- Key insight: A behind-the-scenes dispute between UBS and a lawyer it retained to oversee historical research on Nazi accounts at predecessor bank Credit Suisse spilled into public view on Tuesday.
- What's at stake: The two sides are quarreling over access to information that UBS says is relevant to the question of whether a 27-year-old legal settlement should be reopened.
- Forward look: A federal judge is expected to rule on UBS' request that he issue an order clarifying the parties' obligations under the 1999 settlement. The bank's request has drawn opposition from the Simon Wiesenthal Center, the human rights organization known for its investigations of the Nazi historical record.
For UBS, revelations in 2020 about Nazi-linked accounts at Credit Suisse and the subsequent shotgun wedding between the two Swiss banking giants have opened a Pandora's box.
On Tuesday, two UBS executives faced heat from a bipartisan panel of U.S. senators, as well as an independent lawyer who's responsible for overseeing historical research at the bank and a nonprofit organization named after the famed Nazi hunter Simon Wiesenthal.
Sen. Chuck Grassley, R-Iowa, who chairs the Senate Judiciary Committee, accused UBS of trying to silence the Simon Wiesenthal Center and of filtering the information it's providing to Neil Barofsky, the lawyer who serves as the independent ombudsperson.
"UBS' conduct is absurd and a historic shame that'll outlive today's hearing," Grassley said.
Investigative findings by the Simon Wiesenthal Center in 2020 led Credit Suisse to commit to conducting further historical research — a project that UBS inherited three years later when it bought its longtime rival under emergency circumstances.
Now
According to Barofsky, the information that UBS is withholding involves safe deposit boxes from the World War II era that list German clients; Credit Suisse's involvement in looted art during the war; Credit Suisse's involvement in Nazis' forcible taking of Jewish-owned accounts or businesses; and Credit Suisse's gold transactions with Germany during the Nazi era; among other relevant subjects.
Barofsky testified Tuesday that UBS is withholding the documents despite the fact that his engagement letter with the bank makes clear that he's entitled to see all documents, except those that the bank is prohibited by law from providing.
"It's essential, for me to be able to do this job, for me to be able to have access to all relevant documents," Barofsky said.
Last week, lawyers for UBS asked a federal judge in New York to issue an order clarifying the scope of the two-decade-old settlement agreement, which provided $1.25 billion in compensation to the victims of Nazis and their families.
The UBS executives testified Tuesday that the bank will turn over the documents that it has so far withheld if it can get certainty from the judge that the information can't be used to reopen the 1999 settlement.
"It cannot be that for every piece of information that comes to light, we get under the threat of litigating," UBS General Counsel Barbara Levi testified. "Where is the incentive then for any financial institution or any other institution to look into the past and bring this information to light?"
The court order that UBS has proposed would also clarify the obligations of the parties to the settlement, including language that bars the parties from promoting "public controversy" in the media regarding Swiss banks' links to Nazis.
Rabbi Abraham Cooper, associate dean and director of global social action at the Simon Wiesenthal Center, testified that the proposed court order is an attempt to silence his organization.
"No one should be permitted to suppress, silence, or discredit an American human rights organization simply because it exercises constitutionally protected rights to investigate and publish accurate information about Nazis and their financing," Cooper said in his written testimony.
Grassley agreed with Cooper's assessment of UBS' conduct, but the UBS executives took issue with it. The bank says it's merely seeking to reinforce the parties' existing obligations.
"Let me be clear," Robert Karofsky, the co-president of global wealth management at UBS, said in his written testimony, "any suggestion that we have sued or are attempting to silence today the Simon Wiesenthal Center is false."
Karofsky also testified that UBS' dispute with Barofsky is limited to a relatively small set of privileged communications between Credit Suisse and its lawyers, as well as attorney files, from the 1990s.
But Barofsky, the independent ombudsperson, said UBS has acknowledged that documents created in the 1930s and 1940s have also been included in its privilege review because they were gathered during an internal investigation that Credit Suisse conducted during the 1990s.
UBS emphasizes that the 1999 settlement between Swiss banks and Jewish community organizations involves a release of all claims, whether known or unknown at the time the settlement was signed.
Sen. Adam Schiff, D-Calif., suggested at Tuesday's hearing that UBS may be concerned about its potential future legal liability if there turns out to have been relevant information that Credit Suisse and its lawyers knew about but suppressed in the 1990s.
"If Credit Suisse was aware of this, didn't disclose it, is it your position that the settlement would still cover that? Or would that, given that the party sitting across the table wasn't aware of this, would that be outside the scope of that settlement?" Schiff asked UBS' Karofsky.
"We would understand this to be … part of the 'unknown,' since it was new information that we learned," Karofsky responded.
Schiff shot back: "Well, that's presuming that it was unknown."
