| I.C.E.P. |
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APPOINTED BY |
APPOINTED BY THE SWISS BANKERS ASSOCIATION: Curt Gasteyer Klaus Jacobi Peider Mengiardi ALTERNATES: Hans J. Baer René Rhinow |
TABLE OF CONTENTS
I. Introduction-Summary
This Status Report reviews the background, current status, and the results achieved so far by the forensic accounting investigation being conducted at Swiss banks by the Independent Committee of Eminent Persons (the "Committee" or "ICEP"). Earlier reports have been made through periodic Committee announcements to the press, meetings with the press, and through letters of Chairman Volcker to District Judge Edward R. Korman, the Judge presiding over the Holocaust victims' assets litigation. Progress in the second and concluding phase of the investigation, together with the settlement of this litigation before Judge Korman, provide the occasion for this review of the present state of the investigation.
The Committee's central purpose was established by a Memorandum of Understanding by its founding private organizations the World Jewish Restitution Organization (and allied organizations) and the Swiss Bankers Association. It is to provide the basis for restitution of monies owed to individual victims of Nazi persecution or their heirs who entrusted funds to Swiss banks for safekeeping before and during World War II, to make as full an accounting as feasible of the custody of these funds by Swiss banks, and to satisfy the historic need for a moral accounting for present and future generations of critical events surrounding World War II. These are ambitious, even unprecedented, goals for any investigation, requiring examination of the conduct of an entire banking system more than 50 years after the events. The Committee's investigation, while still remaining private under the control and authority of the Committee, has been greatly assisted by the full cooperation of the Swiss Federal Banking Commission (the "SFBC"). Importantly, the Commission determined that the Committee's investigation had the status of a "special audit" under Swiss banking law. The effect, among other things, is to require Swiss banks to accept the Committee's auditors, to open their books to these auditors, and to pay for the investigation. For the purposes of the investigation, the auditors, who are qualified by Swiss law, have been able to pierce the veil of Swiss bank secrecy.
Several earlier attempts to find dormant accounts of victims of Nazi persecution were initiated by the Swiss Government or the Swiss banks. These investigations, did not receive general confidence. In most cases, the banks looked only to readily available records for accounts opened prior to the end of World War II by people with "Jewish names" with whom they had lost contact. They did not search long unused archives, and few efforts were made to check results or assess their intensity and comprehensiveness. Such efforts in fact were limited in scope and failed to include in the search all types of accounts--closed accounts, accounts booked to suspense, small accounts--and other critical factors that are essential to a comprehensive reconstruction of the record of the past.
At the beginning of the Committee's effort, there were large questions about the nature and volume of records that would be available for accounts opened 50 or more years ago. Applicable provisions of Swiss business law do not require the retention of business records for more than 10 years. However, under the impetus of the Committee investigation, a very large volume of historic records -- literally linear kilometers of files for millions of accounts -- have been identified at Swiss banks, introducing the possibility that the Committee's work, could support a satisfactory and credible settlement and historic judgments. At the same time, this abundance of records has enormously complicated and enlarged the task of identifying the relevant documents and of organizing them to tell the story of the past. This could not be done without costly and substantial effort, and without engaging the resources of four of the major accounting firms of the world.
With the inadequacies of past searches in mind, and the growing evidence from the preliminary document searches of the audit firms that substantial bank records would potentially permit a meaningful reconstruction of the past, the Committee adopted a comprehensive strategy for searching for the accounts of victims of Nazi persecution. The Committee also sought, as a general precaution, an investigative methodology that would be resistant to the possibility that systematic manipulation of records had occurred to obscure the past, although it had no evidence that in fact such manipulation had occurred.
This approach contemplates that a substantial portion of all accounts open in Swiss banks in the 1933-45 period will be incorporated into a computer database. This database could then be matched against databases of victims of the Nazi persecution. The resulting matches of these databases should produce as accurate a picture of the financial dealings of victims of Nazi persecution with Swiss banks as is now feasible after more than fifty years. Accounts remaining dormant will be identified and supplement already published lists. Information about accounts of victims of Nazi persecution that have been closed will also be available.
To accomplish this goal the account data must be identified among the very large volume of available records; this identification process is a very large task involving hundreds of auditors and bank staff. Computer programs must be developed and tested, and millions of individual pieces of information must be entered by hand into the computer databases and then checked. With much of the work already done, the bank database building process is now coming to a conclusion.
Other important problems remain. For example, people fleeing Nazi persecution have used aliases in opening accounts in Swiss banks. It is well known that other victims, particularly because they were prohibited from traveling, trusted intermediaries to make deposits in banks on their behalf. Even with the best databases possible, it will be difficult to identify the fate of these deposits. Additionally, in the case of closed accounts of victims of Nazi persecution, the transaction or other records that will enable the Committee to determine whether these accounts were paid to the original depositors, their heirs, some unauthorized person, or the bank may not be available.
The comprehensive investigative strategy of the Committee also depends on the databases of accounts of victims of Nazi persecution. The Committee has developed databases from some historical data available in Switzerland, and these encompass some 300,000 names. The Committee has acquired a number of databases of victims of Nazi persecution made available with the generous help of the Holocaust Museum of Washington, D.C. However, more complete data on victims of Nazi persecution is available at the Israeli Holocaust Memorial, Yad Vashem, and at the International Tracing Service in Bad Arolsen, Germany, which holds the records of 16 million victims of Nazi persecution on 48 million individual data cards. The Committee needs the assistance of these organizations in order to apply their extensive resources to the identification of those victims of Nazi persecution that had accounts in Swiss banks in the 1933-45 period.
The Committee has not, however, put all its investigative eggs in one basket. As explained below, the database approach is being supplemented by other investigative methodologies designed to verify, cross check and supplement the information to be derived from the database matching process.
The Committee has to this point had full cooperation of the Swiss banks where the auditors have carried out their Mandate. The auditors are instructed to insist upon unfettered access to all bank documents and personnel, and few frictions have been experienced. Moreover, the banks have gone beyond passive cooperation to provide much needed manpower and technical resources to the auditors to assist them in their efforts. To be sure, there are complaints about cost of the investigation -- now estimated to total above the 150 million Swiss francs or about $100 million. But the facts remain: the auditors have access, and the heavy cost of this unprecedented exercise is being borne by the Swiss banking system.
1. Establishment of ICEP
The persecution of minorities by the Nazis and others, prior to and during World War II, made it likely that many of the victims sought to move their assets to safety in neutral or Allied countries. In view of neutral Switzerland's borders with the perpetrators of this persecution, Swiss banks and other Swiss financial intermediaries were recipients of at least some of the assets in search of safety. The loss of life and dislocation that accompanied the pre-war and wartime persecution has resulted in the concern that the victims and their heirs were unable to claim the assets legitimately entrusted to others for their safekeeping. These assets may remain as dormant accounts in the institutions in which they were placed for safety or may have otherwise disappeared.
In 1962, the Swiss Government adopted a Federal decree designed to identify and describe any unclaimed assets that belonged to the victims of Nazi persecution. At that time, SFr. 9.5 million were reported to the Federal authorities, 75 percent of which were distributed to the rightful owners and the remaining 25 percent to the Swiss Jewish Society and the Swiss Organization for Refugees.
Nevertheless, concerns still remained that there were unclaimed assets that had been deposited with Swiss banks. In response to these concerns, the Swiss Bankers Association ("SBA") launched a survey of Swiss banks, and on January 2, 1996, the SBA announced the interim results of this statistical survey that identified a total of 775 accounts with a book value at that time of SFr. 38.7 million that had been opened by foreign customers before May 8, 1945, and that had been dormant at least since 1985.
Continuing concerns that an independent investigation be made of dormant accounts led to the formation of the ICEP. The Committee was established by a Memorandum of Understanding ("MOU") of May 2, 1996, between the World Jewish Restitution Organization ("WJRO"), the World Jewish Congress ("WJC") (representing also the Jewish Agency and Allied Organizations), and the SBA.
The membership of the Committee consists a total of eleven members, including five members, three principals and two alternates, appointed by each the World Jewish Restitution Organization (and allied organizations) and the SBA, plus a neutral Chairman. (See Attachment 1.) ICEP was mandated by the MOU to conduct an investigation to determine whether there are any dormant accounts, financial instruments, and other assets of the victims of Nazi persecution that were deposited before, during, and immediately after the Second World War in banks located in Switzerland. The MOU provides that ICEP appoint an international audit firm to implement this mandate and instruct the firm as to the scope of its duties. Since its first meeting on August 14, 1996, to the date of this Status Report, the Committee has met approximately quarterly -- a total of ten times.
