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Testimony of Neil D. Levin
Chairman of the New York State Commission on the Recovery of Holocaust Victims’ Assets
before the United States House Committee on Banking and Financial Services

Introduction:

Good Morning:
Chairman Leach, Congressman Gonzalez – members of the House Banking Committee:

I would like to thank you for the opportunity to share my perspective on the very important issue of Swiss banks and Holocaust victims’ assets. I am particularly pleased to be able to provide some insight into the role of New York State in its attempt to provide some measure of justice to the victims of a painful chapter in world history.

The Holocaust was a crime unparalleled in the history of modern civilization. Germany, . . . a nation once known for its beauty and culture, eagerly submitted to the will of a madman and embarked upon a course which sought the complete and utter annihilation of every Jewish being on the face of this earth. Insane beliefs in the purity of race became law of the land and within seven years of attaining power, virtually all of Europe fell under the Nazi yoke. Millions of innocent people died as a result, including six million Jews who were murdered simply because they were Jews.

Sadly, more than fifty years have passed since the defeat of Nazi Germany and still the pain endures for those who survived. Once again the horrors of the Holocaust are front page news. Once again we see the newsreels and the photographs depicting the unspeakable brutality that characterized the rule of Adolf Hitler.

Now, however, the focus is not on Germany, but on Switzerland – a nation famous for its neutrality in the face of international conflict. A nation whose neutrality during the Second World War is now seriously called into question.

Background:

Switzerland was a nation completely surrounded by the Axis powers for most of the war and yet miraculously it emerged with its borders and its population intact. Switzerland also emerged as one of the wealthiest nations on the European continent and that is what brings us all here today.

As a result of the tireless efforts of Edgar Bronfman, Senator Alfonse D’Amato and the World Jewish Congress, the world has now learned that much of this wealth was amassed largely through Switzerland’s financial dealings with Nazi Germany and her role as the depository for Europe’s assets.

The assets received by Swiss banks prior to and during the Second World War fell into two main categories. The first consisted of assets looted by the Nazis and deposited in Switzerland. The portion of those assets which consisted of looted monetary gold, was the subject of a recent study by the U.S. government under the leadership of Under-Secretary of Commerce Stuart E. Eizenstat. The Eizenstat report, as it is known, represents the most comprehensive review of Switzerland’s disturbing role as recipient of gold looted from the treasuries of conquered Europe. Although Switzerland was by no means the only neutral nation to receive Nazi loot, by far it received the lion’s share. The multi-agency coordinated effort which resulted in the report constitutes an invaluable and authoritative contribution by our government toward the understanding of a very dark period in history.

The second category of assets received by Switzerland consisted of those personal assets deposited by individuals, many of whom later perished in the Holocaust. These assets consisted of money and securities as well as personal valuables placed in safety deposit boxes. These deposits were made because of the faith and trust their owners had in Swiss banks and the belief that the assets would be there when they, or their heirs, returned for them.

Unfortunately, this faith and this trust appears to have been misplaced.

For now we learn that despite the passage of more than fifty years, assets belonging to victims of the Holocaust, not already looted by lawyers, agents or bank employees, are to this day, still held in the vaults of Swiss banks. We have learned that attempts by survivors and their heirs to retrieve that which is rightfully theirs have been met, not with compassion or understanding, but with rigid rules and legalistic obstacles which only served to frustrate and thwart the recovery efforts.

The Role of New York State:

When Senator D’Amato began holding hearings on this matter in March of 1996, Governor George E. Pataki directed me, in my capacity at that time as Superintendent of Banks, to monitor their progress. In October of 1996, Senator D’Amato publicized certain declassified documents which suggested connections between the New York offices of Swiss Bank Corp. and Credit Suisse and assets of Holocaust victims. The contents of these and other documents prompted the Governor to order a full investigation by the Banking Department into the activities of Swiss banks in New York State, prior to and during the Second World War. The goal: To determine whether, and to what extent, assets belonging to Holocaust victims were held by Swiss banks operating in New York during the war and to ascertain what happened to those assets. Our preliminary review at that time revealed that New York State indeed played a very unique role.

