[R-G] Battle for Holocaust Assets Roils Israel

[Yoshie Furuhashi]

<http://online.wsj.com/article/SB122645046262819241.html?mod=googlenews_wsj>
NOVEMBER 12, 2008

Battle for Holocaust Assets Roils Israel
By CAM SIMPSON

RAMAT GAN, Israel -- The global quest to ferret out money and property
left behind by Jews killed in the Holocaust is now targeting Israel,
and investigators say it's proving at least as difficult in the Jewish
state as it did in Europe.

Estelle Sapir displays a photo of her late father Joseph Sapir, a
World War II death camp victim, during a news conference in 1998. Ms.
Sapir announced she had reached a settlement with Credit Suisse over
her claim on her father.

Many big banks and the government itself have resisted efforts to
claim hundreds of millions of dollars in compensation for bank
deposits, land, corporate shares, art and other assets that
investigators say once belonged to Jews killed by the Nazis and their
allies.

"I cannot say that the Israeli establishment has been, or is, happy
about the return of properties," says Avraham Roet, the recently
retired chairman of the Company for Location & Restitution of
Holocaust Victims Assets Ltd. The private firm, often referred to
simply as the Company, was created by the Israeli parliament after its
investigators identified up to 9,000 bank accounts suspected of
belonging to Holocaust victims.

Thousands of European Jews deposited or invested tidy sums here during
the decades before World War II, often without visiting what was then
British-controlled Palestine. After many were killed in the Holocaust,
their substantial assets went unclaimed, passing into the hands of the
government of the newly created nation of Israel and some of its
largest banks.

While some Israeli institutions have challenged the validity of the
Company's claims, they are generally loath to say much about any of
this in public. Mr. Roet and others say the institutions privately
argue they should be treated more gently than their European
counterparts because they are in a different position than banks and
governments that actively assisted the Nazis. They also say any assets
once owned by Holocaust victims that were subsumed over the years
served a public good because they went toward building a Jewish
homeland.

"They said, 'We are not really cheating the survivors. It's all within
the Jewish community, within Israel. It's not the same as it being
held by the Swiss,'" Michael Bazyler, an expert on Holocaust assets
from the Chapman University School of Law in California, says Israeli
bankers told him in 2006. "That was sort of their excuse. And I'm
saying, 'Wait a second. It's not your money.'"

Mr. Roet, whose two sisters died in a concentration camp near
Auschwitz, Poland, started investigating and targeting some of
Israel's most powerful institutions after his firm opened last year.
The 80-year-old stepped down from the Company's top job in August but
remained a director and its most public face.

Earlier this year, he went after Bank Leumi Le-Israel B.M., Israel's
second-largest financial institution, claiming it owed more than $34
million, a figure derived from a government-approved formula for
fixing the value of roughly 1,300 accounts once held at the bank.

Last year, on the same day Bank Leumi, the Company's biggest private
target so far, announced that it had hired a retired Israeli Supreme
Court justice to scrutinize each of those accounts, the bank's
directors said they would give about $4.79 million to the Company.
Although insistent that it owed nothing, the bank said the payment was
being made "out of public sentiment and as a gesture of goodwill." The
bank disputes many of Mr. Roet's claims and says it owes little.

While most of the Company's focus has been on bank accounts, it says
it has also located about $86.7 million worth of real estate that had
belonged to Holocaust victims and more than 1,000 stolen works of art
in the Israeli Museum that had been recovered by the Allies from the
Nazis. Museum officials have published a complete catalog on their Web
site and the Company's Web site. They also sponsored a special
exhibition earlier this year titled, "Orphaned Art: Looted Art from
the Holocaust in the Israel Museum."

The Company has sweeping powers allowing it access to government and
business records to find lost assets and lay claim to them. It then
tries to locate heirs -- whose names it is forbidden by law to
publicly disclose -- for any money it recovers. When it can't find
heirs, it transfers the money to needy Holocaust survivors living in
Israel. Recovered proceeds also fund the company's operations.

Run out of a suite of offices in a glass-and-steel tower four stories
above a hardwood-flooring store in this suburb of Tel Aviv, the
Company has so far recovered assets valued at just over $183.9
million. That includes about $44.7 million from the government.

Mr. Roet estimates conservatively that there's $500 million of
victim's assets in Israel. That's based on those already recovered and
claims either already made or being prepared. He believes that figure
could reach as much as $1 billion when the quest is over, especially
if land values continue to rise in Israel's urban centers.