2. The First Phase
ICEP first met on August 14, 1996, and, among other actions, authorized a subcommittee to interview international audit firms operating in Switzerland to ascertain their views on the means, methods, and personnel that would be employed to carry out the mandate of the ICEP as established by the MOU. Six major international audit firms including Arthur Andersen, ATAG Ernst & Young, Deloitte & Touche Experta, KPMG Peat Marwick, Price Waterhouse, and STG-Coopers & Lybrand responded to this invitation, and presentations were made by each of these firms to the subcommittee on September 12 and 13, 1996. In addition, on November 4, 1996, in response to a request from the Committee, these six firms submitted formal proposals that confirmed their agreement to implement the mandate and described their program for implementing the mandate, including the personnel and other resources that will be employed.
In the light of the MOU, the presentations made to the subcommittee, and the proposals submitted by the six audit accounting firms, the Committee drafted the Audit Firm Mandate and Instructions - The First Phase (the "First Phase Mandate") (see Attachment 2) which provided the instructions to the selected audit firms as to their duties, functions, and procedures for the first phase of the work of ICEP and which consisted of a program to prepare for audits followed by pilot audits of five Swiss banks. The firms selected for the First Phase forensic accounting investigations were Arthur Andersen, KPMG Peat Marwick ("KPMG"), and Price Waterhouse.
The First Phase Mandate instructs the selected audit firms to determine whether there are any previously unreported dormant accounts, financial instruments, and other assets that were deposited in Swiss banks before, during, or immediately after the Second World War. This search for dormant accounts also includes an examination of whether accounts that would otherwise have been dormant have been extinguished by actions that, whether or not inadvertent or deliberate, were illegal or in breach of fiduciary duties. The audit firm were instructed that any indications that third party intermediaries abused their responsibilities or any evidence of the existence of looted assets revealed during the investigations should be brought to the attention of the Committee, which in turn would notify the Swiss Government of this evidence.
The Mandate divided the investigation into two phases: a first phase of preparatory work involving extensive research extending back to the early 1930s on the history of money flows into Switzerland, Swiss bank organization and regulation, past efforts to identify dormant accounts, and preparation of an audit plan; and a second phase consisting of investigations at the Swiss banks that existed during the 1933-1945 period. The first phase also included pilot audits, which were designed to test the work plan in the real world so that it could be adjusted and fine-tuned to produce a final plan that would assure comprehensive and effective investigations.
At its meeting in June 1997, the Committee heard reports from the audit firms indicating that the preparatory work had been essentially completed, and therefore, the Committee directed the firms to commence the pilot audits immediately. Pilot audits were conducted at: Banque Cantonale Vaudoise, Credit Suisse, Pictet & Cie, Spar + Leikhasse in Bern, and the Swiss Bank Corporation (the "former SBC"). In addition, on the same time schedule, the Committee ordered document retention audits of five representative Swiss banks to test the status of record keeping in these banks, again as a basis for developing the most effective investigative plan. Document retention audits were conducted at: Bank Julius Baer, Banque Cantonale de Geneve, Baumann & Cie, St. Gallische Kantonalbank, and Union Bank of Switzerland (the "former UBS").
The Committee considered reports prepared by the audit firms during the course of the first phase preparatory work, and pilot and document retention audits at its September 1997 meeting. The five preparatory work reports were: (1) the Review of the Swiss Banking Ombudsman, (2) the Review of the Swiss Bank Deposit Taking Laws and Regulations, Policies and Procedures, (3) the Study of the 1962 Swiss Government Decree on Heirless Assets, (4) the 1995 Survey by the SBA of Dormant Accounts, and (5) the Swiss Bank History Project. The Committee also considered the reports prepared based on each of the pilot and document retention audits, which had taken place from June through August 1997. The methodology of the pilot audits was reviewed, and a discussion on the audit firms' information gathering techniques, including the use of interviews, reviews of bank documents, and data testing procedures, took place. It was learned that the extent of documents relating to accounts open in the 1933-45 period varied substantially from bank to bank, but generally there was a substantial record of relevant documents. The audit firms' view was that it would be possible to create databases of accounts open or opened during the relevant period, but the firms could not estimate the completeness of such databases at that time.
After the completion of first phase historical research and data gathering, and the pilot investigations at ten banks, on-site work by two of the audit firms (KPMG and Price Waterhouse) began at two of the largest Swiss banks (the former UBS and the former SBC, respectively) in September 1997. This work continued through February 1998, when the second phase began. During this period, the firms made progress is identifying and reviewing relevant documents and otherwise preparing the banks for the second phase investigations.
It should also be noted that implementation of the first phase and the beginning of the second phase were each significantly delayed by negotiations with the audit firms over the terms of indemnification against litigation or similar losses arising from the investigation. These concerns were prompted, in part, by the then pending class action lawsuit in New York, and required extended negotiation and substantial financial commitments to resolve. Once resolved, the investigation has moved forward to meeting its goal of completion of the essential elements of the Committee's First and Second Phase Mandates by year end.
3. The Second Phase
The Second Phase is the heart of the investigation -- an account-by-account search. The basic directive is both clear and ambitious. Its methodology is contained in the Audit Firm Mandate - The Second Phase (the "Second Phase Mandate"). (See Attachment 3.) The Second Phase Mandate contains the following four basic elements: (1) collection of data on opened, closed, and dormant accounts during the relevant periods and the establishment of a computer database of this information; (2) matching of the database account names against the names of victims of Nazi persecution, including possible third party intermediaries of assets deposited with Swiss banks; (3) analyzing other sources of information, including official records, inside or outside of Switzerland to seek to supplement and cross-check information about identified accounts; and (4) use of other forensic techniques to seek to determine the existence of dormant accounts as defined by the Committee.
For each relevant Swiss bank, the mandated audit firms have been asked, for the period from the beginning of 1933 to the end of 1945, to seek to identify for victims of Nazi persecution all accounts in existence during the period or opened during the period that are now dormant. Similarly, for all accounts of possible victims that were opened but have been closed, the auditors have been requested to seek to determine, to the extent data is available, the facts and circumstances under which the accounts were closed, and, in particular, whether the account balance was paid to the account holder or his or her heirs or successors in interest. In addition, the Committee has directed the audit firms, in cooperation with Swiss authorities, to seek to find accounts opened by intermediaries including, but not limited to, lawyers, accountants, notaries, financial consultants, or others, from records or other information available at banks, with the aim of providing this information to the Swiss Government for further investigation where these accounts were opened for the benefit of victims of Nazi persecution.
1. Audit Firms and Banks
Four audit firms (now three, after the merger of Price Waterhouse and Coopers & Lybrand in July 1998) are conducting the second phase forensic accounting investigations. (See Attachment 4, which lists those banks currently being investigated and additional banks to be investigated in 1998.) KPMG is continuing its investigations at the former UBS (now known as UBS AG after its merger with the former SBC), Price Waterhouse at the former SBC (now known as UBS AG), and Arthur Andersen at Credit Suisse. The following subsidiaries are also included within the current scope of the investigation: for Credit Suisse, Affida Bank, Bank Heusser & Cie AG, Bank Hoffmann AG, Bank Leu AG, Neue Aargauer Bank, and Schweizerische Volksbank; for the former SBC, Adler & Co. Aktiengesellschaft, Armand von Ernst & Cie, Bank Ehinger & Cie AG, Bank Finalba AG, Banque Procrédit SA, BSI - Banca della Svizzera Italiana, and Ferrier, Lullin & Cie; for the former UBS, BDL Banco di Lugano, Cantrade Banca Privata Lugano, Cantrade Privatbank AG, and Schweizerische Hypotheken-und Handelsbank (Hyposwiss). In addition, in order to substantially complete the work of the second phase by the end of 1998, which is the target set forth in the Second Phase Mandate, Coopers & Lybrand was engaged to conduct the investigations at the private and cantonal banks. Currently, Coopers & Lybrand is working at eleven private and thirteen cantonal banks. (See Attachment 4.) More than 420 auditors are now in the field and their work is being supplemented by a large number of bank staffers and outside vendors, especially firms with expertise and experience in data entry. The Committee expects to add a sufficient number of priority banks so that by the end of 1998 the investigation will have involved banks with 85 percent of the balance sheet liabilities of Swiss banks in existence in 1945, including those banks that were the most likely to have received deposits from non-residents in the period before 1946.
