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Holocaust cash haunts bank

Author: Shraga Elam.


Shraga Elam is an Israeli investigative journalist based in Zurich. He has specialised in the
Middle East conflict and World War II and the Holocaust. He is widely published and on
Thursday was one of the AFR team that won the Golden Walkley Award.
Date: 04/12/2004
Words: 1667
Source: AFR
Publication: Australian Financial Review
Section: Perspective
Page: 28

An Israeli parliamentary report will target Bank Leumi with serious allegations about money
belonging to Jewish victims of the Nazis.
Bank Leumi le-Israel, the finance group at the centre of the Rivkin Swiss banking scandal, is
braced for a new and much larger crisis with the scheduled release on Sunday of a devastating
Israeli parliamentary report on its activities.
For six years Leumi, the second largest bank in Israel, has been battling to keep under wraps
sensational accusations that it appropriated money from victims of the Holocaust and that it
has been thwarting current-day investigation efforts.
Israeli parliamentary committee documents examined by the Weekend AFR include reports
by its investigating team that Israeli banks controlled by Leumi hid money from the accounts
of Jews in occupied Europe from British authorities during World War II.
They then used the funds for their own purposes, including as a guarantee to secure loans to
secure the liquidity of an affiliated bank, claiming as early as 1940 that "the depositors will
not see the money".
Leumi strenuously denies the claims, and is pressing the Israeli government to postpone the
release of the parliamentary committee's findings, which states that $300 million of Holocaust
money is held by various banks and the state in 5000 dormant accounts more than half of
them with Leumi.
Israeli Justice Minister Yosef Lapid says Leumi has already stalled the release of the report
for 18 months, and documents seen by the AFR outline the way pressure from the bank has
watered down the committee's findings and its estimates of the missing money.
Bank Leumi made headlines in Australia last year after the AFR revealed details of Leumi
bank accounts in Zurich operated by disgraced stockbroker Rene Rivkin, businessman Trevor
Kennedy and former Labor minister Graham Richardson.
Leumi's former head of private client lending in Zurich, Ernst Imfeld, has been charged over
the loss of 300 million Swiss francs (about $340 million) in client funds. It was as part of
Swiss authorities' interviews of Leumi clients that Rivkin testified in December 2002 that he,
Kennedy and Richardson were the secret shareholders behind a $26 million block of shares
held by Leumi in Offset Alpine Printing Group, which Australian authorities had tried to trace
in 1995.
While Leumi has made provision of Sfr163 million in restitution for the Imfeld saga, former
clients have mounted legal actions claiming the bank is covering up the size of the losses.
Meanwhile, the investigation into missing money belonging to victims of the Shoa, as the
Holocaust is referred to in Israel, has run in the background for four years.
The concerns were first raised in 1997, at a time when world outrage was focused on the role
of Swiss banks during World War II.
In the face of a massive international campaign in 1998 the Swiss banks agreed to pay
$US1.25 billion in restitution to Shoa heirs over the banks' role in hiding and retaining funds
from Jewish clients killed by the Nazis.
By comparison, the ongoing investigations into the accounts of Leumi and other local banks
have attracted almost no coverage outside Israel by the non-Jewish media.
Below the surface, however, there are few more explosive issues within the worldwide Jewish
community, as shown by the threat by Lapid to lead a protest of Shoa survivors outside
Leumi's offices in Israel and New York wearing a Star of David, the mark which Jews were
forced to wear by the Nazis.
Leumi was "the last bank in the world that refused to pay money to Shoa survivors", Lapid
said.
The chairman of an umbrella organisation of Israeli survivor organisations, Noah Flug, said:
"It is unconscionable that in Israel, of all places, the demand to restore Holocaust survivors'
bank accounts goes unheeded."
The comments sparked furious responses from Leumi. "To my sorrow you were misled,
misleading and you slander Bank Leumi," Leumi vice-president Yona Fogel wrote to Lapid.
Fogel said that as the son of a Shoa survivor he would not dream of dispossessing other
victims or their heirs. He said the committee's investigation had not proved the existence of a
single Shoa account at Leumi and that any missing money is held by the state.
Leumi executives have since offered a $US10.5 million ($13.5 million) no-blame settlement
to be matched by $US22 million of state funds while continuing to deny that the bank held