  • Swiss Banking Presence in New York State During World War II

The first Swiss banking institution to be licensed in New York State was Swiss Bank Corporation which received authorization to open an agency office in July of 1939. The opening of this office was a direct response to events taking place in Europe.

Throughout the mid-to-late 1930s, nationals of many European countries began transferring their assets to Switzerland. Initially this group consisted primarily of German Jews, but with the annexation and invasion of Austria and Czechoslovakia, Jews and other nationals throughout Europe began shifting their assets to Switzerland. The threat of war and a possible German invasion of Switzerland led to concerns about those assets previously deposited there, for if Germany did invade, they would forever be lost. As a result, the Swiss began to move assets out of Switzerland to the United States. These assets included the personal wealth of citizens of nations that would eventually be conquered by Germany. Initially, these assets were placed with large American banking institutions, however, as the amounts grew , it was deemed necessary for Swiss financial institutions to open up offices in New York in order to exercise more direct control over them.

In addition to Swiss Bank Corp., the Swiss American Corporation, an investment banking entity of Credit Suisse also opened an office in New York in July of 1939. News accounts on the opening of these institutions made clear their purpose: To protect the funds and securities of those individuals whose assets were, until then, held in Switzerland. By opening institutions here in New York, the Swiss were able to protect those assets and oversee their investment.

In May of 1940, Credit Suisse received approval to open an agency office in New York and its activities mirrored those of Swiss Bank Corp. Union Bank of Switzerland did not have a physical presence in New York until after the war, however, it too transferred assets to New York. These were held both in domestic banks as well as the New York offices of the other two Swiss banks.

The flow of assets from Switzerland to New York was such that by May of 1940, New York was being referred to as a haven for Swiss wealth. Indeed, by June of 1940, Swiss Bank Corp’s New York office controlled assets in excess of $220 million while Credit Suisse’s were estimated at $150 million. A year later, President Roosevelt’s executive order froze all Swiss assets in the United States. The value of all these assets was estimated at $1.5 billion. It was well known at the time that this amount was considerably more than what Switzerland would be expected to hold on behalf of itself and its citizens, leading to the inescapable conclusion that holdings of individuals living in German-occupied nations were included in this amount.

Unfortunately, the identity of most of these individuals was, and still is, a closely guarded secret.

Despite various war-time reporting requirements imposed upon the banks by U.S. law, both Swiss Bank Corp. and Credit Suisse through willful blindness, creative bookkeeping and intentional misrepresentation, managed to maintain the veil of secrecy over the identity of most of their customers. The most common method was through the use of pooled accounts known as omnibus accounts and sub-accounts known as rubric or depot accounts. The overwhelming majority of the assets controlled by these two institutions were held, not in the name of the European owner, but rather, in the name of the Swiss branch where the true owner originally deposited the assets. This mechanism provided both the flexibility to evade various provisions of the Trading With the Enemy Act while also frustrating U.S. government attempts to prevent the cloaking of German-owned and German-controlled assets.

The amount of assets transferred to New York was such that included in this amount were almost certainly assets belonging to individuals who perished in the Holocaust. This, of course begs the question: What happened to those assets?

  • Establishment of the Holocaust Victims’ Assets Commission

That is precisely what the investigation in New York State is attempting to ascertain and this is precisely why Governor Pataki established the New York State Governmental Commission on the Recovery of Holocaust Victims’ Assets. As Chairman of the Commission and now as the Superintendent of Insurance, my goal is to coordinate the multi-agency effort to identify the ownership of personal assets which flowed from Switzerland to New York and determine to what degree they represented the property of Holocaust victims. The resources of the New York State Banking Department, the New York State Insurance Department and other state agencies have been enlisted in this effort. We want to know what happened to those assets. We want to know how much is still held by the banks in New York or in Switzerland and we want to see the banks relinquish that which does not belong to them.

As the primary regulator of the New York branches of Swiss Bank Corporation and Credit Suisse, the New York State Banking Department has ordered both institutions to retain the appropriate outside support to conduct a complete and thorough search of all their records. This is being done under the close supervision of the Banking Department. Both banks have already located and produced documents which relate to their war-time activities in New York. Additionally, we have asked the five domestic money center banks to search their archives and determine the nature and extent of their relationship with Swiss banks prior to and during the war.