2. The Investigative Methodology: "Bottom Up" Approach
(a) Accounts Database
One of the main methodologies has been to establish databases of relevant accounts and to compare those accounts databases with databases of victims of Nazi persecution that have been or will be developed. This involves a highly labor and time intensive process of searching for and identifying relevant documents, entering data in computer readable format, and quality control checking of this data. Once the data is entered and checked, the matching begins, followed by an analysis of the matches to determine their validity as well as the amount of balances in the matched account through research into bank branch and other records.
At Credit Suisse and the former SBC, the collection and identification of relevant records and the data entry process are substantially complete for various types of accounts or are well underway with a completion target of early October 1998. Work is still in progress at the former UBS to both identify relevant documents and to database these records. The process is complex because it involves, at least at the largest banks, hundreds of thousands of accounts and many different types of accounts, including current accounts, safe deposit boxes, saving accounts, numbered accounts, collective accounts, and custody accounts. Its complexity is compounded by the large number of mergers among Swiss banks that have involved transfers of records and the incorporation of the accounts of the acquired firm into the data processing systems of the acquiring bank, which often resulted in losses of important data that must be reconstructed to the extent feasible.
In some cases, especially for the smaller private banks with a relatively small number of clients, it appears that it may be possible to come close to reproducing the entire volume of accounts as they existed in the pre-1946 period. For many banks, particularly the largest commercial and cantonal banks, the expectation is that between 50 to 85 percent of the original accounts can be captured for analysis. However, the bank databases vary in completeness; the degrees of completeness range from virtually 100 percent of the relevant accounts, especially in the private banks, to a low of 30 percent in a few of the small cantonal banks. The weighted average coverage is expected to be in the range of 75 percent. The Committee believes that this approach, when combined with other methods of forensic analysis, provides the best method of achieving the most comprehensive identification of individual dormant accounts in Swiss banks that is now feasible. This approach will still leave a need for estimates of accounts of victims of Nazi persecution that could be attributable to the missing records. It is believed that the amount and quality of available data will provide a reasonable basis for estimating the remainder for which specific data is unavailable.
(b) Databases of Victims of Nazi Persecution
The success of the database methodology depends not only on the completeness of the databases of accounts opened and closed at Swiss banks, but also on coverage of the lists of victims of Nazi persecution to be matched against the databases. The Committee has developed or has obtained access to victim databases with over 300,000 names. In this process, the Committee has had the benefit of work that the audit firms have done to develop information on victims of Nazi persecution, incorporated into databases with over 100,000 names.
The Holocaust Museum in Washington, and Yad Vashem, the Holocaust Memorial in Israel, have been helpful in assisting the Committee in obtaining a more complete compendium of the names of victims of Nazi persecution that might have had deposits in Swiss banks. Adding to the Committee developed information are databases obtained from the Holocaust Museum of victims of Nazi persecution with a total of 200,000 names, including a database 78,000 Jewish deportees from France in the 1940s. Similar information is being sought for other countries with residents who held high levels of deposits in Swiss banks. Yad Vashem has a list of approximately 3.5 million names of victims, and a discussion regarding the establishment of a computer database of these names is currently underway. In addition, the International Tracing Service, an arm of the International Committee of the Red Cross, but governed by a board composed of governmental representatives, has a card file of 16 million names of victims of Nazi persecution, with about one-third of this list accessible through computer searches.
(c) The Database Matching Process
The audit firms have used the victim databases to begin preliminary testing of the matching process. So far, they report a sizable number of possible matches, but have not yet undertaken the research necessary to verify these preliminary indications of a match. However, the intensive matching and research effort is to begin in October when a sizable portion of the bank internal accounts databases are completed and the information on victims has been substantially expanded. Once the databases have been established, the computer matching itself does not take long. The time consuming effort is in the research necessary to verify the matches. We expect the audit firms will be using the last quarter of 1998 to engage in a focused process of researching preliminary name matches to determine the validity of these matches.
(d) List of Accounts to be Published
One product of the investigation will be further evidence of dormant accounts of victims of Nazi persecution. It is the Committee's understanding that these named accounts will be published as were the 5,570 foreign owned dormant accounts that were published by the Swiss Bankers Association in July and October, 1997. Claims to these accounts could then be brought before the Claims Resolution Tribunal for Dormant Accounts in Switzerland (the "Claims Resolution Tribunal"), which is already adjudicating the claims that have been made to the accounts published in 1997. (See Section IV(1) regarding the claims resolution process.)
3. "Top Down Approach"
The audit firms' work program includes development of information on the total on- and off-balance-sheet liabilities of Swiss banks, including data on such liabilities to non-residents of Switzerland. From this type of data the audit firms have been able to develop important information on the total number of the various types of accounts that were open in Swiss banks during the 1933-45 period, thus providing valuable data to test the completeness of the accounts databases developed as a result of the "bottom up" approach. In addition, from foreign liability data, developed as part of the top down analysis, it was hoped to be able to identify sufficient information about the nature of the underlying accounts so as to be able to (a) determine the proportion of foreign liabilities of Swiss banks that were deposited by the non-residents of Switzerland who were victims of Nazi persecution. Substantial progress has been made in developing this information by obtaining official Swiss National Bank aggregate data or individual bank data on the foreign liabilities of the investigated banks. This has been supplemented by estimates of on off-balance-sheet exposure to foreign account holders. Tables of on-balance-sheet foreign liabilities prepared by the Swiss National Bank for 1937 through 1945 for Axis countries, and for countries that were occupied by the Axis powers, indicate that in 1945 the total foreign on-balance-sheet liabilities of 63 Swiss banks to Axis and Axis occupied countries amounted to SFr. 743 million. (See Attachment 5.) The aggregate liability data indicates that, of the Axis and Axis occupied countries, liabilities to French depositors amounted to 45 percent of the total Swiss bank liabilities to these countries, while large volumes of liabilities were owed to Italy (12%), Romania (8%), Germany (8%), Belgium (5%), and Hungary (3%).
It is doubtful, however, that the aggregate liability approach will yield sufficient data to be able to identify dormant accounts or even provide the basis for estimating levels of dormant accounts at individual banks. It does not even provide a reliable basis for estimating the proportion of the foreign liabilities of Swiss banks held by individual victims of Nazi persecution. Nevertheless, the foreign liability data does provide valuable information for the ICEP investigation as it indicates the importance of having information about victims of Nazi persecution who were resident in the countries to which Swiss banks had substantial deposit liabilities, such as France, Italy, and Germany. Accordingly, the Committee has put a high priority on obtaining lists of victims of Nazi persecution from these countries and matching these lists against the accounts databases.
4. Valuation, Interest, and Fees
As part of the Second Phase investigations, the audit firms will provide information regarding the value of accounts at the time they became dormant or in 1945 if there is no identifiable date of dormancy, and the Committee will use this information to assist the Board of Trustees of the Independent Claims Resolution Foundation in establishing guidelines for the Claim Resolution Tribunal on establishing the principal value of accounts. Moreover, identified accounts will have to be adjusted to reflect their long dormant status by specifying an appropriate return on the established principal value. To this end, on October 31, 1997, the Independent Claims Resolution Foundation established a Panel of Experts on Interest and Fees and Other Charges chaired by Henry Kaufman, noted financial economist and former chief economist of Salomon Brothers, together with Walter Ryser, Emeritus Professor of Tax and Commercial Law at Berne University, and Elhanan Helpman, Professor of Economics at Harvard University and former Professor at Tel Aviv University. The Board of Trustees of the Foundation has called on the Panel to apply its expertise, in accordance with the policy guidance discussed in ICEP and adopted by the Board, to assist in establishing adjustments to interest or other returns on dormant deposits or other assets of victims of Nazi persecution, as well as to fees and charges on these accounts, to reflect the unintended long-term character of these assets.
Based on the final report by the Panel (see Attachment 6), the Board of Trustees of the Foundation, after consulting with the Committee, will adopt rules on the appropriate current return adjustments.
IV. Related Efforts of the Committee
1. Claims Resolution Process
As ICEP progressed in its work, it became apparent that a claims resolution process should be established in order to determine the ownership of long dormant accounts that have been identified by the Swiss banks or that will be identified as a result of the ICEP investigation. To this end, the Committee made two recommendations: (1) publication of the names of dormant account-holders who had already been identified by Swiss banks, and (2) the establishment of a claims tribunal where claims to publish accounts could be adjudicated by fully objective and impartial arbitrators in a claims resolution process that would be cost free to claimants.