By comparison, a 2001 settlement between Jewish groups and Austria's
government and private sector totaled about $360 million. A 1998
settlement between Jewish groups and a collection of Swiss banks
reached $1.25 billion.

As in Europe, it's impossible to know how much was really lost in
Israel. The Nazis and their surrogates tried to hide their genocide.
There is no reliable registry of the dead nor of their international
assets. Those who survived didn't typically hold onto the sort of
records that can buttress a claim.

In the 1990s and earlier this decade, Jewish groups threatened or took
legal action against European governments and businesses. The U.S. got
involved, threatening reluctant European companies with sanctions.

Under intense international pressure, deals were reached across the
Continent. Settlements were often based on fragmentary evidence and
statistical estimates of what banks and institutions owed. After
hammering out a total price tag, the targeted institutions funded
settlement pools or agreed to specific procedures for paying claims.
Heirs with verified accounts or other documented assets typically got
top priority. The remaining cash was designated for other victims of
Nazi persecution, including refugees and slave laborers.

The European cases led Israeli scholars in 2000 to publish research
showing heirs had been having difficulty recovering assets in the
Jewish state. The revelations led to a parliamentary investigation,
and, in 2006, the law creating the Company.

The Israeli law sets up a process similar to the one in Europe.
Verified heirs are supposed to get paid first, with needy Holocaust
survivors getting the rest. But there's a crucial difference from
earlier settlements: The Company must target each institution over
each asset that it allegedly held. As with Bank Leumi, this gives the
targeted institutions a chance to fight claims case-by-case, then
shekel-by-shekel within each case.

Company investigators have traveled to Poland, Latvia and Lithuania to
dig up school report cards, birth records and marriage documents to
try to make their cases. They also check Holocaust archives in Israel,
Germany and elsewhere to try to prove account holders died in the
tragedy.

Making matters more complex, many of the dormant bank accounts the
Company has tried to recover have been transferred from one
institution to another or from a bank to the government, and, in some
cases, back again.

Some of the contested accounts have even been paid out to heirs. These
cases get at a particularly contentious issue between the Company and
the banks. The heirs may have gotten the face value of the accounts,
but the law provides a formula to calculate what the account should be
worth when factors such as inflation, currency revaluations and
accrued interest are taken into account.

For example, suppose a European Jew who would later perish in the
Holocaust opened a bank account in 1936 with the equivalent of $1,000.
If heirs eventually identified the account and recovered the money
this year from the bank or government custodians, Mr. Roet says they
most likely got only the face value of the original investment, or
minimal interest on top of it. But the legally mandated formula the
Company uses calculates the "lost value" in that account over the
years. Under that formula, the $1,000 deposit in 1936 would be valued
today at the equivalent of about $23,000.

And Mr. Roet says the banks -- even those that have already paid out
at face value -- still owe the difference for that legally defined
lost value. Without any of the international pressure that European
firms faced, however, many Israeli institutions are offering stiff
resistance.

Of the $34 million from 1,300 disputed accounts Mr. Roet says Bank
Leumi owes, the bank accepts responsibility for only three of those
accounts. They are worth just about $2,200, at face value.

Aviram Cohen, a Bank Leumi spokesman, says the bank's own
investigation shows 600 accounts identified by Mr. Roet belonged to
people who couldn't be Holocaust victims, since there was activity in
the accounts after the war. Bank Leumi says it doesn't owe anything
for almost all of the remainder of the accounts, because they've been
transferred out of the bank over the years. The bank dismisses the
idea that it must pay for the lost value of an account for the years
it held one.

In earlier public statements, bank officials have rejected the idea of
lost value enshrined in the law, calling the basis for claims an
"alleged liability" stemming "from a conceptual revaluation" of
deposits.

The Company's lawyer, Nadav Haetzni, acknowledged that about 100 of
the 1,300 cases were submitted to the bank by mistake. They involved
Holocaust survivors, rather than confirmed victims, he says. However,
Mr. Haetzni also says the error was quickly corrected, that the
accounts in question had little value and that the sum of the claims
against Bank Leumi won't be materially diminished.

In addition, he says the Company recently slapped a second round of
claims against Bank Leumi seeking an additional $31.5 million.

On the issue of lost value, Mr. Haetzni said the law is clear. It
appears the dispute is headed for the Israeli courts.