UBS Slammed by Senators for Obstructing Nazi Accounts Probe

(Bloomberg) — Members of a US Senate committee tore into UBS Group AG executives for refusing to hand over more than 150 documents that an investigator has requested that could shed light on the history of Credit Suisse accounts tied to Nazi Germany, as tensions flared again around a 1998 settlement in the case.

“UBS’s conduct is absurd and a historic shame that’ll outlive today’s hearing,” Chairman Chuck Grassley said at a Senate Judiciary Committee hearing on the issue at which legislators grilled executives from UBS, which now owns Credit Suisse, over the bank’s alleged failure to cooperate with investigators.

The exchanges marked the latest flashpoint in a six-year campaign by activists from the Simon Wiesenthal Center and US politicians to force a reckoning for what they say are a trove of Swiss bank accounts the details of which weren’t fully revealed in probes leading to a landmark 1998 settlement. That agreement saw Swiss banks pay $1.25 billion for their handling of Holocaust victims’ accounts.

UBS has argued that settlement covers any potential future revelations or obligations, but agreed to cooperate with the latest investigation to bring all available materials to light.

But Neil Barofsky, the independent ombudsman the bank hired to oversee the probe, told the hearing UBS’s cooperation had stalled late last year as it refused to provide some documents dating to the 1990s settlement. These records appear to go to “the heart of our investigation,” he said.

Rabbi Abraham Cooper, testifying for the SWC, said that UBS is “actively blocking important aspects of Mr. Barofsky’s work” and accused the bank of seeking to silence his organization.

“When those with unlimited resources control the historical record, the issue is no longer about the past,” said Cooper. “It is a warning about the present and the future. This isn’t just about dusty old papers in archives. This is about money in banks.”

He was referring to a request UBS filed in a New York court last month for an order confirming the settlement covers all possible claims, known and unknown at the time it was reached, and warning the SWC and other Jewish groups against publicly commenting on potential new revelations and obligations.

UBS executives denied they were trying to silence the SWC and other Jewish groups but said the bank needed assurances that it wouldn’t be subject to lawsuits based on the material in the documents if it provided them.

“The settlement agreement in 1999 was an agreement to provide final closure. The parties were well aware that not all the information at the time was on the table,” UBS General Counsel Barbara Levi told the senators.

“It cannot be that for every piece of information that comes to light, we get under the threat of litigating because this is new information,” she added. “Where is the incentive then for any financial institution or any other institution to look into the past and bring this information to light?”

But the senators were critical of the bank’s stance, which is that UBS and Credit Suisse together agreed to pay $1.25 billion in 1998 to settle all known and unknown claims in future.

“Your position is you’re not paying a penny more, is that right?” Senator John Kennedy, Republican of Louisiana, asked Robert Karofsky, the head of UBS’s Americas business, in a courtroom-style cross-examination.

“That is correct, Senator. It was accounted for in the unknown claims,” Karofsky replied.

Kennedy went on to advise Karofsky to consider the wider stakes.

“The smart play here for you is to release these documents and let Mr. Barofsky finish his report and let the chip fall where they may, and then, in front of God and country, if you owe more money, then by God, pay it, because that’s what this is about.”

Barofsky provided a 73-page update on the investigation, showing that it had revealed hundreds more possible leads on Nazi-linked accounts, including those of senior officials and entities.

Investigators found that Credit Suisse had not only handled financing for the so-called ratlines by which prominent Nazis escaped allied justice to flee to Argentina after the war but also served at landlord to an office in Bern that facilitated the flight with bribes and other support.

The Argentine authorities also used a Credit Suisse account to facilitate the equivalent today of about 17 million Swiss francs ($22 million) in bribes and other payments to European officials to keep the ratlines running.

The probe also confirmed that the bank held an account for the economic arm of the Nazi SS, one whose existence the bank had denied in the 1990s, according to Barofsky.

He said he expects to complete his report on the investigation later this year.

The focus of the Senate’s efforts is on ensuring the investigations are complete. But there have already been calls for additional restitution to victims based on the new revelations.

Ronald Lauder, the billionaire president of the World Jewish Congress, called on Switzerland and UBS to open all of its archives, facilitate an independent review and to commit to justice and restitution.

“The continued possession or concealment of such assets creates material legal and financial exposure under US law,” the WJC said in a statement last week.

The Zurich-based bank needs to stay on the good side of US regulators as it pushes to expand its business managing money for rich Americans. UBS has evaluated the possibility of relocating outside Switzerland amid a row over capital requirements. The Americas represent both the largest single revenue source for the global wealth manager and a major strategic focus.

(Updates with comment from Rabbi Cooper in seventh paragraph. An earlier version corrected an exchange between Senator John Kennedy and UBS’s Rob Karofsky)

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