The Daily Star (Beirut) – 17 December 2004
Remember the longest-running story of the 1990s? It began at the turn of that decade with the revelation that European banks and financial institutions had been secretly profiting for more than half a century from bank accounts and assets deposited by European Jews who later died in Nazi concentration camps. The banks, it emerged, had avoided returning the money to surviving family members.
Soon financial houses across Europe were being called to account. The story reached its climax at the end of the 1990’s with the Swiss banks agreeing to pay out the huge sum of $1.25 billion, after their initial foot dragging was exposed in a media campaign led by Holocaust reparation funds and the Israeli government. The Swiss banks affair had a sad coda: much of the restitution money never made it to the Holocaust families. Instead, a sizeable chunk went to the reparation organizations themselves to pay off the inflated salaries of the lawyers who had advised them.
But another, yet more embarrassing, Holocaust banking scandal is belatedly playing itself out today in Israel, even if no one – not even the reparation funds or the Israeli government – is drawing attention to it. In Jerusalem, auditors working for an investigative committee of the Israeli Knesset have unearthed thousands of dormant accounts belonging to Holocaust victims from which Israel’s own banks have long been profiting. According to information leaked by the committee to the Hebrew-language media, the scale of the plundering of the victims’ accounts is huge.
Even though the banks have withdrawn their cooperation – and, according to the chief auditor, access to key documents – the inquiry has reportedly identified at least 5,000 dormant accounts and safe deposit boxes, worth more than $220 million at today’s values. One bank, Bank Leumi, is said to have benefited from the lion’s share of the money, possibly in the order of $160 million. But rather than settle accounts with the Holocaust families, the banks, led by Leumi, are trying to silence the inquiry and continuing to deny that they hold any Holocaust money.
Leumi’s lawyer, Ram Caspi, told the committee last month: “Bank Leumi is a publicly-traded company. It has to answer to stockholders. It cannot simply pay as a result of a committee’s recommendations.” Presumably Caspi fears that the stockholders will be worried that a restitution deal would erode the bank’s record returns this year: In the first three quarters it racked up profits of $342 million – a 68 percent increase over last year.
Similar comments by Caspi prompted outgoing Justice Minister Tommy Lapid, himself a Holocaust survivor, to accuse Leumi of being “the last bank in the world that refuses to pay money to [Holocaust] survivors.”
The Knesset committee leading the inquiry finished its damning report 18 months ago, but its work has yet to see the light of day. Endless legal wrangling by the banks has forced the committee to shelve the report for the time being. Instead, the banks have reached a private deal with the government to make the whole embarrassing episode go away. According to reports in the Israeli media, Leumi will pay the Holocaust families $8 million rather than the $160 million unearthed by the committee.
The valuation formula of the Holocaust assets proposed by Leumi – and rejected by the Knesset committee – offers far more generous terms to the Israeli bank than were offered to the Swiss banks. Whereas the Swiss had to pay the Holocaust families restitution adjusted for inflation and 4 percent interest, Leumi has demanded that inflation be excluded for the period before the creation of Israel – including the war years when inflation hit 300 percent – and that interest be reduced to 2 percent.
The effect of these changes on the restitution that will be offered Holocaust families, some of whose relatives invested their money in Leumi in the 1920s and 1930s, was predictable enough: It dramatically reduced the bank’s liabilities.
The extent of the reduction is illustrated by the testimony provided to the committee by one woman who searched for her uncle’s investments in Israel for many years. She eventually found that in 1940 he had opened an account at Leumi with £1,000, or enough today to buy three apartments in Tel Aviv. When the bank finally returned the money in 1979, she received a pittance.
The reason everyone involved, including the banks, the Israeli government and Jewish reparations organizations, appears happy to hush up the affair – in stark contrast to their behavior when the scandal broke in Europe – is the damage they fear the revelations will wreak on Israel’s image abroad. Caspi has already warned the committee that the story of the Holocaust assets will give ammunition to critics that Israel has been hypocritical: “The Wall Street Journal will say the Israeli banks also hide money, not just the Swiss.”
If pursued, the investigations are also certain to open up a Pandora’s Box of revelations about other misuses of Holocaust assets made by Israeli firms, such as mortgage brokers, real estate companies, insurers, all of which have yet to cooperate with the inquiry. But most damagingly of all, further investigations would turn a spotlight on the even murkier role of the Israeli government in retaining Holocaust assets.
During World War II, the British authorities ruling what was then Palestine confiscated many of the assets invested in local banks and financial houses by European Jews living in enemy countries, including those under Nazi occupation. After the establishment of Israel in 1948, those assets were transferred by Britain to the custody of the Israel government. However, the Jewish state made little effort to trace the heirs; instead, it passed on the assets – including bank accounts, jewelry, land and property – to various ministries and to Zionist organizations like the Jewish National Fund.
Estimates widely quoted in the Israeli media suggest that the government may be holding as many as 10,000 bank accounts and some 5,000 properties belonging to Holocaust victims. That total would dwarf the sums being cited in the case of Bank Leumi. None of these revelations, however, is likely to get the attention it deserves so long as the Israeli government and the Jewish reparation organizations are left to decide who has misbehaved in exploiting the suffering of Holocaust families.