-JO Jacob Friedman, Estelle Sapir and Miriam Stern, on Behalf of Themselves and All Others Similarly Situated v. Union Bank of Switzerland, et al. (See Doc. No. 897)

Filing 4781

MEMORANDUM AND ORDER that the recommendations set forth in the 10 November 2011 letter concerning the Arthur Freund Appeal are adopted in their entirety and the Appeal is hereby closed.. Ordered by Senior Judge Edward R. Korman on 11/16/2011. ** See Order for more details ** (Greene, Donna)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

x
Case No. CV 96-4849 (ERK)(MDG)
(Consolidated with CV 96-5161
and CV 97-461)

IN RE: HOLOCAUST VICTIM ASSETS
LITIGATION

MEMORANDUM AND ORDER
This Document Relates to: All Cases

FILED
IN CLERK'S OFFICE
US DISTRICT COURT E.D.N.Y.

x
KORMAN,J.:

*

NOV 1 6 2011

BROOKLYN OFFICE

At my request, Special Master Helen B. Junz has analyzed the Appeal that has
been filed against the A ward Decision In re Arthur Freund which was authorized
pursuant to the Insurance Guidelines and in accordance with my subsequent Orders,
including my Order dated 27 October 2006. In her letter of 10 November 2011, Special
Master Junz set forth her analysis and recommendations on the Appeal filed In re Arthur

Freund.
In her letter of 10 November 2011, Special Master Junz finds that the Appellant
did not provide a sufficient basis to justify adoption of his main contentions. Special
Master Junz however did find that the CRT's valuation of the insurance policy in
question was in part in error and accordingly recommends an additional payment to the
Appellant.

"*

Special Master Junz is hereby requesting the Court's approval of her

recommendations regarding the Appeal In re Arthur Freund.
Special Master Junz' letter of 10 November 2011 provides an extensive analysis
of the issues raised in the Appeal and explains the basis for her recommendations in
detail. The 10 November 2011 letter is attached hereto and incorporated herein.

In view of Special Master Junz' thorough examination of the record before the
CRT and detailed explanation of her recommendations, it is hereby
ORDERED that the recommendations set forth in the 10 November 2011 letter
concerning the Arthur Freund Appeal are adopted in their entirety and the Appeal is
hereby closed;
ORDERED that payment of US$ 3,276.02 be made to the Appellant identified to
the Court by the Special Master;
ORDERED that for this payment the Signatories of the Settlement Fund are
hereby directed to transfer immediately US$ 3,276.02 to the Swiss Banks SettlementDormant Accounts-Payment account;
ORDERED that the referenced Appeal Decision is hereby approved for release to
the Appellant.
It is further ordered that the Special Master shall provide the Court with the name

and address of the Appellant receiving this Appeal Decision which information shall be
filed with the Court under seal.

Dated:

Brooklyn, 1'ffw York
November$ 2011

s/Edward R. Korman
'- 1·----~--'-E=--d:-w=ar"'-d "I--'K.... ...an
.....
rl"'E:l-1: ~J!.~ ....
-="'-------United States District Judge

Helen B. Junz
Special Master
Holocaust Victim Assets Litigation
Case No. CV 96-4849
P.O. Box 9564
8036 Zurich
Switzerland
November 10,2011
The Honorable Edward R. Korman
United States District Judge
United States District Court
for the Eastern District of New York
225 Cadman Plaza East
Brooklyn, New York 11201

Dear Judge Korman:
At your request I have reviewed the Appeal filed by the Appellant against the
Award Decision, approved by the Court on 27 December 2006, regarding his claim to a
looted life insurance policy held by his father Arthur Freund (In re Arthur Freund). The
CRT informed the Appellant in a letter, dated 30 January 2007, that the Court had
approved the CRT's recommendation that the Appellant be awarded the amount ofUS$
10,784.38 in payment of his claim to the insurance policy issued to his father, Arthur
Freund, by the Berlin branch of a Swiss Non-participating Insurance Company ("the
Insurance Company")

