Time will tell of Swiss bank role Banking: Switzerland's historic neutrality is under scrutiny with allegations of financial dealings with the Nazis at the expense of Holocaust victims. Some say its steadfast secrecy may end up attracting more customers.

ZURICH, SWITZERLAND — ZURICH, Switzerland -- In "The Third Man," a 1949 movie classic about a shadowy black marketer named Harry Lime, the actor Orson Welles turns to Joseph Cotten by a Ferris wheel in an ominous-looking Vienna and remarks on human nature:

"You know what the fellow said, 'In Italy for 30 years under the Borgias, they had warfare, terror, murder and bloodshed, but they produced Michelangelo, Leonardo Da Vinci and the Renaissance. In Switzerland, they had brotherly love, and in 500 years of democracy and peace, what did that produce? The cuckoo clock.' "


The Swiss have maintained that image of benign passivity for centuries. Even amid world wars, Switzerland was the imperturbable land of timepieces, chocolates and banks. But recent revelations suggest that Swiss banking services before and during World War II included extensive, long-lasting financial dealings with the Nazis, a relationship that may have developed at the expense of Holocaust victims.

Adolf Hitler is believed to have deposited the royalties from his book "Mein Kampf" in a Swiss bank. The Nazi government stashed plundered art and more than $500 million in gold in Swiss accounts -- equivalent today to more than $6 billion. And these surreptitious financial dealings are only now casting a cloud over the Swiss banking system, keeper of roughly one-quarter of the world's wealth.


"It's been made to sound as though this is Mafia country No. 1," says Herbert Winter, a Zurich attorney representing about 20 relatives of Holocaust victims seeking compensation. "That is not the case, but that's the way it sounds in the press."

How the scandal will affect Swiss banking depends on the answers to two questions: Are the horror stories true? How many banking customers would care whether they are true or not?

The most vocal criticism has come from the World Jewish Congress and Sen. Alfonse M. D'Amato, a New York Republican, who assert that Switzerland profited from the bank deposits of Jews killed in the Holocaust. Swiss banks say they hold no more than $32 million in unclaimed accounts of Holocaust victims; Jewish leaders say the figure is in the billions.

Swiss leaders have criticized D'Amato for condemning them before investigators can finish their job. In the meantime, the bankers aren't expressing exceptional alarm about their business reputation.

"So far we've seen no drop-off or loss of customers," says Silvia Matile, spokeswoman for the Swiss Bankers Association. "We're doing our best to shed light on the problems. But there is no reason for a change in the rules. Generally our customers are quite satisfied."

The bankers association has begun its own investigation of the accounts and has also granted an international inquiry, headed by former U.S. Federal Reserve Board Chairman Paul A. Volcker, broad access to records. The Volcker committee intends to hire at least two international accounting firms to wade through tens of thousands of documents sealed for decades.

A third investigation is being handled by Switzerland's banking ombudsman, Hanspeter Hani, who is expected to make an announcement tomorrow about his preliminary findings. But it will be at least two years before any of the major investigations is completed.

Many supposed heirs have been coming forward with claims of lost accounts, but with little documentation or proof. Winter describes one of his clients as the relative of a man who died in a concentration camp after writing a letter saying he had deposited a small fortune in a Swiss bank.


Winter looked for proof but came up with nothing.

"The lawyer who set up the account had passed away, and the bank says they don't have an account number," he says. "Maybe there was something there in 1935 or 1938, but there's nothing there now."

Swiss authorities, meanwhile, argue that they are cooperating, opening the hitherto secret bank archives for the first time to foreign investigators. D'Amato insists that the Swiss are dragging their feet and are preventing the world from discovering the truth about one of the darkest era's of Switzerland's past.

It is expected that the Swiss would pose some resistance. Banking has come to seem as much a natural part of the Swiss economy as oil is to Kuwait's. More than half the country's work force is employed in some way with the banking industry.

"As a nation we had to concentrate our efforts on services and industry," says Matile. "We've had a good reputation for more than 100 years, offering the advantages of political stability, neutrality and a strong currency." And the advantage of confidentiality.

The Swiss have from time to time been embroiled in controversy because of money launderers using their banks. But the latest controversy is a different breed altogether, calling into question the very essence of Swiss banks' integrity and confidentiality.


Switzerland obligates bankers to protect the financial privacy of clients as long as they are not committing criminal offenses under Swiss law. Ironically, the banking secrecy dates to efforts by authorities to protect accounts of Jews from Nazi confiscation, beginning in 1933. The plundering Nazis, at first frustrated by the secrecy law, began by the end of the '30s to use it to their own advantage.

The fate of the gold they deposited in the banks is unclear and is one of many questions being researched by Volcker's committee. Newsweek magazine, citing documents from 1945 and 1946, reported that the Swiss had sold hundreds of millions in Nazi gold to the central banks of other nations.

Swiss banking officials say that some of the nation's reputation for bank secrecy has been exaggerated. They point to the popular notion that Swiss bankers simply assign numbered accounts to faceless clients; the truth, they say, is that they have always required the account holder to be identified when opening an account.

The Swiss-Nazi affair has shaken the banking industry in Switzerland. But it's not going to crumble it, says Roy C. Smith, a professor of finance at New York University's Stern School of Business.

"Where else would you take your money?" he asks. "For an account holder, the bottom line is how secure is your money. And the Swiss are very trustworthy. They've been prudent and responsible with other people's money for hundreds of years."

Other nations -- Luxembourg, Panama and the Bahamas, among others -- have entered the international banking market that was once exclusive to Switzerland. But none has the same cachet: "What you have to ask yourself is, 'Do you want your money under the control of some of those countries,' " says Smith. "There's a question of investment know-how, and a question of how corrupt they may be.


"You'll go to Panama and say, 'I'm here for my money.' And they're liable to say, 'I'm sorry, it's gone.' "

The Swiss government's insistence for strict banking secrecy, and its initial refusal to cooperate with foreign investigators in the Nazi controversy, might even attract more banking customers in the long run.

"If it was your money, you'd want them to be that way," Smith says. "People want ferocity in defense of their money."

Pub Date: 11/11/96