Behind the Headlines: Swiss Banks Face Boycott Threat As Settlement Talks Reach Impasse
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Behind the Headlines: Swiss Banks Face Boycott Threat As Settlement Talks Reach Impasse

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Swiss banks are on the verge of facing a renewed boycott threat as U.S. public finance officers prepare to meet early next month.

New York City Comptroller Alan Hevesi has asked state and local finance officers to reconvene July I amid reports that talks between the banks and Jewish representatives on a settlement to Holocaust-era claims are near a breakdown.

In late March, the finance officers agreed to hold off on sanctions against Switzerland’s three largest banks — Union Bank of Switzerland, Credit Suisse and Swiss Bank Corp. — for 90 days while negotiators tried to work out a settlement.

The prospects for reaching a settlement by June 30–or at any point in the near future–now appear to be a long shot at best.

Jewish negotiators did not attend the latest round of U.S.-brokered talks in Washington after the banks failed to put forward an acceptable offer, according to sources familiar with the talks.

A widely reported offer by the banks to pay more than $1 billion to Holocaust survivors turned out to include hundreds of millions of dollars in funds that survivors would receive regardless of whether a settlement was reached.

That money would come from an auditing process currently underway, led by former U.S. Federal Reserve Chairman Paul Volcker, to return all unclaimed Holocaust-era bank accounts held by Swiss banks.

The Volcker commission could produce unclaimed assets estimated to be currently worth more than $700 million, one source said. Beyond that amount, the banks only offered about $500 million–a figure that one source described as “offensive at best.”

If the impasse is not broken, the issue may ultimately be settled in court. Holocaust survivors still have three multibillion dollar class-action lawsuits pending in New York, where a federal judge has been awaiting the outcome of settlement talks before proceeding.

One source said preparations were already being made to go ahead with that litigation.

The lack of progress in the negotiations, which are being held under the aegis of the U.S. State Department, would appear to mark a serious setback to attempts by the World Jewish Congress and lawyers representing the class-action plaintiffs to reach a global settlement to all claims stemming from Switzerland’s actions during World War II.

Jewish negotiators have been seeking to settle not only claims on dormant bank accounts, but also on gold and other assets looted by the Nazis from Jews and sold to Swiss banks, as well as compensation for Jewish slave labor.

The banks, however, have only agreed to negotiate bank-related matters, and the Swiss government has ruled out paying into any settlement.

The highly sensitive talks, which are being held under strict rules of confidentiality, have taken a number of twists and turns in recent weeks.

Sources said that after repeated promises to put forward a settlement package, the banks pledged to make a firm offer earlier this month, just days before the New York State Banking Department decided to approve a merger between Union Bank of Switzerland and Swiss Bank Corp. The U.S. Federal Reserve later gave final approval to the deal.

The WJC, given assurances that an offer would be forthcoming, did not object to the merger, which was taken as a sign that significant progress had been made toward a settlement.

But frustrated Jewish negotiators say the banks failed to make good on their promise.

“They snookered the bank regulators,” one source said, adding that the Swiss banks “used the good offices of the State Department” to request that Jewish leaders drop objections to the merger.

“It was not Switzerland’s finest hour,” the source said.

When it came time for the negotiators to meet again at the State Department last week, the chairs on the Jewish side were empty.

The Swiss newspaper Neue Zuercher Zeitung characterized the move as a boycott, but a Jewish source told JTA: “We were frozen out,” referring to what he called the Swiss banks’ disingenuousness during the negotiations.

“On four other occasions we were supposed to meet to negotiate and on none of those occasions had the banks ever put forth a number,” the source said. “Yes, they kept promising we’d get a number next time. Finally everybody got a little tired of next time and said we’re not coming unless we heard a number in advance.”

Two more negotiating sessions are scheduled before June 30, but it remains uncertain whether they will occur.

Jewish negotiators are waiting to see if the banks come through with a serious offer, sources said.

“It’s in their ballpark,” a source said. “They’re going to have to decide what it is they want.”

A spokesman for the banks said the talks “are ongoing,” but declined to characterize them or comment further.

The World Jewish Congress, for its part, declined to comment on whether or not the talks were continuing.

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