Negotiations on Swiss settlement once again appear to be stalled

New York City Comptroller Alan Hevesi has asked state and local finance officers to reconvene Wednesday, July 1 amid reports that talks between the banks and Jewish representatives on a settlement to Holocaust-era claims are near a breakdown.

In late March, the finance officers agreed to hold off on sanctions against Switzerland's three largest banks — Union Bank of Switzerland, Credit Suisse and Swiss Bank Corp. — for 90 days while negotiators tried to work out a settlement.

The prospects for reaching a settlement by June 30 , or at any point in the near future, now appear to be a long shot at best.

Jewish negotiators did not attend the latest round of U.S.-brokered talks in Washington after the banks failed to put forward an acceptable offer, according to sources familiar with the talks.

A widely reported offer by the banks to pay more than $1 billion to Holocaust survivors turned out to include hundreds of millions of dollars in funds that survivors would receive regardless of whether a settlement was reached.

That money would come from an auditing process now under way, led by former U.S. Federal Reserve Chairman Paul Volcker, to return all unclaimed Holocaust-era bank accounts held by Swiss banks.

The Volcker commission could produce unclaimed assets estimated to be currently worth more than $700 million, one source said. Beyond that amount, the banks only offered $530 million — a figure that one source described as "insulting."

If the impasse is not broken, the issue may ultimately be settled in court. Holocaust survivors still have three multibillion-dollar class-action lawsuits pending in New York.

But that course, which could ultimately yield more money for Holocaust survivors, carries its own risks because it would likely draw out the process for years.

And given the age of Holocaust survivors, "money is more important to us now than money five or six years down the road," a source said.

The lack of progress in the negotiations, which are being held under the aegis of the U.S. State Department, would appear to mark a serious setback to attempts by the World Jewish Congress and lawyers representing the class-action plaintiffs to reach a global settlement to all claims stemming from Switzerland's actions during World War II.

Jewish negotiators have been seeking to settle not only claims on dormant bank accounts, but also on gold and other assets looted by the Nazis from Jews and sold to Swiss banks, as well as compensation for Jewish slave labor.

The banks, however, have only agreed to negotiate bank-related matters, and the Swiss government has ruled out paying into any settlement.

The sensitive talks, which are being held under strict confidentiality, have taken many twists in recent weeks.

Sources said that after repeated promises to put forward a settlement package, the banks pledged to make a firm offer earlier this month, just days before the New York state Banking Department decided to approve a merger between Union Bank of Switzerland and Swiss Bank Corp. The U.S. Federal Reserve later gave final approval to the deal.

The WJC, given assurances that an offer would be forthcoming, did not object to the merger, which was taken as a sign that significant progress had been made toward a settlement.

But frustrated Jewish negotiators say the banks failed to make good on their promise.

"They snookered the bank regulators," one source said, adding that the Swiss banks "used the good offices of the State Department" to request that Jewish leaders drop objections to the merger. "It was not Switzerland's finest hour," this source said.

When it came time for the negotiators to meet again at the State Department last week, the chairs on the Jewish side were empty.

The next negotiating session is scheduled for Tuesday, but the Jewish side has said it will not show up unless the banks come through with a serious offer.

"It's in their ballpark," a source said. "They're going to have to decide what it is they want."

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