The Swiss Bank Claims Process Is Both Just and Thorough


By Edward Korman

Published August 29, 2007, issue of August 31, 2007.
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I am the federal judge presiding over the Swiss Banks Holocaust Settlement. I set aside $800 million of the $1.25 billion settlement to pay claims to dormant bank accounts opened before the war and never claimed, and to accounts closed when the Swiss banks illegally honored coerced written requests from account owners to transfer funds to the Nazis.

I created the Claims Resolution Tribunal to process those claims. Since payments began in July 2001, nearly $1 billion already has been authorized for payment to more than 430,000 survivors and heirs around the world, not only for claims to Swiss bank accounts but also for former slave laborers, refugees, and victims of looting. A total of $1.25 billion was received from the Swiss banks in settlement of these claims, and it is my expectation that that sum will be distributed.

In an August 17 opinion article, three attorneys from the New York Legal Assistance Group, Yisroel Schulman, Phyllis Brochstein and Laura Davis, assess the CRT’s work and conclude that the process was “seriously flawed” (“Swiss Bank Claimants Deserve Better”). The article leaves the false impression that they are objective monitors of the CRT process.

On the contrary, NYLAG attorneys represent specific claimants. Schulman, Brochstein and Davis fail to disclose that the focal point of their attack on the CRT is the denial of a claim that they pursued on behalf of a client, a distant relative of a Polish owner of a Swiss account.

The bank account was closed in February 1939, seven months before the Nazi invasion on September 1, 1939. There is nothing in the historical record to suggest that prior to the invasion the Nazis were seizing Jewish-owned property in Poland, or that Swiss banks were turning over these accounts to Nazi Germany.

With insufficient basis to conclude that anyone other than the owner closed the account, the claim was denied. Early in the CRT process, however, we believed that Jewish account owners could not access their accounts after Switzerland imposed emigrant visa restrictions in January 1939.

If the account was closed after that date, we assumed that the accounts had remained with the Swiss banks. The CRT paid a few claims on that basis.

The CRT has since established from bank records and other research that for someone who was not living in a country under Nazi occupation or alliance, as was this claimant in February 1939, there were many ways to access an account from outside Switzerland even if the emigrant visa rules were otherwise applicable.

The NYLAG attorneys’ grievance — expressed in letters, memos and, ultimately, at a meeting in my chambers on August 8, 2006, all of which the opinion article fails to disclose — was that their client had not benefited from our earlier misunderstanding of the effect of the Swiss visa restrictions. Although reimbursement was not sought from the handful of people who had received the earlier awards, I was not going to perpetuate the mistake.

Schulman, Brochstein and Davis do not disclose in their opinion article that they never disputed the factual basis for the denial of their client’s claim. They simply insisted that his claim be paid because of those few earlier awards.

In addition to failing to disclose the August 8, 2006, meeting in my chambers, they also fail to disclose that I wrote and published a detailed opinion on November 29, 2006, explaining the reasoning underlying my decision. Nor do they disclose that in a letter on December 4, 2006, I asked Schulman to submit any additional evidence he believed had not been previously considered because he may have relied on our prior practice. My opinion and letter are both publicly docketed, and are available on the Internet.

Schulman and his colleagues did not respond to this letter, nor did they appeal. Instead, nine months after I issued the order, they chose to use the Forward’s opinion page to disparage the work of the CRT.

Notwithstanding their unwarranted criticism of the CRT, the NYLAG lawyers acknowledge that the CRT’s rules “appropriately established a very relaxed standard of proof.” These rules are intended to compensate for the Swiss banks’ systematic destruction of Holocaust-era account records. They reflect information gained from the CRT’s examination of the remaining bank files, European archives and claimant information. We have left no stone unturned in our effort to return Swiss bank accounts to their rightful owners.

It is true that sometimes we have amended the rules to reflect new knowledge gained from experience in administering the CRT process. What Schulman, Brochstein and Davis do not mention, however, is that in virtually every case — with the exception of the amendment about which they complain — the modifications have resulted in further relaxation of the standard of proof, paying more people and at higher amounts. For example:

-To compensate for the destruction of bank files, I authorized the CRT to apply an “adverse inference.” If bank records show that an account existed but do not show what happened to it — such as who closed it and received the proceeds — the CRT presumes the account was closed improperly and pays the claim. (Sometimes there is evidence to the contrary, as where the account is closed before Nazi occupation, as with NYLAG’s client.) We have studied many other Holocaust compensation programs, from the 1950s to the present. We are unaware of another program that applies such a generous presumption to make up for the lack of documentation.

