention to the fact that the activities referred to in your letter happened more than ten years ago, while we are only obligated to preserve our correspondence for ten years.Id. This response was not simply a form letter. Indeed, an internal memorandum from the bank's legal department, dated May 17, 1949, reveals how considered a strategy it was. The memorandum indicates that the bank knew it had transferred Dr. Uffenheimer's securities to the Deutsche Bank. It quotes Dr. Uffenheimer's request, which explained that he was making the request pursuant to an order from a German Finance Minister who threatened that non-compliance would be penalized. With his wife still in Germany, Dr. Uffenheimer had agreed to make the request. The bank's memorandum correctly reasoned that, "from this correspondence it follows that Professor Uffenheimer was forced by the German authorities to hand over his assets deposited with us to the Deutsche Bank." Id. What is troubling is that the memorandum then concludes: " for these reasons, we are careful about providing information and withhold information. If necessary, we should rely on the fact that, since then, more than ten years have passed, so that we no longer today are obligated to preserve this correspondence." Id. (emphasis added). Precisely because the bank was aware that it had acted in a way that could expose it to liability, the bank refused to divulge information. This stonewalling, which prevented Dr. Uffenheimer's heirs from gaining restitution, was the principal basis for the CRT's award.
The example of Dr. Uffenheimer is extraordinary only in its documentation. In other cases of forced transfers, all bank records have been destroyed. Nevertheless, uncommon research has been able to document such transfers. The recent award to the heirs of Karoline Sonnenfeld is one example. See CRT Awards, Group XL, award number 30, available at www.crt-ii.org. The CRT awarded $769,320 despite a total lack of bank records. The only evidence of an account was found in a Nazi party newspaper stored in the Austrian census records. The article revealed that police raided Mrs. Sonnenfeld's house after receiving a confidential tip. "[R]ecords were found showing that the Jew also held a safe deposit box with a substantial amount in Pounds Sterling at the Schwizerische Kreditanstalt [Credit Suisse] in Zurich. Search of the house produced a key to this safe, also found in Mrs. Sonnenfeld's apartment. After further investigation, 3,600 Pounds Sterling was seized." Id. at 2 n. 2. Because the bank destroyed any record of Mrs. Sonnenfeld's safe deposit box, this article was the only record of any account.
In 1950, the General Director of Union Bank of Switzerland and former Secretary of the SBA stated that "the best solution" would be "never to mention the entire affair [of forced transfers] again." Bergier Report, at 445-46. He was apparently not the only Swiss bank official to hold this view. The Bergier Commission made the following discovery:
In May 1954, the legal representatives of the big banks co-ordinated their response to heirs so that the banks would have at their disposal a concerted mechanism for deflecting any kind of enquiry. They agreed not to provide further information on transactions dating back more than ten years under any circumstances, and to refer to the statutory obligation to keep files for only ten years, even if their records would have allowed them to provide the information.Id. at 446. As was the case with the decision to transfer assets when the account holder was making the request under duress, the most noteworthy aspect of this Bergier Commission finding may be the fact that it was such a collective decision by the banks. The banks, as a matter of policy, refused to disclose information regarding accounts, even where they had it. It is no surprise that the letter received by Dr. Uffenheimer's representative matched the major banks' agreed upon language almost exactly. Indeed, because the response to Dr. Uffenheimer's heirs preceded by five years the conspiracy to obstruct heirs in their efforts to obtain information regarding accounts that had been the subject of forced transfers, it suggests that the May 1954 meeting simply formalized existing practice.
Notably, the banks' understanding of where they could be liable and where they most needed to employ stonewalling turned on the identity of account holders. The Volcker Committee described records found in one of Switzerland's large commercial banks as follows:
Legal department documents from 1953 to 1969 outline recommended procedures for responding to claims of Jewish account holders and their heirs whose assets were transferred to Germany in the 1930s. A letter from 1969 recommends that
in the case of inquiries about Jewish clients whose assets had to be transferred on their instructions to Germany during the 1930s, or with regard to inquiries received from their heirs, we have always responded that we could not supply the requested information as we are only obliged to retain ledgers and correspondence for a period of 10 years.