In response to these recommendations a claims resolution process was adopted. On July 23,1997 and October 29, 1997, the Swiss Bankers Association published lists containing dormant accounts of both residents and nonresidents of Switzerland from the period prior to the end of World War II based on a SFBC circular letter to Swiss banks requiring them to report these accounts. Additional names publications will follow when other dormant accounts are identified by the Swiss banks or the ICEP process.
On June 25, 1997, ICEP, the SBA, and the SFBC agreed on a comprehensive claims adjudication process. As part of the effort to adjudicate claims to published accounts as quickly as possible, it was agreed to establish a center to receive claims to ownership of the published dormant accounts, administered by ATAG Ernst & Young, which would provide information to claimants, register all submitted claims, and prepare the file on each claim for use in the claims resolution process. It was also agreed to establish an independent and objective international claims resolution tribunal to definitively and equitably decide claims. To help describe the work of the Tribunal, Attachment 7 is a series of slides used in a presentation by the Secretariat's staff in an open meeting of the Board of Trustees of the Independent Claims Resolution Foundation on September 11, 1998. (See Attachment 7.) The Tribunal operates under relaxed standards of proof that recognize the difficulty of presenting evidence in the tragic circumstances of the Holocaust and of World War II. In September 1997, the Independent Claims Resolution Foundation, whose Board of Trustees consists of Paul A. Volcker (Chairman), Israel Singer, and René Rhinow, was established to operate the claims settlement process for resolving claims to published dormant accounts. Currently, sixteen distinguished bankers and lawyers serve as arbitrators for the Claims Resolution Tribunal. (See Attachment 8.)
Over 12,500 claims were submitted to ATAG Ernst & Young. Of these, 9,500 claims relate to the 5,570 accounts published by the Swiss banks in July and October 1997. These claims were forwarded to the Claims Resolution Tribunal, which is in the process of adjudicating such claims. The remaining claims are general claims for unidentified, unpublished Swiss accounts. These claims have been forwarded to ICEP, which has instructed the audit firms to search for these accounts.
2. The Helen Junz Study
In addition to the work being conducted by the audit firms, and under the overall sponsorship of the Committee, economist Helen Junz is preparing a study of the wealth of Jewish communities in certain European countries--Austria, Germany, the Netherlands, and Poland. Ms. Junz's study will provide a macro-economic dimension to the effort to resolve the question of dormant accounts in Swiss banks by estimating the wealth of the Jewish populations in the countries of likely provenance of such accounts -- that is the Nazi-dominated countries of Europe. Ms. Junz delivered a "Preliminary Report on the Wealth Position of the Jewish Population in Nazi-Occupied Countries, Germany and Austria" in December 1997. The final report is expected in December 1998.
3. Cooperation with Bergier Commission
The MOU provided that ICEP would cooperate with Swiss Government investigations of looted assets. The Independent Commission of Experts: Switzerland - Second World War (the "Bergier Commission") was established in December 1996 by a decree of the Swiss Parliament. The Bergier Commission was given the mandate of conducting a broad and comprehensive historical research on the role of Switzerland, and particularly that of its financial organizations and institutions, during the World War II period, as well as on the manner in which Switzerland dealt with this period of its history. The Committee and the Bergier Commission have agreed to cooperate and share information in areas of mutual interest. To implement this cooperation, members of each group have attended meetings of the other, and a statement on coordination and cooperation was adopted. Moreover, the audit firms are meeting regularly with staff of the Bergier Commission.
ATTACHMENT 1
CHAIRMAN
Paul A. Volcker, former Chairman of the Board of Governors of the Federal Reserve System
MEMBERS
Appointed by Jewish Organizations:
Ruben Beraja, President, Banco Mayo Coop. Ltdo.
Avraham Burg, Chairman, Jewish Agency for Israel
Ronald S. Lauder, President, RSL Communications Ltd.
ALTERNATES
Zvi Barak, Chairman of the Board of Trustees, ICC Jerusalem International Convention Center
Israel Singer, Secretary General, World Jewish Congress
Appointed by the Swiss Bankers Association:
MEMBERS
Curt Gasteyger, Professor, Graduate Institute of International Studies, Geneva, Switzerland
Klaus Jacobi, former State Secretary for Foreign Affairs (Switzerland)
Peider Mengiardi, former Chairman of the Board of Directors, ATAG Ernst & Young
ALTERNATES
Hans J. Baer, former Chairman of the Board of Directors, Bank Julius Baer
René Rhinow, Professor of Law, University of Basel; Senator, Swiss Parliament
ATTACHMENT 2
November 19, 1996
I. INTRODUCTION
(1) This memorandum provides the mandate and instructions to audit firms to implement the work program of the Independent Committee of Eminent Persons (the "Committee" or "ICEP") under a Memorandum of Understanding ("MOU") of May 2, 1996, between the World Jewish Restitution Organization ("WJRO"), the World Jewish Congress ("WJC") (representing also the Jewish Agency and Allied Organizations), and the Swiss Bankers Association ("SBA"). After introductory material, this memorandum describes the mandate and instructions to audit firms for the first phase of audit work, including preparations for audits of Swiss banks and pilot audits of five of these banks.
II. THE ROLE OF THE ICEP
(2) ICEP was established to conduct an investigation to determine whether there are any dormant accounts and other assets and financial instruments of the victims of Nazi persecution that were deposited before, during, and immediately after the Second World War in banks located in Switzerland. The MOU provides that the ICEP will appoint an international auditing firm to implement this mandate and instruct the firm as to the scope of its duties. The ICEP met on August 14, 1996, and, among other actions, authorized a subcommittee to interview international audit firms operating in Switzerland to ascertain their views on the means, methods, and personnel that would be employed to carry out the mandate of the ICEP as established by the MOU. Six major international auditing firms including Arthur Andersen, Atag Ernst & Young, Deloitte & Touche Experta, KPMG Peat Marwick, Price Waterhouse, and STG-Coopers & Lybrand, responded to this invitation, and presentations were made by each of these firms to the subcommittee on September 12 and 13, 1996. In addition, on November 4, 1996, in response to a request from the Committee, these six firms submitted formal proposals that confirmed their agreement to implement the mandate, described their program for implementing the mandate, including the personnel and other resources that will be employed, and furnished the ICEP with the amount of the charges for their services.
(3) In the light of the MOU, the presentations made to the subcommittee, and the proposals submitted by the six international accounting firms, this memorandum establishes the mandate of the audit firms and provides the instructions to the audit firms that have been selected as to their duties, functions, and procedures for the First Phase of the work of the ICEP which will consist of a program to prepare for audits, followed by pilot audits of five Swiss banks.
III. BACKGROUND
(4) The persecution of minorities by the Nazis and others, prior to and during World War II, made it likely that many of the victims sought to move their assets to safety in neutral or Allied countries. In view of neutral Switzerland's borders with the perpetrators of this persecution, Swiss banks and other Swiss financial intermediaries were recipients of at least some of the assets in search of safety. The loss of life that accompanied the pre-war and wartime persecution has resulted in the concern that the victims were unable to claim these assets entrusted to others for safekeeping, and that they remain as dormant accounts in the institutions in which they were placed for safety.
(5) In 1962, the Swiss Government adopted a Federal decree, that applied not only to banks, but to every person in Switzerland in possession of unclaimed assets belonging to victims of racial, religious, or political persecution by the Nazi regime, designed to identify and describe any unclaimed assets that belonged to the victims of persecution. At that time, SFr. 9.5 million were reported to the Federal authorities, 75 percent of which were distributed to the rightful owners, and the remaining 25 percent to the Swiss Jewish Society and the Swiss Organization for Refugees.
(6) Nevertheless, concerns still remain that there are unclaimed assets that had been deposited with Swiss banks. In response to these concerns, the SBA launched a survey of Swiss banks, and on January 2, 1996, the SBA announced the interim results of this statistical survey that identified a total of 775 accounts amounting to SFr. 38.7 million that had been opened by foreign customers before May 8, 1945, and that had been dormant at least since 1985. Since the interim results of the SBA survey have been published, some banks have identified additional accounts and amounts of foreign customers, which the SBA estimates could increase the total amount of such dormant accounts by 10 percent.
(7) Continuing concerns that an independent investigation be made of dormant accounts led to the formation of the ICEP. It is for the purpose of initiating this independent investigation that the First Phase mandate and instructions contained in this memorandum have been formulated.
