Swiss banks unlikely to meet settlement deadline

WASHINGTON — As the key players in the standoff with Swiss banks over Holocaust-era claims prepare to meet in New York next week, the prospects for reaching a "global settlement" remain far from clear.

If negotiations do not produce a settlement or significant progress toward a settlement by March 31, Swiss banks could face new sanctions by U.S. states and municipalities — including from California.

Recently, California Treasurer Matt Fong tried to step up pressure on Swiss banks by saying that they must agree in principle to a global settlement of Holocaust claims by March 31 and produce a settlement by May 1. If not, he said, he would ban the state of California from investing in U.S. subsidiaries of Swiss banks.

In December, Fong and other U.S. public finance officers — several of whom had already suspended or threatened to suspend business dealings with Swiss banks for what they said was foot-dragging in paying off Holocaust victims' claims — agreed to wait three months before imposing further sanctions.

The moratorium was intended to give Jewish representatives a chance to negotiate a settlement with the banks and allow the state and local finance officers to then judge whether the banks had responded satisfactorily.

The group, headed by the New York City comptroller, Alan Hevesi, is slated to reconvene in New York on Thursday for a day of hearings and is expected to vote on whether to extend the moratorium on boycotts. The Clinton administration opposes boycotts of Swiss banks, calling such steps counterproductive.

The "global settlement" talks involve Jewish officials, class-action lawyers and representatives of Switzerland's three largest banks. Stuart Eizenstat, undersecretary of state for economic affairs, is helping to facilitate the discussion.

Those involved in the highly sensitive talks have remained tight-lipped. However, one source close to the negotiations said, "There will be no settlement of this matter by March 31."

In Switzerland, banking and government officials have voiced skepticism about the idea of a lump-sum payment.

The head of Credit Suisse, one of the three Swiss banking giants that is participating in the talks, said this week that he does not expect a quick resolution.

"I think we have some way to go until we can discuss seriously the specifics of a settlement," said Lukas Muehlemann, the bank's chief executive officer.

He said the matter should wait until after an independent commission headed by Paul Volcker, former U.S. Federal Reserve Board chairman, completes a sweeping audit of Swiss bank records.

Swiss government officials are not said to be directly involved in the talks. But Thomas Borer, the Swiss government's point man on Holocaust issues, told a Swiss magazine last week that he has "doubts about whether a global solution is opportune or feasible."

Edgar Bronfman, president of the World Jewish Congress, has said that a settlement in the billions of dollars is needed to close a range of claims related to Switzerland's wartime activities, including those of dormant account holders and their heirs and Holocaust survivors who have filed three multibillion-dollar class-action lawsuits against Swiss banks.

It was at Bronfman's request that the U.S. public finance officers agreed to a moratorium on sanctions until March 31.

In response to Fong's recent declaration that he wants a global-settlement agreement by March 31, Hevesi said in a letter to the treasurer, "I believe it is important for our credibility that we maintain our commitment to the process and delay any decision until we have heard full reports from all sides."

Talk of a possible global settlement comes as administrators of a humanitarian fund set up last year by Swiss banks said they are preparing to distribute payments this summer to needy Holocaust survivors in the United States.

About $32 million out of the $190 million Swiss fund will be set aside for Holocaust survivors here, with payments ranging from $500 to $1,000 per applicant, according to the WJC.