The legal department recognized that because the transfer orders were made under duress the risk existed that the bank might be liable to restore the accounts to the rightful owners. However, the legal department noted that claims by non-Jewish German nationals were not considered a liability, which suggests that the bank treated inquiries from Jewish customers differently from those received by non-Jewish German nationals. The management of the bank apparently endorsed these procedures in December 1969.
Volcker Report, Annex 5, at 83 (emphasis added). The banks considered Jewish account holders a special problem.
The stonewalling by Swiss banks was not only in response to individual claimants; the banks also employed this strategy in the face of broad-based efforts to uncover assets of Nazi victims. "[T]he banks and their Association lobbied against legislation that would have required publication of the names of such so called `heirless assets accounts,' legislation that if enacted and implemented, would have obviated the ICEP investigation and the controversy of the last 30 years." Volcker Report, at ¶ 48. Indeed, in order to thwart such legislation, the SBA encouraged Swiss banks to underreport the number of such accounts in a 1956 survey. "`A meager result from the survey,'" it said, "`will doubtless contribute to the resolution of this matter [the proposed legislation] in our favor.' "Volcker Report, Annex 5, ¶ 37 (quoting a letter from the SBA to its board members, dated June 7, 1956). The banks adhered to the SBA's recommendation: "For instance, Swiss Bank Corporation ( Schweizerischer Bankverein, SBV) indicated in 1956 that it could not state `with certainty' that it had such accounts but there were 13 cases (with a total value of 82,000 francs) where this was probable." Bergier Report, at 451. Given what the Volcker Committee was able to find 40 years later, these estimates were clearly nothing more than a lie.
When external pressure forced Switzerland in 1962 to adopt the Registration Decree, which was "meant to provide a genuine solution [to] the problem that had remained unresolved throughout the 1950s," the banks again put forth "concerted resistance." Id. at 451. This time the banks did not vigorously resist the law's passage; rather, they completely frustrated its implementation. Pursuant to the Registration Decree, banks were obliged to "report any assets whose last-known owners were foreign nationals or stateless persons of whom nothing had been heard since 9 May 1945 and who were known or presumed to have been victims of racial, religious or political persecution." Id. at 452. "A total of 46 banks reported 739 accounts containing a sum total of 6,194,000 francs." Id. at 453. They declined to report accounts of people who died after May 9, 1945 (even where one customer had died in the Dachau concentration camp on May 13, 1945), accounts held in the name of a trustee, and accounts where the account holder's name was arguably not Jewish. Id. at 454. "In short, a whole raft of measures was adopted with the aim of deliberately minimising the results of the investigation." Id. And again, this raft of measures was not adopted by isolated banks in isolated situations — it was a collective decision to deceive by the Swiss Banking Association that delayed justice in some cases for several decades, but in most cases indefinitely.
Where more isolated but sensational external events threatened to breach the banks' wall of secrecy and appearance of propriety, the banks employed one more measure: Ignore the event. The Bergier Commission explained:
There were some cases — the most recent in the 1990s — in which bank employees stole unclaimed assets. Out of fear that such incidents could cause a public outcry, offenders were often not subjected to criminal prosecution. In an actual case in 1990, the Federal Banking Commission went so far as to back the decision by the Swiss Bank Corporation to refrain from bringing criminal charges as "the offender was willing and able to fulfil his duty of loyalty within the time required."
Bergier Report, at 447. The banks were more concerned with keeping the matter quiet than doing what was right.
It is important to reiterate that the Swiss banks' devotion to secrecy and their repeated acts of stonewalling were not based on principles — they were profit-driven. Put differently, "the banks' rhetorical efforts to uphold the existing `legal system,' guarantee the [v]iability of the law and protect `property rights' on the basis of banking secrecy" were merely that — rhetoric. Bergier Report, at 448. As the Bergier Commission found, "it is apparent that the claims of surviving Holocaust victims were usually rejected under the pretext of banking secrecy and a clear preference for continuity in private law. Over the many years of such rejections, a large number of accounts were reduced to zero or almost." Id. at 455. Where economics counseled against upholding secrecy, private law and property rights, however, the banks were quick to abandon their supposedly entrenched values.