(8) The assignment of the Committee is of historic importance. The goal of the ICEP is to conduct a comprehensive, thorough and independent investigation that can satisfy the reasonable demands of public opinion that these matters be definitively settled. In carrying out this task, the intention of the ICEP is to provide as clear answers as the presently existing record will now permit about assets entrusted by victims of Nazi persecution to the custody of banks in Switzerland through an intensive investigation based on unfettered access to relevant Swiss bank files and personnel. In the same manner, the investigation will examine the methodology of the Swiss banks, the SBA and the office of the Ombudsman as regards the search for accounts and assets in question and to record its conclusions. The Committee fully recognizes the great difficulty of the task ahead as it requires following an audit trail that is now dimmed by the passage of more than fifty years. Because of the historic importance of the work assigned to the Committee and its difficulty, extraordinary efforts of forensic auditing and historical analysis will be required by the auditors, and usual audit practices, such as sampling to verify the accuracy of records, must be effectively supplemented by the more rigorous disciplines of forensic auditing.
IV. FIRST PHASE MANDATE AND INSTRUCTIONS
(9) The major objective of the investigative audit of Swiss banks to be governed by this mandate and instructions is to determine whether there are any previously unreported dormant accounts and other assets and financial instruments that were deposited or otherwise conveyed to the custody of Swiss banks before, during or immediately after the Second World War, regardless of the domicile of the client (hereinafter "dormant accounts"). The scope of the audit includes not only the determination of the existence of previously unreported dormant accounts, but also an examination of whether there were accounts that would presently exist as dormant accounts in Swiss banks but for the fact that actions by the depository Swiss banks or others caused these accounts to be categorized as other than dormant accounts as a result of actions that were inconsistent with the banks' legal or fiduciary duties.
(10) In carrying out this audit, with respect to each bank audited, the auditors shall, inter alia, examine bank records and other available sources of information to determine:
(a) The scope and effectiveness of
(i) the methodologies and guidelines of the SBA and the office of the Ombudsmen, and
(ii) the methodologies and implementation procedures of individual Swiss banks, as well as the banks' compliance with Swiss laws and regulations, as well as directives of the SBA,
as regards previous searches for dormant accounts;
(b) the accuracy and integrity of bank record keeping for accounts that became dormant accounts both before and after they became dormant accounts, and compliance with Swiss laws and regulations on destruction of bank records;
(c) policies and practices on the payment of interest on dormant accounts, as well as with respect to the application of fees and charges on such accounts, including any differences in such interest, fees and charges for dormant accounts compared with accounts held by persons with non-dormant accounts;
(d) the number of dormant accounts, the total value of the amounts in these accounts; the number and the total amount in such accounts where there have been contacts with account holders or other authorized persons since 1945; and an estimate on how much of the total amount of such accounts may have been opened by persons who were victims of persecution for religious, racial or political reasons during the period 1934-1946.
(11) The Auditors shall determine whether or not there is any evidence of:
(a) any deliberate or inadvertent record keeping errors or misclassifications of accounts, missing records, irregularities in record keeping, as well as any evidence of misapplication or embezzlement of dormant accounts; and
(b) any lapses from accepted standards of ethical behavior expected of bank or other fiduciaries at the time any such actions were taken.
(12) In addition, to cooperate fully with the historical and juridical investigation to be established by the Swiss Government under legislation now pending before the Swiss Parliament, particularly with respect to the focus of this investigation on the identification of any assets that may have been looted by the Nazis and placed for safekeeping in Switzerland, the auditors shall report to the ICEP any evidence relevant to this investigation that comes to their attention in the course of conducting the audit as instructed in this Section IV, including evidence of accounts containing looted assets or information indicating a breach of fiduciary duty by fiduciaries, so that the ICEP can take appropriate action on a case-by-case basis to report this information to the Swiss Government.
(13) For the purpose of implementing this mandate and instructions the following definitions shall apply:
(a) The term "account" means accounts, assets or financial instruments of every kind, including, but not limited to cash, securities, art, jewelry, collectibles, gold and other valuable metals, held by a Swiss bank in any form and under any legal regime, e.g., general deposits, special deposits, safety deposit boxes or other trust, custody or funds management arrangements.
(b) The term "dormant account" means an account
(i) with respect to which there have been no withdrawals or additions by, and no correspondence or other contacts with the account holder(s) or their representative(s) or with the beneficiary(ies) for a period of at least ten years in arrears from November 1, 1996; or
(ii) whose holder(s) or representative(s) (physical person(s) or legal entity(ies)) are connected with the bank and with respect to which the only activity for a period of at least ten years in arrears from November 1, 1996, have been charges of fees and/or costs of administration or other action by the bank.
V. THE FIRST PHASE OF WORK - PREPARATIONS AND PILOT AUDITS
(14) The First Phase of the audit work shall consist of data gathering and analysis to prepare for the pilot audits, followed by pilot audits of five Swiss banks. The first three months of the First Phase shall be devoted to preparing for the audit. To carry out this First Phase, a preparatory committee shall be established which shall be composed of a chairman and members selected by the ICEP taking into account the recommendations of the audit firms. This preparatory committee will have the responsibility for gathering information that is necessary to prepare for the audit and for assigning the work projects specified in this Section V or otherwise approved by the ICEP to the individual selected audit firms for implementation.
(15) In developing the necessary information, including the information referred to in paragraphs (16) and (17) below, the audit firms should draw upon their knowledge and experience about the Swiss banking system and Swiss bank procedures and controls, and where such knowledge exists in the audit firms they should not perform de novo research to develop this information. In addition, to expedite the preparatory work, on-site visits to banks to obtain information from records and personnel, as well as the use of questionnaires directed to banks, techniques which are expected to be used extensively in the pilot audits and in the Second Phase audits, should be minimized in the preparatory work, and used where necessary to form an overview of operational methods and procedures to serve as a basis for on-site auditing in the pilot and Second phases of the audit program.
(16) As part of this preparatory work, an analysis shall be made of the procedures, methods and techniques that were used by the victims of Nazi persecution to place assets with Swiss banks, and include:
(a) the timing of historical events that created the atmosphere that generated the flow of assets in search of safekeeping, taking into accounts any contemporary records or reports, including reports of the destination of such funds from newspaper reports or other contemporary documents;
(b) in connection with (a) above, an analysis of the usefulness to the audit of any official or other documentation that recorded capital or other financial flows into Switzerland, as well as any other contemporary official documents such as the 1945 Swiss census of German assets in Switzerland, and the "Safehaven" documents in the archives of the United States and the United Kingdom;
(c) a review of the records of the Swiss bank Ombudsman and other accounts of victims' claims to assets in Swiss banks for any assistance such records may provide in conducting the audit;
(d) a list of the names of the Swiss banks that were open in the 1934-1946 period, as well as any available information on the likelihood of their having received assets from victims of persecution, and, if they no longer exist, the place of disposition of their records;
(e) the procedures and methods used to open accounts that later became dormant;
(f) an analysis of balance sheets and other financial data that may be available on Swiss banks during the period 1934-1946 to determine their usefulness in carrying out the audit objectives;
(g) a compilation of the laws and regulations in Switzerland governing the opening of accounts during the 1934-1946 period, and record keeping with respect to such accounts from the time of opening until the present; and
(h) the Swiss laws and regulations, and bank policies and procedures, for paying interest and crediting dividends; as well as for assessing fees, commissions or other similar charges, on open and dormant accounts from 1934 to the present.
(17) As part of the First Phase preparatory work, the preparatory committee shall also:
(a) review the work of previous surveys of dormant accounts in 1962 and 1996;
(b) review the record keeping practices of individual banks at the time of account opening during the 1934-1946 period, and subsequently; the banks' practices with respect to the retention and destruction of records including account opening, closing, transactional and other record keeping; records storage or archiving systems; the chain of custody for relevant bank records, and other related matters relevant to the audit; all as may be necessary to establish a general understanding of such bank facilities and systems as a basis for the auditing of individual banks in the pilot audits and in the audits to be made in the Second Phase.
(c) determine the feasibility of creating a database of all accounts opened by Swiss banks in the period 1934-1946 and of any relevant information available on such accounts up to the time of closing of such accounts; and
(d) for the purpose of making the pilot audits, recommend for selection by the ICEP for inclusion in the pilot audits two offices of the largest Swiss banks, one Cantonal bank, one private bank, and one regional bank, based upon the probability that they would have been likely to have received funds in search of safety because of a reputation as a recipient of such funds, or because of a location close to a border.
