Wartime Dealings in Gold, Jewish Money, Haunt Swiss

Nation's banks and politicians consider creating reconciliation fund

Switzerland seems stuck inside an Escher painting. Every time the government thinks it has made two steps forward regarding its handling of World War II-era accounts and Nazi gold, it finds it has actually taken two steps back.

Pressured by Holocaust survivors, Jewish groups, and politicians, the Alpine country began an investigation that has unearthed a few dormant accounts of death-camp victims.

This week, however, in addition to stepped-up audits of Swiss banks, talk has turned to a possible reconciliation fund for victims. Jewish leaders called Monday for an interim payment, noting that it may be years before the inquiry is complete.

"The question has been asked directly and now we must give some kind of answer," says Victor Ruffy, chairman of the foreign policy committee of the lower house of parliament. Bankers and politicians say debate is just starting in parliament and bankers are divided on the issue.

Also this week, former US Federal Reserve chairman Paul Volcker, who heads a committee established by Swiss banks and the World Jewish Congress, said that three US accounting firms have been hired to comb through Swiss bank records from 1933 to 1946 to seek unclaimed assets of victims or their survivors. The aim is to finish the search by mid-1998.

How much money they will find remains uncertain, but charges of questionable dealings have been pouring in for months. Among the allegations:

*That there were secret compensation deals between Switzerland and East European nations.

*That the Swiss-based Bank of International Settlements, which represents the world's central banks, allowed Nazi Germany to trade in stolen gold, possibly helping to extend the war.

*That Swiss banks hold vast amounts of gold looted by Nazis and money from Jews who perished in the Holocaust.

"We have to have complete transparency on Switzerland's relationship as a financial center with the former Nazi Germany," says Flavio Cotti, Swiss foreign minister. "We want an investigation which gives us a complete picture."

"This is exploding," adds Jean-Phillipe Tissieres, a Swiss Foreign Ministry spokesman.

Amid nationwide soul-searching, the Swiss Bankers Association in Basel for the first time has said banks were too narrow-minded in the years after the war when families came looking for lost accounts. The association said banks interpreted laws too narrowly, that such actions were inexcusable, and that they will work to right the wrongs.

Among the most recent allegations is that in the late 1960s, Switzerland used unclaimed bank accounts of those killed in the Holocaust to compensate Swiss businessmen who lost property after the Communist takeover in Poland and Hungary.

While the Swiss government first denied that such a deal occurred, after examining its own archives it recast the story.

"There was no secret agreement, it was merely confidential," says Mr. Tissieres. "What we found in the archives was a confidential exchange of letters between the two governments. The letters outlined the transfer of funds to Poland from Swiss accounts which had stayed dormant up to 1954. But it's totally wrong to say we hid this."

In the 1949 protocol, Switzerland promised to pay Poland about 2 million Swiss francs ($1.6 million) from dormant Polish accounts, says Peter Hug, a historian in Bern. The Swiss paid more than 460,000 Swiss francs into a Polish government account at the Swiss National Bank called Account N, Tissieres says. Money from this account was then recirculated to Swiss businessmen.

In addition, protocol provisions made Poland, not Switzerland, guarantor in case survivors or heirs ever came looking for their money. But Switzerland never gave Poland information on the accounts, impeding any possible searches. The government has appointed two new commissions to investigate. A full report is expected in early December.

"The credibility of the Swiss Foreign Ministry has been shattered," says Elan Steinberg, executive director of the World Jewish Congress in New York.

Some American government officials close to the affair say the Swiss should have tackled the problem last year and taken the lead before letting it turn into a public-relations fiasco.

New strands continue to be added to the story. In mid-October, the Netherlands said it wanted restitution for 75 tons of gold reportedly stolen by the Nazis. But a Swiss source close to the investigation says that during the war the president of the Dutch National Bank was an ardent Nazi supporter who actually gave the Dutch gold to Germany's Reichsbank. Another probe is likely, aimed at learning which gold payments to Nazi Germany from occupied countries were forced.

In addition, questions have arisen regarding the role of the Bank of International Settlements. The BIS was created in 1930 to handle national gold reserves and increase cooperation among the world's central banks.

Some historians here argue the BIS sold stolen gold, thereby helping to finance the Holocaust and Germany's war effort. This view is opposed in Basel.

"It's an enormous exaggeration to say that the BIS allowed the war to be prolonged," says Gunter Baer, secretary-general of the BIS. "Between 1939 and 1945 the Reichsbank would have found other ways to finance the war."

Mr. Baer disputes the idea that all the gold Germany sold via the bank after early 1943 was stolen. But he concedes it's no surprise the BIS is in the spotlight. Among unscrupulous actions by the bank during the war era, the most notorious was the thwarting in 1938 of a Czech effort to keep its gold from falling into Nazi hands by depositing it in the BIS.

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