Our role, however, does not end here:

  • Establishment of Claims Processing Office in New York State

I am very pleased to inform this Committee that New York State has decided to establish a claims processing office for those Holocaust survivors or their heirs who are seeking the return of assets held in Swiss banks. This office will assist the claimants in the preparation of their claims and if necessary, will act as their voice to the Swiss banks. This office will seek to ensure that the claims are handled in an appropriate and timely fashion.

Desirable as it may be, however, this office will not be in a position to conduct its own searches in Switzerland and thus it is important that expectations be managed. Nevertheless, New York State hopes to alleviate the burdens which claimants currently face when dealing directly with the banks in Switzerland and we will certainly ensure that their voices are heard loud and clear.

  • Claims Against European Insurance Companies

Recently, the issue of Holocaust victims’ assets has also arisen in the context of European insurance companies which either refused to pay the proceeds of life insurance policies taken out by persons murdered by the Nazis, or in some cases, actually paid the policy proceeds to the Nazis. This matter is of obvious interest to me as the Superintendent of Insurance. We are firmly committed to pursuing these claims with the same intensity and the same vigor as we have pursued banking assets and we intend to enlist the help of other state insurance commissioners in this cause.

  • Cooperation Required From Switzerland

As is readily apparent, however, New York only holds some of the answers to the many questions which still exist.

The fact is that most of the assets held in New York during the war originated in Switzerland and they were eventually transferred back after the war. Thus, it is there where many of the answers lie. Since the Banking Department first began its active investigation last October, I and my staff traveled to Switzerland on several occasions. We have met with the top officers of the three major Swiss banks, we met with the President and the Director of the Swiss Federal Banking Commission, the Chairman of the Swiss Bankers Association, the Swiss Banking Ombudsman, Swiss Ambassador Thomas Borer, United States Ambassador Madeline Kunin and many others. We have also met with and continue to maintain on ongoing dialogue with Paul Volcker and the auditors of the Volcker Commission, which as you know was established to search for dormant accounts in Switzerland. We secured an unprecedented agreement from the Swiss Federal Banking Commission under which the New York State Banking Department was promised access to bank records in Switzerland, including actual customer account information, to the extent it relates to assets which belonged to victims of the Holocaust and which may have been present in New York State at one time. Additionally, arrangements for the mutual exchange of information have been established between the auditors of the Volcker Commission and the Banking Department on areas of joint interest.

  • The Absence of Answers From Switzerland

Our investigation has raised many questions, yet many of the answers, which lie with the banks in Switzerland, are not forthcoming. Three weeks ago during our last visit, we again met with Swiss Bank Corp., Credit Suisse and Union Bank of Switzerland. At that time, we were informed by all three that they do not have any records relating to their business in New York during the war.

As you can imagine, such a claim is a very difficult one to accept. Despite the fact that the legal requirement in Switzerland for retention of closed account records is ten years, given the sizable portion of assets moved to New York and the substantial banking activity engaged in by Swiss banks, one would expect that at least some relevant documents are still in existence.

We, however, have been told there are none.

No routine document destruction policy is so thorough and so complete. Perhaps the clearest evidence of this can be found in New York itself, where both the New York branches of Credit Suisse and Swiss Bank Corp have located some of their wartime records.

It is believed by many that all three major Swiss banks presently have substantial records in Switzerland relating to their wartime business. Indeed, these are the records which will be reviewed by the auditors of the Volcker Commission and the historians of the Bergier Commission. We are not prepared to accept the claim by the banks that none of these records relate to their business in New York. We are not prepared to accept the claim that all records relating to the focus of our investigation were routinely destroyed, prior to the efforts of Senator D’Amato and the World Jewish Congress. We have made this known to the banks and we are awaiting their response.

  • A Catalyst For Change

At the time the Volcker Commission was established in May of 1996, no consideration appears to have been given to how the Commission’s work product would be used. We wanted to know how the results of the auditors’ work would be disseminated? How would Swiss bank secrecy laws affect this dissemination? How would the claims process work? By what standard would claims be reviewed? These were questions which required answers. Although swift determination of the validity of some claims will be possible, most will not be so easy, thus attention to this issue was clearly necessary.