Summary of the Award decision
The award was based on archival documentation provided by the Appellant. This
documentation consisted of
1) a registration form filed by the Insurance Company on 9 July 1940 with the
Central Finance Office (Zentra/finanzamt) in Berlin, which certified that Arthur
Freund, who resided in enemy territory, namely in Tel Aviv, Palestine, held a life
insurance policy numbered 241444 with them. The face value of this policy was
4,828.00 German Goldmark ("GM") (payable in dollars) and the actual (cash
surrender) value was RM 2,864.45.
and

2) two documents relating to the question whether Arthur Freund's Insurance
Company policy was subject to the Nazi Ordinance regarding confiscation of such
Jewish-owned policies. The first document is a letter from the Insurance
Company to the head of the Gestapo, dated 22 February 1943, inquiring whether
the confiscation Ordinance applied to Arthur Freund's policy. The second is a
form letter from the Office charged with liquidating Jewish-owned assets

(Vermogensverwertungsstelle), dated 1 November 1943, to the Gestapo
requesting confirmation that the confiscation Ordinance applied to Arthur
Freund's assets so that they could move expeditiously to confiscation of his
Insurance Company policy.
The CRT, after applying the relevant paragraphs of the Guidelines governing its
recommendations with respect to insurance claims, determined that Arthur Freund's
Insurance Company policy had indeed been surrendered and that there was no evidence
that the policy holder had received the proceeds and that the current US dollar value of
the surrendered policy amounted to US$ 10,050.64. In as much as this amount was
below the average value of certain insurance policies, as set forth in the Guidelines, the
CRT recommended that the award amount for the policy held by the Appellant's father
be raised to the relevant average value, which in this case amounted to US$ 10,784.38.
Issues in the Appeal
In a letter, dated 16 April 2007 and received by the CRT on 27 April 2007, the
Appellant asked for reconsideration of the amount that had been awarded for his father's
life insurance policy. The Appellant asserted that the CRT's determination of the award
amount was in error on two grounds:

1) the Appellant asserted that a mistake was made in awarding the US dollar
counter value of the RM 2,864.45 reported by the Insurance Company on their
registration form [col. 3b] rather than the GM 4,828.00 reported on the same
form[col. 3a].
The Appellant argued that the difference between these two amounts stems from
an erroneous application of the conversion rate between the GM and the RM. In
explaining his view the Appellant posited that
"this calculation done by the Nazis in 1940 is mistaken and was meant to
decrease the Policy value"
and that the proper official rate for the GM, as set in the Reich's 1935 law, was
GM 1=RM 1. He concludes accordingly that
"the basis for the [award] calculation should be 4,828 RM."
and

2) the Appellant contended that, because his father bought his policy from a Swiss
insurance company and the CRT is also based in Switzerland, any award should
be calculated in Swiss francs ("SF") and that he wished to receive the award in
SF. According to the Appellant
"The official exchange rate between the RM and SF was 1.52 (see CRT
decision in the account of Paul Friedmann, claim Nr. 601288IHS). So, the
original value of the Policy in SF should be 4,828 RM multiplied by 1.52

