It is twenty years now that a night guard stole documents destined for the shredder at the predecessor of UBS in Zurich. The theft indirectly caused one of the biggest ever crisis for Swiss banking. And is exemplary for the woes of a once proud industry.
Christoph Meili was doing his shift at Union Bank of Switzerland in the night to January 9, 1997, when he spotted documents ready for destruction. He (falsely) assumed they were proof for banking relations with victims of the Holocaust and removed the documents.
The employee of Wache AG missed the fact that the documents dated back to the years of 1897 through 1927 and thus couldn’t possibly be proof for the dormant accounts. He gave the files to a Jewish organization, which in turn handed them over to the police.
The theft of the documents prompted an escalation of the simmering conflict over the so-called dormant accounts at Swiss banks. It also proved to be the catalyzer for one of the crisis Swiss banking has ever seen, with a now infamous class-action lawsuit engineered by a group of New York-based lawyers. UBS and Credit Suisse settled the conflict at the end of the century with the payment of $1.25 billion.
Arrogant Swiss Bankers
The case in several ways proved a warning sign for what was yet to come. Both the representatives of Swiss banking and politicians in Bern underestimated the global impact of the demands put forward by Jewish claimants.
At first sight, bank bosses arrogantly brushed aside the case instead of taking it seriously and in a forward-looking manner. Robert Studer, the head of UBS, for instance on public television said the issue was «peanuts», adding insult to injury at a time when the conflict was reaching boiling point.
Ten years later, Swiss banks were equally naive in their handling of the tax dispute with the U.S. The responsible managers gravely underestimated the potential damage and failed to reach a global settlement, which would have come much cheaper than the individual payments the banks were condemned to make later.
The dormants accounts case also showed how vulnerable to extortion the banks had become – not withstanding their ironclad reputation. Jean-Pascal Delamuraz, one of the seven federal ministers at the time, called the demands extortion and demand for ransom payments, further fueling the controversy.
The agreement reached between the Swiss big banks and the U.S. claimants today would appear to be the prototype for demands made by the U.S. in later – and to a certain extent also by certain European countries. Those demands of course were linked to untaxed assets hidden away with the help of Swiss banks.
From the end of the 1990s, several governments changed tack and started cashing in on their threats to sanction and punish certain activities.
With the dormant accounts conflict, the Swiss banking industry also saw its international reputation badly tarnished. The banks came to be seen by some as inhuman institutions seeking to improve profits even to the detriment of victims of the Holocaust.
A similar effect came into play in relation to the tax dispute with the U.S. and Germany, when it became known with which tricks and methods Swiss bankers helped their clients avoid paying taxes. Swiss bankers became known as Swiss banksters.
Last but not least, the affair also erupted at a time when Swiss banking evolved from being a pure Swiss business into a banking industry dominated by an anglo-saxon culture. A culture that proved fatal when the financial crisis broke (sub-prime mortgages) and equally in connection with the tax dispute with the U.S.
Bankers such as Robert Holach (UBS) and Robert A. Jeker (Credit Suisse) were replaced by Marcel Ospel (UBS) and Lukas Muehlemann (CS). That’s when the compensation for managers became «global».
And that’s roughly how the night of January 9, 1997, became emblematic for Swiss banking.