VI. THE FIRST PHASE PILOT AUDITS
(18) Once the preparatory work provided for in Section V has been completed, and the ICEP has chosen the Swiss banks to be audited in the pilot audit program, as well as the audit firms to audit these banks, the auditors shall promptly commence the pilot audits of the banks so selected. In making this audit of Swiss banks, the auditors shall, in consultation with the ICEP, employ all necessary auditing and investigative techniques and procedures, including the examination of records, the interview of bank personnel and others with knowledge of the matters under review, and data analysis using advanced data processing techniques. The ICEP expects the pilot audit program to take three months. The principal objective of the pilot audit program is to assist the ICEP in developing final audit instructions for the Second Phase audits.
(19) With respect to access to information and bank secrecy, the MOU provides that the SBA will assure the auditors unfettered access to all relevant files in banking institutions regarding dormant accounts and other assets and financial instruments deposited before, during and immediately after the Second World War. In addition, representatives of the Swiss Banking Commission ("SBC") have assured the ICEP that the SBC will cooperate with the ICEP with a view to assuring that information requested by the audit firms of banks will be made available to them. However, the ICEP itself would be subject to the information availability restrictions of Swiss bank secrecy law. Nevertheless, the SBC has also assured the ICEP that it would be able to have access to all the information developed by the auditors except for the names of account holders or information that would necessarily reveal the name of an account holder and the auditors are so instructed not to provide such information to the ICEP. The SBC representatives also confirmed that the audit firms could use non-Swiss personnel from their offices outside of Switzerland to assist in the performance of the audits.
VII. REPORTS
(20) Auditors shall keep such logs and records of their work as necessary to document fully the techniques and procedures used to carry out the audit as well as all actions taken during the course of the audit. The preparatory committee shall prepare brief progress reports for the ICEP on the results of their work at monthly intervals, and a comprehensive report on the conclusion of the preparatory work.
(21) Each audit firm selected to audit a bank or banks in the pilot audit program shall make a brief progress report to the ICEP at the end of each month of work and a final comprehensive report on the pilot audits that shall include a description of the auditing methods and procedures, of all information reviewed, all findings and conclusions, as well as their recommendations for any changes to the scope of the audit. Counsel to the ICEP will receive the reports of the preparatory committee and from the audit firms in the First Phase, and will serve liaison as a contact point for conveying any further instructions from the ICEP, as well as to receive comments from the audit firms conducting the pilot audits. Responding firms should be aware that price of services will be only one of the factors that will be taken into account in making the selection of firms to carry out the audit.
VIII. THE SECOND PHASE
(22) Based on the preparatory work and pilot auditing in the First Phase, the ICEP will formulate a final mandate and instructions for the auditing of the Swiss banks that the ICEP determines are to be audited taking into account the advice of the audit firms. The ICEP, after consulting the audit firms, will designate the banks to be audited by each firm and will take the necessary steps to establish reporting requirements and coordinate the work of the audit firms in order to obtain comparable results. The ICEP now expects this Second Phase to begin in June 1997 and to be completed by approximately June 1998.
Members: Mr. Paul A. Volcker, Chairman; Mr. Reuben Beraja, Mr. Avraham Burg, Prof. Dr. Curt Gasteyger, Prof. René Rhinow, Prof. Dr. Klaus Jacobi, Mr. Ronald S. Lauder.
Alternates: Mr. Hans Baer, Mr. Zvi Barak, Dr. Peider Mengiardi, Mr. Israel Singer
ATTACHMENT 3
INDEPENDENT ASSOCIATION OF EMINENT PERSONS*
MEMORANDUM
January 30, 1998
Audit Firm Mandate - The Second Phase
I. Introduction
II. The Four Basic Elements
(a) collection of data on opened, closed, and dormant accounts during the Relevant Period and the creation of computer databases of this information;
(b) an analysis of the databases of account names established under (a) to determine whether the names of victims of Nazi persecution, third party intermediaries of such victims, and other persons are among the depositors or account holders whose names are on the databases of opened, closed or dormant accounts such as by comparing these databases against other databases of victims of Nazi persecution, of claimants on their behalf, of accounts that were blocked by government orders during World War II, and other sources of information;
(c) gather and analyze other sources of information mainly inside Swiss banks but also including official records, inside or outside of Switzerland to seek to supplement and cross-check information about identified accounts; and
(d) where no opening, closing, or transaction records exist, use of other forensic accounting investigative techniques to seek to determine the existence of dormant accounts, as well as those accounts that should have been dormant but for the fact that the funds in the account are unavailable for reasons other than their return to the original depositors or their legal representatives.
III. Types of Information to be Developed
IV. Utilizing Bank Data Task Forces
V. Interim Report
* Members: Mr. Paul A. Volcker, Chairman; Mr. Reuben Beraja, Mr. Avraham Burg, Prof. Dr. Curt Gasteyger, Prof. Dr. Klaus Jacobi, Mr. Ronald S. Lauder, Dr. Peider Mengiardi.
Alternates: Mr. Hans Baer, Mr. Zvi Barak, Prof. René Rhinow, Mr. Israel Singer.
ATTACHMENT 4
ICEP Forensic Accounting Investigation Banks - 1998
AA= Arthur Andersen KPMG = KPMG
CL= Coopers & Lybrand PW = Price Waterhouse
| Name of Bank Currently Being Investigated | ICEP Audit Firm | ||
| Aargauische Kantonalbank |
|
||
| Banca dello Stato del Cantone Ticino |
|
||
| Bank Sarasin & Cie |
|
||
| Banque Cantonale du Jura |
|
||
| Basellandschaftliche Kantonalbank |
|
||
| Basler Kantonalbank |
|
||
| Berner Kantonalbank |
|
||
| Bordier & Cie |
|
||
| Coutts & Co. AG |
|
||
| Dreyfus Söhne & Cie AG |
|
||
| E. Gutzwiller & Cie Banquiers |
|
||
| Gonet & Cie |
|
||
| Graubündner Kantonalbank |
|
||
| La Roche & Cie., Banquiers |
|
||
| Landolt & Cie, Banquiers |
|
||
| Mirabaud & Cie |
|
||
| Rahn & Bodmer, Banquiers |
|
||
| Schaffhauser Kantonalbank |
|
||
| Schweizerische Bankgesellschaft (UBS) |
|
||
| Schweizerische Kreditanstalt (Credit Suisse) |
AA |
||
| Affida Bank | AA | ||
| Bank Heusser & Cie. AG | AA | ||
| Bank Hofmann AG | AA | ||
| Bank Leu AG | AA | ||
| Neue Aargauer Bank | AA | ||
| Schweizerische Volksbank | AA | ||
| Schweizerische Bankgesellschaft (UBS) |
|
||
| BDL Banco di Lugano | KPMG | ||
| Cantrade Banca Privata Lugano SA | KPMG | ||
| Cantrade Privatbank AG | KPMG | ||
| Schweizerische Hypotheken-und Handelsbank (Hyposwiss) | KPMG | ||
| Schweizerischer Bankverein (formerly SBC) |
PW |
||
| Adler & Co. Aktiengesellschaft | PW | ||
| Armand von Ernst & Cie | PW | ||
| Bank Ehinger & Cie AG | PW | ||
| Bank Finalba AG | PW | ||
| Banque Procrédit SA | PW | ||
| BSI - Banca della Svizzera Italiana | PW | ||
| Ferrier, Lullin & Cie | PW | ||
| Schwyzer Kantonalbank |
|
||
| St. Gallische Kantonalbank |
|
||
| Thurgauer Kantonalbank |
|
||
| Wegelin & Co. |
|
||
| Zuger Kantonalbank |
|
||
| Zürcher Kantonalbank |
CL |
||
CL= Coopers & Lybrand DT= Deloitte Touche PW = Price Waterhouse
| Name of Bank to be Investigated | ICEP Audit Firm | ||
| Bank Aufina |
|
||
| Bank Falck & Co. AG |
|
||
| Bank J. Vontobel & Co. AG |
|
||
| Bank Julius Baer & Co. AG |
|
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| Banque Cantonale de Genève |
|
||
| Banque Cantonale Neuchâtëloise |
|
||
| Banque Cantonale Vaudoise |
|
||
| Baumann & Cie |
|
||
| Coop Bank |
|
||
| Darier, Hentsch & Cie |
|
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| Hentsch, Chollet & Cie. |
|
||
| Lombard, Odier & Cie. |
|
||
| Luzerner Kantonalbank |
|
||
| Mourgue d'Algue et Cie. |
|
||
| Pictet & Cie |
|
||
| Schweizerischer Bankverein (former SBC) Subsidiary: | |||
| Solothurner Bank Soßa | DT | ||
| Société Bancaire Julius Baer SA | DT | ||
ATTACHMENT 5
Country |