A particularly telling example of profits being placed over "banking secrecy" is the secret post-war deals reached by the Swiss with Poland and Hungary to loot unclaimed accounts belonging to Holocaust Victims. "[T]he primary aim of [these deals] was to favour Swiss interests in the wake of nationalisation of assets in Poland and Hungary." Bergier Report, at 450. The Bergier Commission was conservative when it wrote that this was "the primary aim" of the deals. What actually happened was that money was taken from dormant accounts of murdered Polish and Hungarian citizens and transferred to Swiss citizens to ameliorate the claims these citizens were raising against the Polish and Hungarian governments after their assets had been nationalized. And yet, "[t]he agreement[s] got no or very little publicity. It was therefore virtually impossible even for heirs living abroad to assert their claims." Id. at 451. Gerhard Weinberg, an eminent historian of the Nazi era, explained the deal with Poland as follows:
[I]n 1949 the Swiss government signed a secret agreement with the Communist government of Poland under which the Swiss government with the agreement of the regime in Warsaw located the accounts in Swiss financial institutions of those Polish citizens who had been murdered and who either had no heirs or whose heirs had been stonewalled. The proceeds of this looting operation were then paid over to Swiss citizens who had claims on Poland arising out of the nationalization and/or confiscation of their property in Communist Poland.Swiss Banks and Nazi Gold: Hearings before the House Comm. on Banking and Financial Servs., 105th Cong. (June 25, 1997) (statement of Gerhard L. Weinberg). The deal with Hungary was similar in operation. See Special Master's Proposed Plan of Allocation and Distribution of Settlement Proceeds, G-32 n. 94 (hereafter "Proposed Plan") (citing Gerhard L. Weinberg, "German Wartime Plans and Policies Regarding Neutral Nations," statement before American Historical Association, January 10, 1998 (hereafter "Weinberg, AHA Statement")). While the "primary aim" of "favour[ing] Swiss interests" through these deals is clear, it is hard to imagine what secondary aim there could have been.
What is most striking about these secret agreements is that, as the Bergier Commission pointed out, "[s]urprisingly, it was now apparently possible to conduct an internal investigation so that a list of dormant accounts relating to these countries could be drawn up." Bergier Report, at 450. Indeed, "[n]either private property rights nor banking secrecy had been a barrier to the release of these assets." Id. at 451. Dr. Weinberg explained:
[A]ccounts which previously have been announced in diplomatic negotiations as either not existing or incapable of being located, and which have been withheld from the heirs either for those reasons or because the heirs cannot produce documents acceptable to the financial institutions, can suddenly be identified, their contents removed, and legal title to the assets transferred to Swiss citizens whose claims against Poland or Hungary might hinder future profitable Swiss trade with those countries.
Proposed Plan, at G-33 n. 94 (quoting Weinberg, AHA Statement, at 3-4). The United States opposed the agreement with Poland because "such an agreement would be inconsistent with the declarations previously made by Swiss officials regarding the disposition of heirless assets found in Switzerland." See Stuart E. Eizenstat, U.S. and Allied Efforts to Recover and Restore Gold and Other Assets Stolen or Hidden by Germany During World War II, 200 (May 1997). But its opposition was to no avail. Again, the banks' focus was on profits, and the deals went forward.
3. Document destruction
While stonewalling was generally an effective way for the Swiss banks to insulate themselves from liability and benefit economically, wholesale destruction of records was still more successful. Document destruction is likely the most contentious subject regarding the banks' behavior in the post-war period, and it is naturally the subject on which it is the most difficult to obtain information. As noted at the outset, there are records pertaining to 4,100,166 accounts out of an estimated 6,858,116 accounts open or opened between 1933 and 1945. Of those 4.1 million accounts for which some record exists, it is quite common to find nothing more than a customer registry card. Records of account activity or closing documents are rare. The findings of the Bergier Commission and Volcker Committee help explain why records are so often lacking.
