Who Gets the Swiss Banks’ Holocaust Loot?

Swiss banks are accused of, among other things, pocketing pre-war deposits made by Holocaust victims rather than returning the money to victims’ heirs. Four months ago, the Swiss banks agreed to pay $1.25 billion in reparations. Last Sunday, the New York Times reported that a variety of Jewish groups are squabbling over how to divide the money. Why the dispute?

The dispute arises because, 50 years after Holocaust, no one knows exactly who is owed money. The $1.25 billion figure is only a best-guess estimate of the interest-adjusted amount that the Swiss banks pocketed (the banks’ initial offer was $600 million). Paul Volcker (former head of the Federal Reserve Bank) and his investigators have spent several years culling records to figure out who is owed what. But Volcker’s team will be able to assign only a small portion of the $1.25 billion to specific individuals. Even after lawyers’ fees are subtracted, there may be as much $1 billion left–and this is where the various Jewish groups enter the picture.

Under a deal brokered by a federal judge in Brooklyn, the remaining $1 billion will be used for “rough justice”–a “rough and ready” calculation. Since the money can’t be distributed to its true owners–because heirs can’t be found or because records have disappeared–it ought to go to those most directly harmed by Holocaust, even if their families didn’t bank with the Swiss. Some say that the money should go to destitute Holocaust survivors. One group that surely deserves particular attention is the so-called “double victims”–Jews who survived the Holocaust only to end up on the wrong side of the Iron Curtain for 40 years. Others say the money should fund Holocaust education efforts. And, naturally, a variety of charitable groups would like to administer the disbursement.

The federal judge in Brooklyn will make the final decision. The settlement arose out of a class-action suit made in his courtroom, and accordingly he has the job of approving the final deal.

The distribution of the rough justice money is especially important as a bellwether. Suits against Krupps, Volkswagen, Ford (for profiting from Jewish slave labor), and various European insurance companies (for refusing to pay life insurance benefits to Holocaust victims’ heirs) may create new pools of “rough justice” money. And naturally the decision made about this pool will have a great deal of bearing upon the decisions made about those pools.

NEXT EXPLAINER: The suit against the Swiss banks was a class-action suit in which a small group of lawyers negotiated on behalf of all Holocaust victims and heirs–and without the explicit approval of their “clients.” How does a “class action” suit work?

Explainer thanks Professor Michael J. Bazyler of Whittier Law School for his help.