Very early on in our investigation, at the urging of Governor Pataki, we sought to be a catalyst for change in Switzerland and we have not hesitated to take the initiative with the banks or the regulators. Accordingly, we initiated discussions with the Swiss regarding the establishment of a claims process which would be both just and expeditious and to that end we suggested the creation of an independent arbitration tribunal. Borrowing from past experiences such as the Iran – U.S. Claims Tribunal or the private claims processing facilities established to handle claims for asbestos related injuries, the goal here is to put in place a claims process which will avoid the legalistic obstacles which have impeded recovery efforts in the past. With the passage of so much time, no reasonable person can be expected to present a claim which would pass legal muster in a Swiss court of law. Thus, a claims process which takes this into account is necessary. This process must be one in which the claimant has faith and which has integrity to ensure that baseless claims are rejected. With the establishment of an independent arbitration tribunal, we believe that a such a process can be put in place. This has been the topic of much recent discussion and we will continue to push for it.

Additionally, we have repeatedly called upon the Swiss to publish the names of the dormant accounts they have already identified, since there was simply no reason to wait until after the Volcker Commission completed their work, as they originally planned. Senator D’Amato publicly called for the release of these names in a letter to Ambassador Borer back in March of this year. Although Swiss officials publicly commended the Senator for the constructivness of this request, another three months would pass before it became a reality. We certainly commend them for this progress, but so much more must be done.

Conclusion:

Since this matter was first brought to light, a number of positive and constructive promises have been made by the Swiss to address this matter. If they are sincere, they are welcome. These promises, however must be coupled with swift action. They cannot be made simply to buy favorable headlines and more time. The establishment of a fund by the Swiss banks with additional contributions from the Swiss community will provide needed assistance to many elderly Holocaust survivors. But that is not enough. This matter is not and has never been about money. It is about justice and morality. It is about that which is right and that which is wrong. It is about fighting for the rights of those who were powerless during the Holocaust.

It is incumbent upon the Swiss banks to once and for all lift their veils of secrecy on this issue. We are repeatedly told that these things take time. Yet the banks have had over fifty years and still that is not enough time.

In 1946, the Swiss banks successfully resisted a call for them to conduct a census of assets which would have provided all the answers we seek today.

In 1962, when 500 banks were asked to conduct a survey of their dormant holdings, most banks simply ignored the survey and of the 26 that did respond, only a pittance was reported.

Prior to that, assets contained in 53 dormant accounts were used by the Swiss government to settle post-war claims with the Polish government. The representation from Switzerland was that these were "heirless assets." Last March, however, when the names of these 53 account holders were published, an heir to one of them was located within a few hours. Swiss historians subsequently disclosed that there was no evidence the Swiss government or the banks ever tried to find the depositors or their heirs.

More recently, the Swiss Bankers Association set up the Office of the Swiss Banking Ombudsman to handle inquiries for missing assets. Amazingly, a person must first pay $70 before their request will even be considered and their search consists merely of circulating the name to the banks and awaiting a response. Needless to say, with limited resources and limited powers, that office has not had very many successes.

In January of 1996, the Swiss Bankers Association announced that their member banks uncovered 775 dormant accounts opened by foreigners prior to the end of the war. Definitions and the scope of the 1962 survey are offered as explanations why these accounts were not uncovered then. An additional eighteen months passed before the veil of secrecy was finally lifted on these accounts.

The sad fact is that resistance on this issue has been going on for fifty years. Much faith is now placed on the efforts of the international commissions, however, the Volcker Commission and the Bergier Commission have enormous undertakings before them and their work plans are measured in years. The average Holocaust survivor is 78 years old and every day their numbers dwindle. Time is not a luxury they have.

Governor Pataki and New York State are unequivocally committed to doing all that is necessary to ensure that justice is served as expeditiously as possible. We cannot undo the horrors of the Holocaust , but we can ensure that its victims are not again victimized. For more than fifty years justice has eluded those who placed their trust in Swiss banks. That is long enough . . . justice is long overdue.

The daily revelations concerning the war-time conduct of Switzerland and its relationship with Nazi Germany are such that Swiss history will inevitably be re-written. It remains for the Swiss to decide how their future will be written, for as one commentator noted: "Swiss neutrality has no past. Only this generation can determine if it has a future."

 

 

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