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which equals 7,338.56 SF.) This sum should then be multiplied by the
factor of 12.5 which equals 91,732 SF. This is the sum I am expecting to
receive."
Consideration of the Appeal
As set out above, the Appellant asserts that the CRT's award decision should have
been based on the face value of his father's life insurance policy, numbered 241444,
which, as reported to the Nazi authorities by the Insurance Company in their form letter
of9 July 1940, amounted to GM 4,828.00 (column 3a). The Appellant reached this
conclusion by interpreting the amount ofRM 2,864.45 (column 3b) reported by the
Insurance Company in the same form letter as representing the conversion of the GM
face amount into RM by using a manufactured exchange rate designed by the Reich's
authorities to diminish the value ofthe asset.
The Appellant's interpretation, however, is in error. First, the amounts listed in
the report form were provided by the Insurance Company not by the Reich's authorities.
I note in this respect that the Insurance Company's submission was made in response to
an Ordinance requiring the registration of details of life insurance policies (and other
assets) held by them in the names of non-residents, who where enemies of the Reich. I
note that Arthur Freund, who at the time resided in Tel Aviv, Palestine, would have been
subject to this Ordinance. Subsequently, when under the 11th Ordinance of 25 November
1941 all Jews who did not reside within the inner Reich, lost their German nationality and
thereby all their assets within the Reich, the registration requirement was broadened to
include all those who might fall under the earlier Ordinance. Some Swiss insurance
companies, arguing that they could not determine who among their clients was Jewish,
did not comply (or complied in ways that made the registration meaningless). The
Insurance Company, however, was not one of these. 2 Thus, in the case of Arthur Freund,
the Insurance Company in 1943 even reminded the head of the Sicherheitspolizei (the
Security Police), which collected this information, that it held a policy in the name of
Arthur Freund and asked whether this policy was subject to the 11th Ordinance. Though
the documentation does not include a reply to this question, it is clear that the policy was
confiscated, i.e. that the Insurance Company surrendered it to the Nazi authorities.
However, as in all the cases where confiscation preceded the death of the policy holder,
the Insurance Company would not have paid the face value of the policy to the Reich, but
rather the cash surrender value of the policy as of the date of confiscation. In the same
way, the Insurance Company provided in its 1940 report form both, the original value of
the policy (GM 4,828.00) and the cash surrender value (RM 2,864.45) that had been
accumulated by that date. Thus, the difference between the two reported amounts reflects
the policy value to maturity (fully paid-up value) or value at death if that occurred before
the policy was fully paid up, and the actual value at a given date before either of these

1 I note that the official exchange rate between the RM and the SF in 1938 was in fact RM l=SF 1.7485,
which is the rate applied by the CRT in the award decision cited by the Appellant.
2 See also Bergier Commission, vol 12, part 1, Karlen et al. Schweizerische Versicherungsgesellschaften im
Machtbereich des «Dritten Reichs», pp. 428-29.

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events. This difference thus has nothing to do with any conversion of the GM into the
RM, which indeed was at GM 1=RM 1 as stipulated in the 1935 law.
Given the above, the CRT was quite correct in using the amount ofRM 2,864.45
as the basis on which the award amount for Arthur Freund's policy was calculated.
However, the CRT did neglect to consider that the actual confiscation date, according to
the documentation, appears to have been November 1943 or later. In its explanation of
the Award Decision the CRT wrote on 30 January 2007
"the available records indicate that the original known value in 1938 [of the
policy] was 2,864.45 Reichsmark ("RM"). The CRT has applied the exchange
rate ofRM 1.00 equals .2807 United States Dollars ("US$")as described in the
Guidelines and has determined the current value of that amount by multiplying
the historic value by a factor of 12.5 in accordance with the practice for bank
account claims, to achieve the amount ofUS$ 10,050.64."
The error in referring to the valuation date as in 1938 rather than the actual
reporting date of9 July 1940 is of no consequence in the CRT's calculation of the award
amount. However, neglecting to consider the difference between the valuation date and
the confiscation date is of relevance. The fact that the surrender of the policy was
demanded at least 39 months after its cash surrender value was reported would make a
difference if the premiums had continued to be paid up to the date of confiscation.
Though there is no documentation on the payment of premiums following the
Policyholder's emigration to Palestine in 1936, the fact that the Insurance Company in
1940 reported his full address in Tel Aviv indicates that the Company was in touch with
him. Accordingly, it seems probable that premiums continued to be paid until the policy
was surrendered to the Reich's authorities and that, therefore the actual cash surrender
value that accrued to the Reich in 1943 was somewhat higher than that reported in July
1940.
As to the calculation of the policy's cash surrender value in 1943, the
documentation does not include the issue date of the policy other than that the Appellant
notes that it was issued at a time of concern about high inflation and financial turbulence.
Nevertheless, it is possible to derive the issue date and the cash surrender value in
November 1943 from data provided by a number of insurance companies to the
International Commission on Holocaust Era Insurance Claims ("ICHEIC") in 1999.
Information submitted by Allianz, the dominant German insurance company at the time,
states that life insurance policies in the main were sold as savings instruments with an
average term oftwenty years. In the early part ofthe term, the cumulative amount of
premiums paid would naturally exceed the cash surrender value of the policy as risk
premiums and expenses swallowed up most ofthe premium. But, in the 12th year ofthe
term, the cash value began to overtake the cumulative amount of paid premiums. In other
words, in the 12th year, the cash surrender value reached 50 percent of the face value of
the policy. After that, the cash value rose on an accelerating trend to reach full face value