any monies belonging to victims of the Shoa.
The chairwoman of the parliamentary inquiry, Collette Avital, has complained of attempts by
Leumi to intimidate her. "[Leumi CEO] Galia Maor called me . . . and tried to convince me to
be more lenient with Leumi than I would be with a Swiss bank, saying: 'We've done so much
for the state of Israel, we are Zionists,"' Avital said. "I don't buy it."
Yair Olmert, the nephew of a senior government minister who worked as a lawyer for Leumi
for many years, told the Weekend AFR that he considered the behaviour of Leumi
management on this issue as symptomatic of its culture one of "insensitivity, arrogance and
viciousness".
The saga has its origins in the 1930s, when many European Jews, conscious of the rising tide
of anti-Jewish sentiment in Germany, bought land and buildings or deposited money in
Palestine, most notably with the Anglo-Palestine Bank, which would later be renamed Bank
Leumi.
At the beginning of World War II, with Germany holding most of Europe, the British
mandate in Palestine ordered all the accounts of what it now regarded as enemy aliens to be
blocked, and for the banks to transfer the funds to a custodian. With many of the owners
killed by the Nazis, the money was later transferred to the government of Israel, leaving no
unclaimed bank accounts.
However, an investigating team led by Yehuda Barlev, a high-profile auditor and a former
police officer in an anti-corruption unit, told the parliamentary committee last year that at a
time when some banks were facing credit problems, Leumi and other banks had not declared
all of the accounts and instead had diverted the money, including to a Leumi branch in
London.
Barlev testified that the investigating team had discovered 2500 Shoa accounts at Leumi
worth $US200 million, though the total has been sharply reduced in the committee's final
report to a request that Leumi return between $US10 million and $US85 million.
"Another claim [raised by the Leumi] is that the bank did not profit >from the Shoa accounts,"
Barlev testified. "The bank clearly benefited >from these deposits throughout the whole
period. We see also that its profitability rose.
"These Shoa victims' accounts served as securities for the banks. They knew that they [the
victims] would not withdraw these monies and they used them as guarantees for loans that
they took."
Barlev tabled a public document from the Central Zionist Archives which showed that in
1940 Mizrahi Bank asked for a loan from Leumi.
Asked for guarantees, Mizrahi presented the accounts of Jews in occupied Europe and
declared: "The depositors will not see the money."
Barlev said it was peculiar that already in 1940 Mizrahi knew that no one would claim the
money and used it as a guarantee. Leumi not only accepted it as such but was responsible for
the deal as it controlled Mizrahi at that period, he said.
Barlev also accused the bank of delaying the investigation: "We asked for a list of retirees
who have a picture of what was the situation at that time. We got a list of people that we could
meet, but none of them remembered [anything].
"After we tendered the draft of our preliminary findings, we discovered suddenly that there
are pensioners with a phenomenal memory who remember what happened and can say who is
the account owner, his family and his children, including change of address. But they were
not on the list that we got."
Chairwoman Collette Avital said in a transcript from a parliamentary hearing: "We are not
judging now about your way of working. I ask you if you have information really relevant for
the issue at hand."
Yehuda Barlev responded with: "The bank established a website with 17,000 dormant
accounts and one could go there and search. This was true till we started to look at what was
there. Since then, the internet site doesn't exist.
"In the book of professor Nahum Gross on Bank Ha'poalim it is written about other banks. In
this book a rush/panic is described to withdraw monies [from the banks] in the years 1939-
1941 and the banks in the country almost collapsed."
Nahum Gross added: "There is no need to exaggerate. It concerned only a minority of the
banks that got into problems and were saved."
Yehuda Barlev: "Who saved them and with which money?"
Nahum Gross: "Bank Leumi. But you want to say that this was financed by victims' assets and
this isn't accurate as in Bank Leumi there was no separation between these monies and
others."
Bank Leumi fiercely contests Barlev's findings, and launched an attack on his investigation
and report through the financial paper Globes on November 22. It claimed that not a single
account was found that could be clearly shown to belong to a Shoa victim and rejected the
demanded to pay $10 million as unfounded.

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