Behind the Headlines: Nazi Gold Issue Drives Wedge Between U.s., Jewish Advocates

From the beginning of the Nazi gold controversy, Jewish leaders concluded that public pressure was the best way to prod Switzerland to account for its actions during World War II.

Relentless criticism and a media storm prompted Switzerland to create a humanitarian fund last year to benefit Holocaust survivors, as well as commissions to search for historic truth and to audit its banks for dormant Holocaust-era accounts.

The United States, for its part, issued a scathing report last year suggesting that Switzerland helped prolong World War II by trading extensively with Nazi Germany.

But the U.S. State Department believes that to everything there is a season, and that pressure tactics and accusations have ceased to be productive.

Now more than ever, that view places the administration at odds with many of the key Jewish players who have been pressing the issue.

The administration is also now at odds with U.S. local governments, which Jewish groups have seen as an influential tool in pursuing their case.

Indeed, following the collapse of talks between Swiss banks and Jewish representatives aimed at settling Holocaust-era claims, a commission of state and local finance officials last week cleared the way for punitive measures against the banks — including outright boycotts.

The World Jewish Congress, which has spearheaded the campaign for Switzerland to make amends, gave a green light to the move.

Although the differences between the ways the State Department and Jewish groups view the standoff with Switzerland have long been apparent, they have become more pronounced in recent weeks as frustrations have mounted over the lack of progress.

In walking the difficult line between Jewish and Swiss negotiators, the State Department, which has been brokering the talks, has had to juggle two concurrent interests.

The State Department has sought, as Bennett Freeman, a senior adviser to Stuart Eizenstat, the administration’s point man on the issue, describes it, to bring “maximum justice to Holocaust survivors in the minimum period of time while causing the least possible tensions in our relationship with Switzerland.”

Some Jewish leaders are sensitive to the State Department position.

“We have to be very realistic and understand that the State Department exercises the foreign policy of the United States and that its first priority” in dealing with a crisis “is to find the light at the end of the tunnel,” said Rabbi Abraham Cooper, associate dean of the Simon Wiesenthal Center.

“The fact that it’s not always going to be parallel to the Jewish community shouldn’t come as a shock.”

But in the wake of the collapse of settlement talks, some Jewish players have had a difficult time masking their frustration and disappointment that the State Department has not served as a greater advocate for Holocaust survivors.

“The State Department, having condemned the immorality of neutrality, has to ask itself, `How is it playing the role of a neutral between Swiss banks and Holocaust survivors?’” one Jewish source said. “The Swiss government is not neutral in supporting its banks. Why is our State Department neutral when it comes to supporting its Holocaust survivors?”

Privately, some Jewish sources go further in suggesting that the State Department has favored the Swiss side.

The State Department, for its part, rejected “any suggestion that we are letting concerns for good relations with Switzerland alone diminish our determination to do the right thing on Holocaust-assets issues,” said Freeman.

“It was not our role to favor one side or the other,” he said, adding, “We were brought together by both parties expressly to facilitate and not to arbitrate.”

He added that similar concerns of favoritism have been expressed by some on the Swiss side “who feel that the State Department has become synonymous with the World Jewish Congress, which is also not the case.”

Roger Witten, the lead lawyer representing Swiss banks in the talks, declined to address the State Department’s role, saying only, “Such commentary about the State Department’s performance and motives is quite inappropriate and demeaning.”

The source of some of the frustration on the Jewish side stems from the way settlement talks played out in their final weeks, and particularly from a June 3 letter Eizenstat sent to Israel Singer, the WJC general secretary, who has been involved in the negotiations.

A letter designated “privileged communication” obtained by JTA informs the WJC that Eizenstat, the U.S. undersecretary of state for economic affairs, received a “firm and concrete offer from the banks for settlement of the class-action litigation.”

A source involved in the talks said the negotiators understood that to mean that a long-awaited offer in the range of $1.35 billion to $1.85 billion had been conveyed to Eizenstat.

“I have received the banks’ firm assurance that their offer will be conveyed to you and the plaintiffs at the June 5th meeting in New York,” Eizenstat wrote. “I am confident that their assurance can be relied upon.”

The letter came as the New York State Banking Department was deliberating over whether to approve the merger of two of the Swiss banks involved in the talks, Union Bank of Switzerland and Swiss Bank Corp.

The WJC, heeding what it understood as a State Department request, dropped its objections to the merger, and with it, an important card it felt it was holding in the talks.

The merger was approved, but June 5 came and went without an offer. It wasn’t until several days later, a source said, that the banks put forth an offer for $600 million.

Jewish negotiators were livid.

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

One source said that Eizenstat’s letter, which was distributed to the financial officials at their meeting last week, served to undermine the State Department’s argument against state and local sanctions.

The State Department declined to discuss specifics of the letter, citing confidentiality agreements governing the talks.

Now, as Swiss banks face proliferating boycott threats, pressure may soon be mounting on Switzerland on another front.

The U.S. Senate Banking Committee is planning to hold hearings later this month on reopening a 50-year-old accord signed with Switzerland on the return of Nazi-looted gold.

Switzerland agreed to return $58 million to the Allies in the 1946 Washington Accord despite records that showed that Switzerland received about five times that amount.

Sen. Alfonse D’Amato (R-N.Y.), who chairs the committee, and others have long threatened to reopen that accord if Swiss banks and the Swiss government were not forthcoming in returning stolen assets.

The State Department has not taken a position on reopening the accord.

As for the effectiveness of the newly stepped-up campaign of public pressure against Switzerland, preliminary evidence suggests that the State Department’s concerns about a backlash may prove true.

Last week, Eizenstat had urged the finance officials not to impose sanctions, saying it would lead to a hardening of positions on both sides.

The boycott moves, seen as risking a wider boycott of more Swiss companies with major business interests in the United States, reportedly are helping swing popular sentiment in Switzerland behind the government’s hard-line stance.

Swiss bank shareholders have threatened to sue New York City and New York State for damaging the bank’s image and the value of their investments. The chairman of the newly formed United Bank of Switzerland, the merged entity of Union Bank of Switzerland and Swiss Bank Corp. and now the country’s largest bank, said in response to the boycott moves: “We are being absolutely blackmailed.”

A right-wing party in Switzerland, meanwhile, has called for an immediate boycott of “American and Jewish goods, restaurants and travel destinations.” And the Swatch Group, the Swiss firm that is the world’s largest watchmaker, said it also may boycott U.S. products.

The Swiss government has said the boycott moves could disrupt U.S.- Swiss relations and trigger a free-trade dispute, which Switzerland could take to the World Trade Organization.

Swiss President Flavio Cotti called on Washington to block the boycotts, saying he expected the U.S. government to demonstrate it is “aware of its international responsibilities.”

The State Department, for its part, gave the Swiss no promise that Washington would or could block the boycotts, saying this week, “It’s a very complex question.”

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