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in the twentieth year. 3 In the case of Arthur Freund, the documentation shows that by
July 1940 his policy had reached a cash surrender value of 59.3 percent of its face value.
According to the Allianz data, this means that the policy was in the 14th year of its twenty
year term. Consequently, the issue date would have been in 1926, which accords with the
Appellant's description that his father bought the policy with Germany's hyperinflation
and the financial turbulence of the time in mind. The remaining term to fully paid-up
th
status thus was 6 years. By late 1943, the policy would have been well into its 17 year
and, according to the Allianz data, would have reached about 83 percent of its paid-up
value. Consequently, the award amount should have been based on a policy cash
surrender value ofRM 4.007.24, which according to the Guidelines as re-affirmed by the
Court, translates into a current US dollar amount ofUS$ 14,060.40. The award already
received by the Appellant amounted to US$ 10,784.38, which leaves a difference yet to
be paid ofUS$ 3,276.02.
It is further noted that the Guidelines under which the CRT treats insurance
claims stipulate that in cases where the Policyholder survived the Holocaust, cash
surrender values as of confiscation date (generally taken to be 1938) are to be awarded
for looted policies. Accordingly, the only claim for which the CRT has recommended
payment of the face value of a looted policy held by a Holocaust survivor was the case of
a fully paid-up policy.

The second assertion of error addressed by the Claimant concerns the CRT's
translation of the RM value of the policy into US dollars rather than into Swiss francs.
The Claimant posited that ifhis father bought a policy from a Swiss company, he would
have used the Swiss franc to anchor the policy's guaranteed value. Second, he argued
that the fact that the CRT is based in Switzerland further supports his demand that the
award be based on the policy's Swiss franc value ..
As to the Appellant's first point, the form filed by the Insurance Company shows
very clearly that the anchor of the policy's value was the US dollar, which also is in
accord with the general usage at the time. Consequently, the CRT was quite correct in
using the translation into US dollars as the basis for calculating the award amount. The
point regarding the CRT's location is of no relevance to the interpretation of the CRT's
guidelines relating to the treatment of insurance policy claims. However, the Appellant
may wish to note that in his case the application of the generous interpretation of the
CRT's guidelines as approved by the Court, has been to his advantage. It is noted that
the Insurance Company is not one of the Swiss insurance companies participating in the
settlement process and that the Appellant's claim should have been treated by the
German Foundation. It was only the refusal of the German Foundation to accept such
claims from the CRT and the concern that Policyholders or their heirs not be
disadvantaged as a consequence of bureaucratic problems that led the Court to allow
these claims to be treated under the CRT's Guidelines. It further should be noted that
ICHEIC, Report On The Estimation Of Holocaust ERA Insurance Claims Which Have Been Unpaid And
Uncompensated by the ICHEIC TASK Force Chaired by Glenn Pomeroy and Philippe Ferras, December
1999, Annex E: Presentation by the Companies: Life Insurance in Germany 1928-1940, presentation by
Allianz, pp. 2-3.

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5

under the Gennan Guidelines insurance claim awards, not the least because they were
subject to the effects of the Gennan currency refonn, yielded considerably lower awards
than claims treated by the CRT.

Recommendation
In view of the above, I find that the CRT was correct in using the policy value of
RM 2,864.45 as the basis for calculating the award amount, but that it was in error in not
considering the lapse of time between the valuation date of the policy and its probable
surrender date. I consequently recommend that the Appellant be awarded an additional
US$ 3,276.02.
With respect to the Appellant's contention that the award amount should have
been calculated on basis the policy's Swiss franc value, I find that the CRT was correct in
translating the RM value of the policy into US dollars and that the Appellant's contention
has no basis in fact.

Helen B. Junz

Approved:

The Honorable Edward R. Konnan
United States District Judge
United States District Court
for the Eastern District of New York

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