Switzerland's Real Role In WWII And A Deep Look Into The Swiss Bank Controversy

American Jewish Committee
Tuesday, 18 February 1997

Recently declassified documents have raised serious questions and considerable discussion about the true nature of the Swiss-German relationship during World War II, including its financial holdings of Jewish refugees and the Swiss role in trading Germany's looted gold -- "Nazi gold" -- for cash, enabling the Third Reich to sustain its war machine.

A just-released American Jewish Committee report offers a comprehensive analysis of Switzerland's behavior during and after the war and its relationship to the Nazi regime. Further, this special study examines what happened to Jewish assets deposited in Swiss banks. The 42-page publication - "Switzerland, Swiss Banks, and the Second World War: The Story Behind the Story" - seeks to answer a number of troubling questions including: Did the Swiss violate their neutrality and profit from their relationship with the Nazis? Is the Swiss debt limited to the dormant and heirless assets, or is there more? If there is a debt, how should it be calculated? How is it to be paid? To whom is it owed? To the Jews? To Europe, which bore the brunt of the Nazi rampage? To the Allies, who defeated Germany and paid a fortune to rebuild Europe?

The report, part of AJC's ongoing series of "International Perspectives," was written by Marilyn Henry, staff correspondent in New York for the Jerusalem Post. It is intended to provide detailed background and context for a better understanding of the current discussions surrounding Switzerland, its banks and World War II-related assets.

Ms. Henry notes that while other countries were neutral during World War II, Switzerland played a particularly critical and central role for both the Nazis and the Jews. "As Germany occupied territory, it acquired gold, which it needed to trade for cash to finance the war. For that, it turned to Switzerland." Bern would continue to exchange gold, much of it stolen from treasuries of occupied countries, for currency for Germany until the end of the war, she added. And for those trying to protect their assets from the Nazis, she states that "Switzerland's proximity and its banks' reputation for discretion had made it a place of choice for many individuals. Secrecy was guaranteed by the Banking Law of 1934, which protected all investors from disclosure…The very Swiss secrecy laws that had been designed to protect the accounts became the tools that thwarted the heirs' efforts to retrieve their families' funds."

Ms. Henry makes the distinction between what the Swiss referred to as "dormant accounts," meaning an existing account in which there has been no activity for at least ten years, and "heirless accounts," which are those assets for which the rightful owners are not known.

While the Swiss Bankers Association claims that there are fewer that 1,000 dormant accounts from the Holocaust era, the heirs contend that there are much more and they have filed two class action suits to identify and retrieve the funds. The AJC report details a chronology of events, summarized as follows:

The 1946 Washington Agreement, an Allied-Swiss accord that dealt with the disposition of German assets and Nazi gold located in Switzerland, raised the issue of the fate of heirless Jewish accounts. The Allies claimed these accounts to pay for refugee relief and resettlement, to which the Swiss pledged their "sympathetic" consideration. Heirless assets were difficult to determine as depositors often used secret and numbered accounts. Soon after the Washington Agreement, the Allies lost interest in the question of heirless accounts. Efforts by the Swiss government to determine the scope of such accounts were bedeviled by bankers' fears that the inquiries would threaten secrecy laws, and in 1947, it was announced that nothing was known about heirless assets of Nazi victims.

In 1957, the Swiss Justice Ministry conducted another survey and reported that heirless assets would not reach the million-franc mark. However, six years later, the Swiss government announced that there could be "considerable" heirless assets in numbered accounts or property held by fiduciaries and lawyers. After a search, the Swiss banks determined that they held more than 9 million Swiss francs, then valued at $2 million, that was likely to be of Jewish origin, and from 1963 - 1973, 7.7 million francs were distributed to heirs. In 1976, when the balance was distributed, one-third went to a Swiss refugee-aid office and the remaining two-thirds to the Swiss Jewish community.

"Decades later," writes Ms. Henry, "Swiss regulatory authorities reportedly asked the banks to survey their dormant accounts. This general review presented the unexpected opportunity to determine if there were any accounts that could belong to Nazi victims.

"In February 1996, the Swiss Bankers Association announced that it had identified 774 dormant accounts, now valued at $32 million, from the Holocaust era. The find cast suspicion on the rigor and the range of the 1962 search."