Due to banks-sight | Due to banks-other | Sight deposits-customers | Time deposits- customers |
Savings and similar deposits |
Total |
|
| France | occupied | 53.3 | 4.2 | 213.5 | 9.4 | 51.2 | 331.6 |
| Italy | Axis power | 23.6 | 3.3 | 50.9 | 4.0 | 8.9 | 90.7 |
| Romania | occupied | 13.8 | 0.1 | 50.7 | 0.4 | 1.1 | 66.1 |
| Germany | Axis power | 19.6 | 0.3 | 24.9 | 2.3 | 17.3 | 64.4 |
| Belgium | occupied | 14.7 | 0.1 | 21.5 | 0.8 | 1.3 | 38.4 |
| Hungary | occupied | 11.0 | 0.1 | 13.1 | 0.8 | 0.7 | 25.7 |
| Low Countries | occupied | 14.4 | - | 10.0 | - | 0.8 | 25.2 |
| Czechoslovakia | occupied | 13.7 | - | 6.5 | 0.3 | 1.1 | 21.6 |
| Bulgaria | occupied | 9.1 | - | 5.0 | 0.1 | 0.2 | 14.4 |
| Yugoslavia | occupied | 3.1 | - | 7.1 | 0.1 | 0.5 | 10.8 |
| Denmark | occupied | 6.1 | - | 3.0 | - | 0.2 | 9.3 |
| Russia | occupied | 6.6 | - | 2.2 | - | 0.2 | 9.0 |
| Austria | Axis power | 2.6 | - | 3.5 | - | 1.8 | 7.9 |
| Greece | occupied | 0.5 | - | 6.3 | 0.5 | 0.4 | 7.7 |
| Luxemburg | occupied | 1.1 | - | 3.4 | 0.1 | 0.1 | 4.7 |
| Poland | occupied | 0.1 | - | 1.6 | 0.2 | 0.4 | 2.3 |
| Finland | occupied | 1.4 | - | 0.5 | - | 0.3 | 2.2 |
| Norway | occupied | 0.6 | - | 1.3 | - | 0.1 | 2.0 |
| Total Axis powers or (partly) occupied | 195.3 | 8.1 | 425.0 | 19.0 | 86.6 | 734.0 | |
| Total not occupied countries | 140.3 | 15.0 | 390.0 | 23.3 | 32.9 | 601.5 | |
| Grand total | 335.6 | 23.1 | 815.0 | 42.3 | 119.5 | 1,335.5 | |
Source data used for this table: Swiss National Bank - Department of Economic Studies and Statistics. Document name: Foreign assets and deposits in Swiss Banks and assets and liabilities in foreign currencies of Swiss Banks at December 31, 1945, Table No. 4.
This document was found by Firm A in May 1998 in the archive of the Swiss National Bank.
The banks included in this statistic are:
23 Cantonal Banks
5 Large banks
27 Local and other banks
8 Branches of foreign banks
ATTACHMENT 6
September 4, 1998
Mr. Paul A. Volcker, Chairman
Independent Claims Resolution Foundation
C/o 610 Fifth Avenue, Suite 420
New York, NY 10020
Dear Paul:
I want to hereby inform you of the recommendations of the Panel of Experts on Interest, Fees and Other Charges, established by the Independent Claims Resolution Foundation, whose function and responsibilities were described and detailed to me in your letter dated November 14, 1997.
Several important factors influenced our recommendations. It is most critical to recognize the unusual economic and financial backdrop that prevailed in the 1940s and indeed for at least the early post world War II years. Investment alternatives were highly limited. They consisted primarily of government bonds, deposits, and a small volume of corporate obligations. Mutual funds, mortgage securities, and a diversity of foreign obligations were not an investment alternative at that time in Switzerland. The Swiss equity market was exceedingly small and not very liquid. Institutional portfolio management was generally rather passive and consisted virtually entirely of fixed-income obligations. Dynamic portfolio management, the measuring of portfolio performance, the rapid growth of mutual funds and international portfolio investing are of recent vintage and have been generally driven by American market participants and not by Swiss institutions.
We also recognize that small sums of investable funds tend to have much more limited opportunities than do large pools. This is because small sums have limited capacity to diversify risks. This is somewhat less so today than in the first few decades following World War II but even today prudence suggests that small portfolios cannot assume large risks.
Incorporated in our recommendations is also the very unusual characteristic of the funds of Holocaust victims most importantly the involuntary dormancy of the accounts that prevented the owners from making any investment decisions. This influenced our decision concerning the return on the investment as well as the appropriate fee that should be charged by the Swiss institutions. The panel took the view that the dormancy should begin January 1, 1945. However, the Independent Claims Resolution Committee may conclude that the dormancy should begin with 1940 because the victims of the Holocaust probably were constrained in their investment decision once world War II began. We, therefore, have included calculations starting with 1939. Our analysis ends with data for June 30, 1998, but the calculations assume that the returns for the first half of 1998 will prevail for the entire calendar year. In addition, it should be noted that our evaluations are confined to the accounts of Holocaust victims.
The data used in our valuations were supplied to us by the Swiss National Bank. There were gaps in these statistics. Dividend yields were not available for the entire period under consideration. In addition, data could not be supplied on the composition of and rates of return on managed accounts and on accounts where Swiss institutions could be deemed to have had the discretion to invest in equities and fixed-income obligations. For these portfolios, we estimated the likely portfolio composition and rates of return.
With these caveats in mind, our data and recommendations fall into four categories of accounts: (1) demand, savings and time deposits, (2) bonds; (3) equities and (4) managed accounts.
Demand, Savings and Time Deposits. There should be no difference in the rate of return accorded to demand, savings and time deposits. This is because these deposits were out of the control of the accounts holders. In addition, because these deposits have become in fact involuntarily long term, no fee should be charged by the bank for maintaining the account. For the period involved, the following returns were achieved: for demand deposits, a compounded annual average of .74% for time and savings deposits, a compounded annual average of 3.32% (see Figures 1 and 4.
In addition, we concluded that when deposits originally exceeded S.F.10,000, the compensation should be the bond rate of return. This is because deposits of this size would have had the opportunity to be invested in higher yielding investments during the post world War II years if the deposits had not been frozen.
An alternative option for all deposit accounts including demand, savings, and time deposits would be to award them the long-term bond yield, if you deem the unusual nature of the dormancy an overriding consideration. In that case, the annual average return and total compensation would be as noted in the following paragraph.
Bonds. For these obligations, we assumed that they consisted entirely of the obligations of the Swiss Government. The availability of other bonds in Switzerland during the 1940s was very limited. The safekeeping charge for these investments were small (as shown in Figure 7). The average annual net yield for these bonds was 4.00% and the accumulated value S.F. 8.33 for S.F.1 invested in 1945.
Equities. Our compensation recommendation for equity investments are based on the data shown in Figure 10. A few gaps in this data should be recognized. The indices provided for Swiss stocks were discontinued and were rebased in 1967 and again in 1988. The index prior to 1989 did not include dividend reinvestments. We concluded that a 2% dividend payment for all prior years would be appropriate.
Our recommendation is that equity investors be granted an average annual rate of return net of fees of 8.08%, which is equal to S.F.66.46 for every S.F.1 invested in 1945. These compensations are net of safekeeping and management fees. As the data in Figure 10 shows, much of this sharp increase in equity values has taken place since the start of the 1990s.
Managed Accounts. The committee did not have data on the range of investments in these accounts. After a broad review of market developments during the period from 1945 to 1997, we concluded that in the early Post World War II years, from 1945 to 1955, these portfolios were most likely entirely confined to Swiss Government bonds and that a gradual liberalization in portfolio management could be assumed to have occurred subsequently with a rising proportion being allocated to equities. As a result, the following allocations were applied:
| YEARS | BONDS | STOCKS |
| 1954-55 | 100% | 0% |
| 1956-65 | 95% | 5% |
| 1966-75 | 90% | 10% |
| 1976-85 | 75% | 25% |
| 1986-97 | 60% | 40% |
In addition, we recommend a management fee of 0.5% annually on the equity portion and a small safekeeping fee for both type of assets. Based on these modifications, we recommend an annual rate of return of 5.20% and an accumulated value of S.F. 15.46 for S.F1 investment in 1945.
