Judge Ponders New Swiss Bank Balance

The federal judge overseeing the allocation of the $1.25 billion Swiss bank settlement is considering increasing the amount of money being awarded to the heirs of Swiss bank depositors, angering those who would like the extra money used to benefit needy survivors.

Prompting the reassessment is the fact that about half of the $800 million the court set aside to pay the claims of Swiss bank account holders has yet to be distributed. The Holocaust-era money deposited in those accounts either was never claimed or the banks refused to release it after the war.

The proposal to increase the amount awarded to the heirs of depositors was made by the special master appointed by Brooklyn Federal Court Judge Edward Korman to monitor the settlement distribution, Helen Junz. In a 22-page report submitted to the court last March, she wrote that the formula used to determine how much each of the heirs should get was too low, based upon the amount of money found in accounts whose balance was known.

Junz said that the number of accounts in which the balance was known increased from 598 to 978 in the two years she monitored them. There was considerably more money than expected in those accounts and Junz said the "conclusions and implications that can be drawn from this cumulative evidence have been remarkably stable, thereby increasing the confidence that can be placed in their reliability."

As a result, she proposed that those who received money based on the formula should receive another $180 million. And she said that projected awards should be increased by a total of $285 million. When combined with another $65 million now being distributed to 13,000 people ($5,000 each) who were unable to prove their family had bank accounts but who made a convincing argument that such accounts existed, plus an adjustment for interest, the amount proposed to be distributed to the heirs of bank account depositors totals $803 million.

Korman is not expected to act on that recommendation soon because there are still several hundred bank deposit claims still to review. But he has stressed in the past that his first obligation is to the bank depositors. On March 9, 2004, he said he had a "legal and moral obligation to the deposited asset class," and he promised not to reallocate money set aside for them "until I am certain that the claims to those funds will not exceed the amount set aside."

Were Korman to follow Junz’ recommendation, it would mean that needy Jewish survivors would receive no additional money. They already received $185 million under the settlement, which was distributed to social service organizations that provide help to needy survivors. Observers pointed out that money to those organizations has almost doubled since the settlement was reached because Korman directed that interest accrued from the settlement money be used to benefit needy survivors. And he has said that should any money be left over, it would be used to benefit needy survivors.

Objections to Junz’ proposal were filed with the court by survivors in the United States and by the State of Israel.

Kent Yalowitz, a Manhattan attorney representing Israel, said the state agreed with the judge that the first to be paid in this settlement are those who had deposited assets. But he said that in a 2004 hearing "a lot of people spoke of the needs of survivors, many of them desperately poor. And we urged the judge, based on statistical evidence we compiled, to increase the allocation to those who were needy survivors in Israel. Israel felt that its citizens had not been adequately taken into account" when the settlement distribution was formulated.

Yalowitz said he understands that the judge has discretion regarding Junz’ proposal, but he said that by holding his hearing, Korman had "created an expectation in needy survivors."

"To go back now and change those presumptions about how much should be in each account: this is a matter within the judge’s discretion," Yalowitz said.

In his court papers, Yalowitz said Junz’ recommendation would "recast" the ground rules and risks drawing Korman "into the arena of speculation about evidence that will never be found. … We are not persuaded that such an adjustment is compelled by the evidence."

"In our view, it would be profoundly unfair to the neediest survivors to now deem their status as claimants unworthy of full protection of the court," he wrote, adding that their claims have "both a moral and legal legitimacy."

Several Holocaust survivors and the Holocaust Survivors Foundation-USA filed court papers in June saying that if accepted, the proposal would "radically alter the settlement in this case, eliminating the likelihood that substantial funds would remain" for needy survivors.

In an affidavit submitted to the court, David Mermelstein, a survivor from Florida, recalled meeting with Korman in January to discuss distribution of the unallocated deposited asset funds, which were said to be between $365 million and $425 million.

"There was no doubt at the meeting that everyone … expected a large sum of additional money to become available (in addition to the current amount being spent) to provide assistance to needy survivors," he wrote.

As of Oct. 17, 17,427 awards have been made to the heirs of bank deposit owners that totaled $403 million. The money ranged from a few thousand dollars to $21 million. The average award was $138,380. An average account contained $89,988.

The settlement has also made payments to benefit various groups of survivors:

# Those who were forced by the Nazis to perform slave labor: $1,450 was paid to 190,625 of them for a total of $277 million.
# Social service agencies that care for needy survivors worldwide are receiving $18.5 million annually for each of 10 years. The distribution is now in its sixth year and so far 180,738 needy survivors worldwide have benefited, among them 73,840 non-Jews.
# Those who were turned away by Switzerland when they sought refuge there: 4,071 of them received a total of $12 million.

In all, the Swiss bank settlement has to date helped 393,424 survivors and a total of $908 million has been distributed or allocated.