The Swiss banks generally complied with Swiss law on record keeping, but this is precisely the ruse. The Swiss Code of Obligations requires only that banks keep correspondence and accounting records for a period of ten years, regardless of whether an account is open or closed. Volcker Report, Annex 7, ¶ 3. If the banks could stonewall for ten years, then they could "legally" destroy the very documents which might answer claimants' questions. This is exactly what they did. Banks "regularly and systematically" destroyed material that was ten years old. See Volcker Report, Annex 7, ¶ 11. In some banks, the document destruction was annual, in some it was semi-annual, and in some it was simply intermittent. But it happened across the board. And thus the banks destroyed countless records that might have been critical in explaining their Nazi era actions with respect to accounts once held by Nazi victims. The destruction was part of the banks' ordinary course of business, and it was massive.
The Volcker Committee explained how unexceptional this practice of document destruction was for the banks. One commercial bank it highlighted made no special exception for maintaining its dormant accounts, which it simply considered open accounts for which the account holder might one day appear. See Volcker Report, Annex 7, ¶ 21. Moreover, this bank "did not retain lists of records destroyed in the normal course of business and in accordance with Swiss law." Id."Therefore, large quantities of documents [from this bank] relating to accounts from the Relevant Period have been destroyed in the normal course of business without record." Id. at Annex 7, ¶ 22. This reveals the critical issue — the banks made no effort to save relevant documents, despite the fact that they knew Nazi victims and their representatives were clamoring for them.
Even given the banks' policy of destroying decade-old records, some records of dormant but still open accounts (the most recent ten years worth) would presumably have survived. In the case of large dormant accounts, banks would often "manage the assets in the interest of customers about whom no further information was available." Bergier Report, at 455; see Junz, at 5. The banks could use these accounts to generate substantial commissions and fees, and records would persist. In the case of small dormant accounts, however, the banks devised ways to eliminate the accounts altogether, and then eliminate all record of them. For instance, the banks would continue to charge activity fees on dormant, non-interest bearing accounts, and when claimants would request that the bank perform a search for their account, the bank would charge high search fees. The search fees could reach 25 francs in the 1950s, 250 francs in the 1960s, and 750 francs by the 1980s. Bergier Report, at 446. "The practice of opening safes and selling assets to pay for the cost of hiring the safe also is documented for that period." Junz, at 3. The Bergier Commission summarized the effect of such fees:
Because dormant accounts often contained small amounts, these fees frequently exceeded the value of the assets being sought and, together with the routinely charged administrative or other costs, reduced them substantially . . . Due to the deduction of such fees, unclaimed accounts, deposits and safe-deposit boxes could also disappear in the space of a few decades.
Bergier Report, at 446. Once accounts were closed, "all traces of individual accounts disappeared because banks could destroy all records relating to customers whose accounts had been closed out after a ten-year archiving period." Id. at 447. The Bergier Commission concluded:
The disappearance of all traces of assets from the Nazi era created a kind of higher level of dormancy: the `dormant account' itself became `dormant.' In other words, not only did the banks not have any information on the customers concerned, but researchers were also no longer able to obtain documents on these accounts at the bank during the period in question.Id. at 447-448.
This practice of routine document destruction and account erasure not only flourished in the immediate post-war period, it continued until the Bergier Commission and ICEP were established in 1996. Indeed, in the 1980s, the Union Bank of Switzerland issued instructions on how to close accounts: "The closure is to be effected by charging as many fees, expenses, etc. for different services to the accounts as to wipe out any balances they contain. The fees and expenses to be charged are to be credited to the internal account `SV inheritances.'" Bergier Report, at 447. As the policy flourished, the banks never lost sight of their purpose — economic gain. For example, in one dormant deposit account held in the Swiss Bank Corporation (SBV), the balance decreased from 3,255 francs in 1939 to zero in 1980. See Junz, at 4. Still, the bank did not close the account. Instead, it kept the account open and charged fees that by 1992 had led to a negative balance of 4,793 francs. This seemingly inexplicable dec