-We use the earliest historically accurate date when determining when the Nazis began seizing Jewish property. This is an important date, because it permits the application of the adverse inference. For example, in Germany, we presume confiscations began when Hitler acceded to power on January 30, 1933. To our knowledge, most claims processes use a later date of 1936 or 1937. For Hungary, we use the earlier alliance date of November 1940, rather than the occupation date of March 1944. (Curiously, NYLAG complains about the “inconsistent” application of “occupation” versus “alliance” dates, when the point obviously is to favor the claimant by choosing the earlier date.)

-For the many accounts for which account owner information is limited because so many records have been destroyed, there are often several plausible claimants: sometimes two, sometimes five or more. They all show a plausible connection to the account owner because all that is known from the bank records is the owner’s name, and perhaps country. There are many claims processes that likely would reject all of the claims because there is no way to determine which claimant was related to the account owner. (For example, the account owner could be listed in the bank files as “Isaac Meyer” from “Austria,” and five unrelated claimants may show that they had a relative named Isaac Meyer from Austria). We have chosen the opposite tack. Rather than denying all of the competing claims, we award all of them, dividing the account among the claimants pro rata.

-Where there are no bank records documenting the existence of an account, the CRT tries to locate evidence from some other source, such as Austrian and German census archives. For example, after Nazi occupation in 1938, the Austrians required Jews to complete a detailed census form listing their assets. Some 60,000 were filed. The CRT has made numerous awards to claimants who listed Swiss accounts on the census forms, although the bank records themselves may have been destroyed or are otherwise unavailable to the claims process. Whether based on the bank files, archives or other documentation, these awards are not inconsequential — they average $135,000.

-Many claimants plausibly have shown that a family member owned a Swiss account, but the bank records have not been located. Once again, in an effort to ensure that claimants do not bear the burden of the banks’ destruction of documents, I have authorized the CRT to make payments to those with “plausible undocumented claims” in the amount of $5,000 each. These are not “humanitarian” payments, as Schulman, Brochstein and Davis refer to them, but awards based on the CRT’s assessment of specific criteria, including the nature of the account owner’s relationship to Switzerland, the family’s postwar attempts to access the funds, and other factors that I described in a February 17, 2006, decision.

-The CRT applies average, or presumptive, values calculated by the auditors who acted on behalf of former Federal Reserve Board Chairman Paul Volcker, who led the investigation of Swiss banks in the late 1990s. CRT Special Master Helen Junz, an economist who in connection with the Volcker investigation studied and reported on the wealth of the Jewish population in Europe on the eve of the Holocaust, has since reexamined these account values in light of information learned from the claims process. She has recommended a considerable increase in the presumptive values, which if adopted by me, in whole or in part, would result in millions of dollars in additional payments to those who have already received awards as well as to those whose claims remain to be paid.

-Many CRT accounts do contain value information. However, when the actual value is lower than the average value, the claimant receives the higher amount; we assume that the account may have been eroded below presumptive value by fees and other charges. Since unlike in most countries, unclaimed accounts in Switzerland escheat to the banks and not the state, the banks had an interest in continuing to charge fees against these assets.

-Many Holocaust victims owned custody accounts containing bonds. In almost all cases, we pay the higher of market or nominal value as of the date the account was closed. This reflects our assumption that the account owner was forced to turn over the account to the Nazis and could not control her investment decisions.

-We have opened the process to as many claimants as possible, even though every new claim must be matched against all other claims and bank accounts to ensure that the proper owner is paid. To that end, I permitted the CRT to analyze some 70,000 — of more than 600,000— questionnaires, in addition to the approximately 35,000 claim forms sent to the CRT. The questionnaires were submitted early in this case, even before I approved the settlement, as part of a broad informational survey of Nazi victims and heirs. However sparse many of the questionnaires may be, we have made every effort to match them to Swiss accounts as well as to analyze them as “plausible undocumented claims,” and we have made many payments as a result. Similarly, although late claims slow the review process for those who submitted timely applications, I have authorized several extensions of the filing deadline to ensure that claimants have been given every opportunity to participate in this settlement.

In addition, the concern of Schulman, Brochstein and Davis that too small a portion of the $800 million set aside for bank account claims will benefit Swiss bank account owners or their heirs is misplaced. Before the CRT concludes its work next year, many more awards will be forthcoming.

Moreover, as I have already noted, Junz has recommended that an upward adjustment be made to the average, or presumptive, values used by the CRT to pay awards for accounts of unknown value.

We are well aware that the CRT process has not been “expeditious,” as Schulman, Brochstein and Davis complain. This effort to fill in the glaring gaps in the Swiss bank records is unfortunately difficult, and it takes time.

It would have been more expeditious to deny many claims, given the paucity of the bank documentation. But to assist those whose claims against Swiss banks have been ignored for too long, we chose another approach: conducting extensive research, and sorting through sometimes dozens of competing claims and complicated family relationships. The process has been — and will continue to be — thorough and just.

Edward Korman is a federal district court judge for the Eastern District of New York.

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