Sanctions Against Swiss Banks Intensify Pressure on Alpine State

In clearing the way for punitive measures against Swiss banks, American public finance officials have unleashed a forceful salvo in what is turning into a war of attrition over Holocaust-era claims.

Ignoring strong objections from the Clinton administration, a commission representing hundreds of state and local finance officials decided Wednesday to lift a moratorium on sanctions against the banks after settlement talks with Jewish groups reached what one official described as “a total, stone-like impasse.”

California said it would become the first state to impose sanctions by not seeking new investments with U.S. subsidiaries of Swiss banks, and New York said it would bar short-term investments, among other steps, with the banks if there is not a settlement by Sept. 1.

New Jersey and Pennsylvania also announced they would take action.

New York City Comptroller Alan Hevesi, who heads the five-member commission, said he hoped U.S. officials would impose a graduated process of sanctions that may give participants in the negotiations “a little more time to resolve the issues.”

Swiss banks lambasted the move and threatened to sue U.S. states or cities that adopt boycotts. The Swiss government called the sanctions “counterproductive, unjustified and illegal,” and said the move could disrupt U.S. Swiss relations and trigger a free-trade dispute.

Talks between Switzerland’s three largest banks and Jewish negotiators broke down last week after Union Bank of Switzerland, Swiss Bank Corp. and Credit Suisse Group said that $600 million was their final offer to settle claims over Holocaust-era bank deposits.

The World Jewish Congress and lawyers for Holocaust victims rejected the amount as “insulting” and are holding out for a $1.5 billion “global settlement” that would cover all claims against the banks, the Swiss central bank and the Swiss government.

The funds would go to Holocaust survivors and their heirs.

It is not clear after this week’s developments where those settlement talks stand. After the Hevesi commission announced its verdict, the Swiss banks reportedly were considering revoking their $600 million offer.

Stuart Eizenstat, U.S. undersecretary of state for economic affairs, who began brokering talks between the two sides last December, expressed disappointment at the lapse of what he called a “historic opportunity for resolving this matter that may not come again soon.”

In blunt remarks to the finance officials — made by telephone during Wednesday’s daylong hearing — Eizenstat urged them not to slap sanctions on the banks and warned that such a move could lead to a hardening of positions on both sides.

Speaking to reporters early Wednesday, Eizenstat had said that while pressure on Switzerland may have played an important role in the past, “our belief is that sanctions or the threat of sanctions have made the Swiss public more inflexible” and “have contributed to an environment in which further progress becomes more difficult.”

Jewish groups, frustrated by what they felt was a lack of good faith by the banks, took a different view of the matter.

Edgar Bronfman, head of the WJC, which in March had asked the finance officials to hold off on sanctions while efforts to reach a settlement continued, told the commission on Wednesday that it would no longer stand in the way of sanctions.

In an interview the next day, Elan Steinberg, executive director of the WJC, rejected the State Department’s concerns about a hardening of Switzerland’s stance, saying, “There’s no stance to harden. Either you return what was stolen or you don’t.

“This is not a bazaar at which we are haggling over a price,” he said. “We will win, we will lose, but we won’t be swindled. We will struggle for justice.”

Other developments this week, meanwhile, also served to ratchet up pressure on Switzerland:

Lawyers representing five Holocaust victims filed a new class-action lawsuit against Switzerland’s central bank to recover plundered gold acquired by Switzerland during World War II.

The lawsuit asks the U.S. District Court in Washington to award compensatory and punitive damages stemming from what it called the “unlawful behavior” of the Swiss National Bank.

The Swiss government and the Swiss National Bank have refused to join the commercial banks in negotiations with Jewish groups and have said they would not be a part of any settlement.

A spokesman for the Swiss government in Bern blasted the suit, saying it is “not justified by the facts, politically unacceptable and legally untenable.”

A separate group of four Holocaust survivors filed a new state lawsuit in California against three commercial Swiss banks, alleging that the banks’ behavior violated California’s Unfair Competition Act.

The new suits are in addition to a pending multibillion-dollar class-action lawsuit filed in New York against the three Swiss commercial banks. In the absence of a settlement, lawyers for Holocaust survivors have threatened to pursue that litigation as well.

Eizenstat said the standoff with Switzerland should be resolved in court if agreements cannot be reached, but cautioned against that scenario, which could lead to protracted litigation. “It is very important,” he said, that a settlement “be reached quickly and in the lifetime of survivors. This is a race against the clock, and we must, if we possibly can, avoid having a biological solution to this litigation.”

In other state efforts to take action, New Jersey is considering a bill that would require the state to divest some $66 million in stock invested with Union Bank of Switzerland until assets are returned to Holocaust survivors. Vermont, Rhode Island and Kentucky also are considering similar moves.

At the same time, some positive news has emerged for Holocaust survivors who are awaiting compensation:

U.S. and British officials announced that the remaining gold looted by the Nazis from European central banks had been returned and about three-quarters of it would be donated to an international fund set up by the two countries last year to benefit Holocaust survivors.

With contributions from 16 countries — including eight European countries that donated part or all of their share of residual Nazi gold held by the Tripartite Gold Commission — the fund now stands at $57.5 million and is expected to increase.

The gold commission was set up by the United States, Britain and France after World War II to return looted Nazi gold to nations from which it was plundered.

Officials said payments from the fund, which is separate from a humanitarian fund established by Switzerland last year, are slated to be distributed to Holocaust survivors in Eastern Europe through the American Jewish Joint Distribution Committee as early as next month.

The United States and 38 other nations announced a drive to identify art stolen from Holocaust victims and to compensate their heirs.

The announcements on the art and the international fund came as Jewish groups and representatives from more than 30 countries convened at the U.S. State Department for an organizing seminar in advance of a second international conference on Holocaust-era assets, slated for the fail.

The Washington conference, a follow-up to a last year’s London conference on Nazi gold, is intended to focus on looted artworks, insurance policies and other assets.

Eizenstat, the Clinton administration’s point man on Holocaust restitution issues, said the hoped the gathering would allow for discussion of remaining Holocaust-era questions in a “positive, non-confrontational way.”

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