On May 2, 1996, an independent committee, chaired by Paul Volcker, the former chair of the Federal Reserve, was set up to investigate and audit these Holocaust-era accounts. The audit is expected to take two years.

Turning specifically to the terms of the 1946 Washington Agreement, Ms. Henry found that the Allies had two major items on their agenda: return of the gold that the Nazis had looted and the liquidation of German assets in Switzerland. (Heirless assets were not an integral part of this settlement, but were covered in side letters to the accord, with neither commitments on the Swiss side to uncover the assets nor the threat of sanctions by the Allies if the Swiss failed.) "The Allies had no firm idea of the amount of gold that Germany had shipped to Switzerland or the extent of German assets….The Swiss contended that Switzerland's war-time role was as a transit point for gold rather than as a final depository, that it had not accepted looted gold, and that Switzerland could not be held liable to restore the entire trove."

The Allies and the Swiss ultimately agreed to a settlement which called for the Swiss to pay the Allies 250 million Swiss francs in gold (about $58 million) as its contribution to the reconstruction of Europe. The gold became part of the gold pool (gold amassed by the Allies from various German hiding places and recovered from the neutral countries) that was administered by the Tripartite Gold Commission (with representatives from the U.S., U.K, and France) to make restitution to the central banks of Europe. The "gold pool" ultimately comprised nearly 337 metric tons of gold - some $379 million in 1946 values. The Allies, in turn, renounced all claims to the gold in Switzerland and the matter was considered formally settled.

In 1996, the Swiss National Bank publicly acknowledged that it had profited on its gold dealings with Nazi Germany, earning an estimated 20 million Swiss francs in commissions on a total war-time trade of 1.2 billion Swiss francs.

The second major item on the Allied-Swiss agenda in Washington in 1946 concerned all assets and property in Switzerland that was owned or controlled by Germans in Germany. These assets were to be liquidated and used for reparations for damages caused by German aggression. The Swiss government vigorously disputed the Allies' claim to these assets, but ultimately agreed to liquidate German assets - whatever they were determined to be by the Swiss Compensation Office - and hand over fifty percent to the Allies for refugee resettlement. Over the next six years protracted negotiations about the liquidation of the German assets would hit snags and obstacles, including custodial disputes and compensation claims by Germans whose property had been taken and compensation for Swiss citizens who suffered financial losses in Germany because of the war. The Swiss would make an advance payment of 20 million Swiss francs and balk on the rest. In the meantime, the Federal Republic of Germany was established. In 1952, the Allies agreed to accept a lump-sum payment, receiving 121.5 million Swiss francs, minus the 20 million the Switzerland had already advanced, with the monies raised by Germany, with a loan taken out with a Swiss banking consortium. The German assets in Switzerland served as the guarantee.

"To date, the Bern government has maintained that its obligations to return Nazi loot were settled by the 1946 Washington Agreement with the Allies," writes Ms. Henry.

In his foreword to the publication, David A. Harris, AJC's Executive Director, writes: "While no gesture by any government, or, for that matter, any bank, can begin to make up for the incalculable losses endured by the victims of Nazi Germany and its allies, Switzerland has the obligation and the opportunity to help the remaining Holocaust survivors live out their years in dignity, with at least some of the assets that are rightfully theirs.

"Switzerland also needs to engage in moral stock-taking. The myth of the country's strict neutrality during the war has been punctured by banking and insurance records. The picture is not a pretty one; political neutrality easily turned into moral neutrality between persecutors and persecuted."

For more than half a century, together with other international Jewish agencies, the American Jewish Committee has been involved in helping secure restitution for Holocaust victims. AJC was the first Jewish group to introduce the concept of restitution for survivors -- as early as 1940 -- and, immediately after the war, first raised the issue of the funds held by Swiss banks. AJC was a prime force, in collaboration with the World Jewish Congress, in the formation and activities of the Conference on Jewish Material Claims Against Germany, and the AJC played a lead role in securing reparations from Austria and from German industrial firms that had used Jews for slave labor. Since the fall of communism, AJC has used its diplomatic contacts to help secure reparations for survivors who missed out on German deadlines for applying because they lived behind the iron curtain.

For more information, or to contact American Jewish Committee, see their website at: www.ajc.org