Inflation Adjusted Returns. In all of the subgroups mentioned above, with the exception of demand deposits, positive rates of returns prevailed after adjusting for inflation as measured by the Swiss consumer price index. Understandably, these adjusted returns were the lowest for deposits, higher for bonds, and the best for equities. These real rates of return are also shown in detail in the accompanying figures.
Dealing With Accounts The Initial Amount of Which Is Not Documented. There may be instances where institutions do not have the documentation showing the value of the account at the beginning of the dormancy. Under such circumstances, it may be advisable to take the amount shown at the earliest entry date on the books of the institutions and to discount it back to 1945 by the factors provided in the accompanying tables for the type of account in question after elimination of all anticipatory taxes. We recognize that the actual procedure to be followed for dealing with these accounts will vary and may require much more definitive treatment. While we are prepared to assist in this matter, this task may well be best accomplished by your accountants.
Safe Deposit Boxes and So-Called "Geschlossene Depots." The panel does not make any recommendation for the payment of any interest for these kinds of banking relations, since the institutions involved have no control whatsoever over the values deposited nor any knowledge of what they consist of.
The table below summarizes our recommendations. To aid you and the Committee in your discussions, it depicts and compares the effects of 1 S.F. over the period 1939-1998 with that of 1945-1998. The details supporting the data for 1939 through 1998 are attached as Figures 16 through 32.
Recommended Value to be Attributed to 1 S. F. By Type of Investment
| 1945-1998 (1) | 1939-1998(1) | |
| Demand, Savings and Time Deposits | 5.82 | 6.81 |
| Bonds | 8.33 | 10.17 |
| Equities | 66.46 | 70.45 |
| Managed Accounts | 15.46 | 18.89 |
1. Full Year 1998 is an estimate utilizing values and/or rates prevailing at June 30, 1998.
We, of course, would be willing to elaborate on our recommendations if there is a need to do so.
Sincerely,
Panel of Experts on Interest, Fees and Other Charges
Henry Kaufman, Chairman
Elhanan Helpman
Walter Ryser
ATTACHMENT 7
Slides Used by the Secretariat of
the Claims Resolution Tribunal for Dormant Accounts in Switzerland
in a Presentation at an Open Meeting of
the Board of Trustees of the Independent Claims Resolution Foundation
on September 11, 1998
THE CLAIMS RESOLUTION TRIBUNAL FOR
DORMANT ACCOUNTS IN SWITZERLAND
The Claims Resolution Tribunal for Dormant Accounts in Switzerland has been established to resolve all claims submitted as part of the Claims Resolution Process that relate to dormant accounts.
How many dormant accounts are there?
-- July 23, 1997 List: 1,867 dormant accounts, holding approximately 60 million Swiss Francs
-- October 29, 1997 List: 3,703 dormant accounts, holding approximately 12 million Swiss Francs
These balances are based on figures provided by the banks, and do not include any adjustments based on interest and fee guidelines.
Article 22 Relaxed Standard of Proof
The Claimant must show that it is plausible in light of all the circumstances that he or she is entitled to the dormant account.
The Tribunal must bear in mind the difficulties of proving a claim after the destruction of the Second World War and the Holocaust and the long time that has lapsed since the opening of the dormant account.
The 16 Arbitrators of the Claims Resolution Tribunal come from Canada, Cyprus, Israel, Switzerland, the United Kingdom and the United States.
The 31 Legal Secretaries that work with the Arbitrators come from Australia, Austria, France, Germany, Israel, Malaysia, the Netherlands, Switzerland and the United States.
Initial Screening is the review procedure adopted by the Tribunal to review a claim and the bank records, where a bank has decided not to disclose to a claimant
Fast Track is an expedited settlement procedure adopted by the Tribunal where the bank discloses to a claimant and agrees to pay the amount in the dormant account to the claimant
Ordinary Procedure is the arbitral proceeding adopted by the Tribunal where a bank discloses to a claimant, but the claim is not resolved in the Fast Track procedure
Accounts published 5,570
Claims filed 9,500
Accounts claimed upon 2,377 (45%)
Accounts claimed upon 2,377
Number of claimants 7,148
Average number of claims per Account 4
Account with most claims 71
Total Claims 9,500
Bank Disclosure 3,300
(these claims go directly to the Tribunal for Arbitration)
CRT Disclosure 700
(it is expected that around 700 of the 6,200 IS claims will result in disclosure decisions by the Tribunal and will then be adjudicated in Arbitration)
Total Claims with Disclosure 4,000
(it is expected that there will be almost twice as many claims that proceed to arbitration as there are claimed accounts - over 40% of all claims)
Number of IS claims 6,200
IS Decisions rendered 1,132
Disclosure ordered 92
Nondisclosure correct 1,040
IS resubmittals after a denial 145
Number of FT/OP claims 3,300
Arbitral proceedings commenced 300
The Tribunal has received claims from claimants in 27 different countries.
Claimants have submitted claims in 20 different languages.
Major Claimant Nationalities Major Claimant Languages
United States 20% English 37%
Germany 12% German 19%
France 12% French 14%
Israel 9% Spanish 9%
ATTACHMENT 8
Claims Resolution Tribunal for Dormant Accounts in Switzerland
Arbitrator Biographies
CHAIRMAN
Hans Michael Riemer (Switzerland) is a Professor of Private Law at the University of Zurich and an ordinary judge of the Court of Cassation of the Canton of Zurich. Since 1991, he has served as a substitute judge of the Swiss Federal Supreme Court.
ARBITRATORS
Hadassa Ben-Itto (Israel) retired from her service of 31 years as a judge in Israeli courts at all levels, including as Vice President of the Tel-Aviv District Court and as Acting Justice of the Supreme Court of Israel.
Robert Briner (Switzerland) is President of the ICC Court of International Arbitration and a Partner in a Geneva law firm. Formerly, he was President of the Iran-U.S. Claims Tribunal in The Hague.
Thomas Buergenthal (United States) is a Professor at the George Washington University Law School. He is the U.S. national member of the 18-member United Nations Human Rights Committee and served as a judge, Vice President and President of the Inter-American Court of Human Rights from 1979 to 1991.
L. Yves Fortier (Canada) is a Senior Partner of the law firm Ogilvy Renault in Montreal and President of the London Court of International Arbitration. Formerly, he served as Canada's Ambassador and Permanent Representative to the United Nations in New York. From 1984 to 1989, he was a Member of the Permanent Court of Arbitration in The Hague.
David Friedmann (Israel) is a banker of long experience, formerly CEO of Bank Leumi and currently Chairman of the Board of Union Bank of Israel.
The Right Hon. Lord Higgins (United Kingdom) was a Member of Parliament and Chairman of the Treasury Committee of the House of Commons. As a current member of the House of Lords, he is a Conservative Party spokesman on social issues.
Howard Holtzmann (United States) is an international arbitrator of long experience and was the senior U.S. member of the Iran-U.S. Claims Tribunal in The Hague from 1981 to 1994. He currently concentrates on international arbitration activities.
Andrew J. Jacovides (Cyprus) is an Ambassador/Special Advisor of the Cyprus Mission at the United Nations and a Member of the Advisory Group of the Commonwealth. He has been a member of the Foreign Service of Cyprus since 1960 and served as Ambassador to the United States and Germany.
Franz Kellerhals (Switzerland) is a Partner in the law firm Kellerhals & Partner in Berne and a Professor of Civil Procedure at Berne University. He has served as president, member and counsel in various international arbitrations.
Hans Nater (Switzerland) is a Partner in the law firm Stiffler & Nater. He specializes in arbitration and is on the Swiss list of ICC-Arbitrators.
Roberts B. Owen (United States) is Senior Counsel (retired) of the law firm Covington & Burling in Washington. He is the presiding arbitrator (appointed by the International Court of Justice) for the Brcko Controversy in Bosnia-Herzegovina. Formerly, he was the Legal Adviser of the U.S. State Department.
William W. Park (United States) is a Professor of Law at Boston University and Counsel at the law firm Ropes & Gray in Boston. He is Vice President of the London Court of International Arbitration.
Doron Shorrer (Israel) is a former Commissioner of Insurance and Director General of the Ministry of Transport of Israel. He is now an independent economic and financial adviser.
Zvi Tal (Israel) is a distinguished legal scholar and a former Member of the Supreme Court of Israel.
Jean-Luc Thévenoz (Switzerland) is a Professor at the Law Faculty of the University of Geneva and Director of the Center for European Legal Studies--Banking & Financial Law. He is a consultant and arbitrator in various international commercial ligations and is a member of the Swiss Arbitration Association.
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