UBS faces an unpleasant New Year's surprise in the U.S. An important financial media outlet cites allegations about previously undisclosed Nazi-linked accounts at Credit Suisse. The United States Senate is also involved.
Fresh allegations about Credit Suisse's wartime activities have reignited fears of potential legal and financial challenges for UBS, which acquired the embattled bank in 2023.
The accusations, tied to previously undisclosed Nazi-linked accounts, have led to intensified scrutiny from U.S. lawmakers and investigators. However, legal experts suggest the risk of substantial new claims may be limited.
Dozens of Investigators
Sources close to UBS have revealed to finews.com that U.S. investigators are now poring over Credit Suisse's historical archives.
The reopening of the inquiry in late 2023 by UBS' General Counsel Barbara Levi (finews.com reported), prompted by pressure from U.S. lawmakers – more specifically the Senate's Budget Committee under Chairman Sheldon Whitehouse (D-R.I) and Ranking Member Chuck Grassley (R-I.W.) –, has turned into an expansive and well-funded effort.
The inquiry was initially started in 2021 by former Credit Suisse General Counsel Romeo Cerruti after allegations by the Simon Wiesenthal Center of previously undisclosed accounts of high-ranking nazis.
Seemingly Unlimited Resources
The dozens of investigators, described as operating with seemingly unlimited resources at the bank's expense, are reportedly staying for extended periods at Zurich’s luxury Park Hyatt hotel.
The scale of the operation, with lavish accommodations and substantial manpower, underscores the intense focus on Credit Suisse’s wartime legacy. One insider close to UBS remarked, «The resources dedicated to this inquiry are extraordinary, reflecting the high stakes and the intense pressure from U.S. authorities.»
Familiar Face: Neil Barofsky
Leading the investigation is Neil Barofsky, a former U.S. prosecutor and independent ombudsman. Barofsky is no stranger to Credit Suisse, having served as the bank's court-appointed monitor following its 2014 guilty plea in a U.S. tax evasion case.
In this role, Barofsky oversaw the bank's compliance with U.S. regulations, particularly in preventing further tax evasion. His tenure, initially set for two years, was extended to four years and involved significant oversight, with a team of specialists closely examining the bank's operations.
New Revelations...
The four-year compliance effort reportedly cost Credit Suisse close to 1 billion dollars.
The new revelations, reported by The Wall Street Journal on Saturday (article behind paywall) and based on Barofsky’s findings, have sparked fears that UBS could face renewed financial claims or lawsuits linked to Holocaust survivors, their heirs, or advocacy organizations.
...New Legal Fears
As the main surviving financial entity from the 1990s 1.25 billion dollar settlement between Swiss banks, insurances and Jewish organizations, UBS has inherited the weight of historical scrutiny.
Despite these fears, legal experts consulted by finews.com believe the potential for significant new claims is limited. They point to the precedent set by U.S. District Judge Edward Korman, who oversaw the distribution of the original settlement funds.
Legal and Procedural Barriers
«The behavior of Swiss banks during World War II has been litigated extensively,» noted one expert. «Judge Korman’s ruling created a clear framework for resolving these issues. Any new claims would face substantial legal and procedural barriers, especially given the finality of the previous settlement.»
Nevertheless, Nazi-era allegations add to UBS’s already considerable public relations and legal headaches. The bank is contending with lawsuits from AT1 bondholders after the controversial write-down of 17 billion dollars in Additional Tier 1 bonds during the Credit Suisse acquisition.
Fresh Headaches
UBS is also defending itself against claims from Georgian billionaire Bidzina Ivanishvili, who has accused the bank of mismanaging his assets in several jurisdictions, resulting in significant losses.
While the current investigation has drawn international attention, experts suggest the financial implications for UBS may be limited.
Complex Legacy
The reopening of records does not necessarily indicate new liabilities, particularly given the legal safeguards established by past settlements.
However, the scale of the inquiry, combined with the involvement of the United States Senate and leading financial media, highlights the complex legacy UBS has inherited.
UBS Seeks to Shed Light on Historical Accounts
UBS has pledged to contribute to a more comprehensive clarification of dormant accounts linked to the Nazi era, which were previously held at Credit Suisse predecessor banks. In a statement, UBS emphasized its commitment: «Since UBS’s acquisition of Credit Suisse in June 2023, we have prioritized ensuring that the review is thorough and complete. To that end, we have re-engaged Neil Barofsky as the independent ombudsman. We are providing him with all necessary support to facilitate his work and to bring greater transparency to this dark chapter of history through the ongoing review.»
