I.C.E.P.

EMBARGOED UNTIL 10:00 A.M. (EDT) JUNE 25, 1997

STATEMENT OF PAUL A. VOLCKER before the COMMITTEE ON BANKING AND FINANCIAL SERVICES of the U.S. HOUSE OF REPRESENTATIVES WASHINGTON, DC JUNE 25, 1997

Mr. Chairman and Members of the Committee:        I first want to express my appreciation to you, Mr. Chairman, for arranging this hearing.   In doing so, you have provided a forum for clarifying issues and assessing progress in the international effort to reach final settlement of the important questions related to Nazi Germany persecution before and during World War II.   My particular role today is to bring you up to date on the work of the Independent Committee of Eminent Persons and the latest developments in the effort to identify dormant accounts in Swiss banks that rightfully belong to victims of the Holocaust or refugees.        Before getting into the substance of our work, however, l also want to especially acknowledge the impetus that Senator D'Amato has given to these efforts, as well as to other areas of investigation.   In particular, he pointed out and emphasized some months ago the wisdom of publication of the names associated with dormant accounts in Swiss banks as one means of facilitating the recovery of these funds by the account holders or their heirs.   As l will relate in a few minutes, that approach has now been carried forward into a concrete plan for publication.   In addition, special procedures are being established for matching accounts with claimants.        You may recall the Committee (ICEP) was established last year by agreement between the World Jewish Restitution Organization and allied Jewish groups and the Swiss Bankers Association.   Each founding organization appointed three members and two alternates to the Committee.   Those members in turn invited me to become Chairman.        Late in 1996, the Committee started its work by appointing three large international accounting groups with substantial forensic capability to plan and conduct an investigative audit of all Swiss banks.   The aim is to determine the existence of dormant and "heirless" accounts in Swiss banks that originated with refugees or persecuted persons before or during World War II.   The search will include both deposit accounts and other funds or valuables placed in the banks for safekeeping, including accounts opened by Swiss nominees or intermediaries on behalf of persecuted persons.        Considerable time has been spent in the planning for the detailed audits, as well as in dealing with perceived legal and financial risks to those conducting the audits.   That phase is now concluding.   Pilot audits now underway of a sample of five Swiss banks, including one of the three largest, a private bank, and cantonal and regional institutions.   An additional five banks are also being audited specifically to assess and test document retention practices and policies, and to help assure relevant records are maintained.   On the basis of this work, full scale audits will be undertaken of all relevant Swiss banks, beginning in the fall and probably extending through most or all of 1998.   I expect hundreds of auditors will be drawn from the three firms involved.        All of this, as you will be aware, is quite unprecedented in terms of normal banking practices, and particularly so in the case of Switzerland that has been especially sensitive to the privacy of its banks.   In recognition of the extraordinary circumstances surrounding our inquiry, we have had the cooperation of the Swiss banking authorities and the Swiss Bankers Association, as well as of other Swiss officials.   In particular, our investigation will have the full force of officially sanctioned audits and will be able to penetrate Swiss banking secrecy.   As a result, there will be no legitimate place for the audited banks to hide from our investigation.        Your hearing is especially timely because just this morning in Bern the Swiss Federal Banking Commission has agreed to a framework for facilitating the reconciliation of claims against dormant accounts. First, the names (and addresses where available) of all dormant accounts originating before 1945 in Swiss banks will be published.   In the interest of assuring full disclosure, the account names will be revealed whether or not there is a pres umption that the account is in fact related to Holocaust victims or other persecuted persons.   We expect that there may be thousands of such dormant accounts, many of purely Swiss origin and of small amount. Second, names will be added to the list as the audits sponsored by the ICEP identify such names.   Our understanding is that refugee accounts may frequently have been in the name of a Swiss agent or nominee, presenting difficult problems of identification.        Our auditors will be especially sensitive to the need to find evidence bearing on that question. Third, entirely new arrangements to facilitate receiving and reconciling claims are being established.   The account names will be widely circulated by paper and electronic means.   Simple claim forms will be readily available.   To deal with inquiries, contact points by means of 800 numbers or otherwise will be established in Israel, New York and elsewhere, as well as in Switzerland.   Claims already made through the Swiss Bank Ombudsman have already been placed in a data base by our accountants and claims presented through Israeli authorities will also be processed.        The administrative resources of another large accounting firm will be called upon to assure that claim forms are widely distributed and easily available, and that claims will be efficiently processed and sent to the appropriate bank. Fourth, claims to the named accounts will be turned over to a new claims reconciliation process.   To deal with these claims, the Swiss Federal Banking Commission has agreed to the establishment of an independent and objective international Claims Resolution Panel (CPR).   That panel will be formally established by the Swiss Bankers Association, in consultation with the Committee I chair and other interested parties, including the WJRO.   The international panel will be authorized to definitively and equitably decide claims operating under liberal rules of evidence.   Importantly, the SBC and ICEP will maintain supervision over the entire process.        No doubt, there will be dormant accounts for which no valid claimants can be determined even after diligent investigation with relaxed criteria.   It is intended that such funds be used for appropriate charitable purposes.   It is also contemplated that future legislation in Switzerland and/or international agreement could be helpful in achieving these purposes, especially in assuring finality in the distribution of funds.   However, the process will proceed without awaiting passage of necessarily time-consuming legislation.        Attached to this statement is the full Joint Press Release by Mr. Kurt Hauri, Chairman of the Swiss Federal Banking Commission and myself on behalf of the ICEP.   I commend it to you for a full description of our agreement and the modus operandi.        I am as conscious as you that all of this has taken time.   A number of participants with different understanding and different authorities have needed to reach agreement.   The job of sorting out thousands of accounts originating a half century ago is inherently difficult.   Indeed, I know of no precedent for the effort.   But I do think we are now getting a grip on the problem.   The accountants are entering the banks, and we expect them to proceed expeditiously and with the full force of their forensic resources.   I should be able to report significant concrete progress in the fall.        I should also add that, as I indicated to you in my earlier testimony, believe that the organizational arrangement of the ICEP, agreed to by the WJRO and the Swiss Bankers Association, provides the most promising avenue for reaching a common understanding and resolution of this most difficult and contentious matter, and touching as it must deep seated emotions.        In that connection, on the occasion of our recent meeting in Jerusalem, the Prime Minister of Israel affirmed again that the WJRO is the appropriate vehicle for reflecting the interests of the State of Israel.   From my own experience, l can tell you that the ICEP has maintained good channels of communication with the variety of Swiss officials involved, with the Swiss Bankers Association and with Secretary Eizenstat, who is leading the investigation into U.S. Government archives.   We continue to look forward to working with the Swiss Historical Commission, given our common interests and the overlap in our inquiries.        As you will realize, a sense of mutual confidence and understanding between the Swiss and Jewish groups has been difficult to maintain.   In the circumstances, preserving the avenue provided by the ICEP for constructive communication among the various parties has, I believe, value in itself.        I do not suggest that our work is easy and straightforward, or without controversy and acrimony.   The opposite is the case.   But the overriding fact of the matter is that no other approach offers the prospect of eliciting a necessary degree of cooperation in determining the facts of the situation.   We intend to proceed with all deliberate speed in the expectation that our work can provide a basis for agreed and final resolution of the disposition of dormant accounts in a manner that does justice to the historic importance of the investigation.

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