The International Commission of Holocaust Era Insurance Claims (ICHEIC) failed to meet its promises to Holocaust victims and their heirs to compensate in speedy fashion policies that remained unpaid for some sixty years. When the claims process will have been completed only about 3 percent of the $15 billion value of unpaid life insurance Holocaust-era claims will have been paid, few unpaid nonlife policies will have been considered, and the process will have taken at least eight years instead of the two or so originally anticipated. As of November 2004, ICHEIC plans to complete its operations by mid-2006.
The chief reasons for this failure are inept governance and poor management. Governance became akin to secret diplomacy, in which ICHEIC’s chairman and his immediate subordinates relied heavily on dealing only with those who favored their views while making promises to others that were never fulfilled or too long delayed. ICHEIC management mainly ignored the numerous studies pinpointing the serious problems with the claims process.
To make matters worse, insurance companies did not honor their initial pledges, and political pressure on ICHEIC to initiate reforms faded. Most Jewish and U.S. regulators participating in ICHEIC came to believe that there was no alternative to ICHEIC, having been worn down by the inflexible stance of ICHEIC’s leadership. Finally, the U.S. courts recently dismissed suits against insurance companies and ICHEIC.
ICHEIC was founded in August 1998 during a resurgence of interest in restoring assets lost during the Holocaust to survivors or their heirs. ICHEIC brought together insurance companies, U.S. state regulators, and Jewish organizations-including the State of Israel-in a nongovernmental organization governed by a Memorandum of Understanding (MOU) signed by all parties. ICHEIC’s aim was to quickly reimburse unpaid insurance policies, both life and nonlife, from the Holocaust era in a manner devoid of the problems of ongoing restitution efforts such as the cumbersome nature of government agreements, high costs, and prolonged class action suits. Later agreements were signed with countries to cover all their policies, including Austria, Belgium, Germany, and the Netherlands.
ICHEIC’s governing board consists of twelve commissioners: three Jewish representatives from, respectively, American Gathering of Jewish Holocaust Survivors, Centre of Organizations of Holocaust Survivors in Israel, and the State of Israel; three U.S. state insurance regulators, namely, California, Florida, and New York; four insurance companies, namely, Allianz, AXA, Generali, and Zurich; and two European regulators. The four insurance companies plus Winterthur are ICHEIC members. Lawrence S. Eagleburger, the former U.S. secretary of state, was named ICHEIC chairman.
Estimating Unpaid Holocaust-Era Life Insurance
One of the first ICHEIC efforts was to estimate the total number and value of unpaid Holocaust-era life insurance policies held by Jews. With a few slight differences, the ICHEIC members looking at the issue were able to determine that the Jews of Nazi-occupied Europe-excluding the 1938 USSR boundaries-owned more than 800,000 life insurance policies worth nearly $600 million at face value. There is sound historical data indicating that the total number of policies held by Jews and non-Jews for all countries in Nazi- occupied Europe was fifty-six million and their face value exceeded $15 billion. The Jewish portion can be reasonably determined by first applying the Jewish percentage of the population. In addition, it is possible to roughly estimate the Jewish propensity to buy more insurance at higher average values than non-Jews, as a result of demographic differences. A much higher percentage of Jews than non-Jews lived in urban areas and were self-employed businessmen or worked in relatively well-paid professions.
A further test indicates that the nearly $600 million face value of life insurance is a conservative estimate. Immediately before the Holocaust era, this face value-due upon death or maturity-translated into asset value or cash surrender value of about $150 million. This amounts to some 1-1.5 percent of total Jewish assets in Nazi-occupied Europe, while the 1938 Nazi survey of Jewish assets in Austria indicated the cash surrender value of life insurance at roughly 2 percent.
Determining the current value of Holocaust-era policies was much more contentious. The Jewish side presented what it considered a conservative estimate of nearly $19 billion (2003 prices). This was derived by first converting the face local currency value of all policies to dollars at the exchange rate for 31 December 1938 (an exception is Germany in which the purchasing power parity rate-29.7 U.S. cents=1 RM-is used because the reichsmark was overvalued). Then, the current dollar value of the policies is determined by assuming the pre-Holocaust amount was invested in a very conservative fashion-U.S. government thirty-year bonds. The resulting $19 billion is considered a reasonable benchmark of current value. In reality, this amount is likely larger because the portfolios of the insurance companies normally also contain investments that pay higher returns than U.S. government bonds, such as real estate and stocks.
From this amount must be subtracted Holocaust-era insurance claims already paid. It is generously assumed that 10 percent of the policies in Eastern Europe were paid directly to policyholders, beneficiaries, or heirs between 1945 and 1997. The corresponding percentages for West European countries are 70 percent, except 20 percent for Austria and none for the numerous Netherlands burial policies. (In 1938 in the Netherlands with a population of 8.5 million, there were 10.2 million small-valued burial policies-“volksverzekeringen.” Most likely some people had more than one policy since each one had a very small value.) In all, this means almost 40 percent of the policies were paid to the correct person through 1997. Without the Netherlands burial policies, the paid numbers come close to half.
In value terms, the amount repaid is nearly $4 billion in 2003 prices with interest. This number, however, is only about 20 percent of the $19 billion outstanding. The large difference between the value and quantity of policies paid reflects the substantial German underpayments as a consequence of the 1948 monetary reform. At that time, the Allied powers insisted on a monetary change in which 10 reichsmark (RM) were made equivalent to one deutschmark, in order to save the postwar German economy from the vast deluge of RM the Nazi regime had dumped on the market to pay for the war effort. Indeed, without this Allied action, the German economic miracle that followed would not have taken place or would have been much delayed. The problem is that the Jews, who were not responsible for the Nazi war effort, along with many non-Jewish Germans, had to suffer in terms of reduced values of assets for the wartime economic policies of the Nazi regime. The non-Jewish Germans, however, benefited from the economic miracle.
Consequently, by 1997, a benchmark number of Holocaust policies not restored amounted to some 400,000-plus 150,000 Netherlands burial policies-life insurance policies, with a 2003 value of approximately $15 billion.
ICHEIC insurance company members did not accept the methodology proposed by the Jewish participants for calculating the current value of unpaid policies for Germany and Eastern Europe. After prolonged negotiations, ICHEIC members came to an agreement that reduced the value of unpaid Jewish life insurance policies to about $3 billion for 2003. This much lower amount results from two valuation compromises:
● East European nationalization. The insurance companies insisted they had no legal obligation to pay for policies nationalized by the communist governments of Eastern Europe, since these governments took over the policies. It was shown, however, that some companies received partial payment for their nationalized assets. In addition, many insurance contracts written in Eastern Europe indicated that payments to policyholders were backed by company funds outside the country in which the policy was written. A compromise was worked out in which companies promised to pay claims on a “humanitarian” basis at an amount that is equivalent to about one-third of the reasonable benchmark current value.
● The German monetary reform. The German government insisted that ICHEIC calculate the current value of policies using the same formula by which claimants were paid in the postwar period-that is, including the effects of the 1948 Monetary Reform. Interest would be paid only from 1969 to the current period. The outcome was minimal payments averaging about $1,000 per policy. After years of negotiations on this issue, in October 2002 the German Foundation for Remembrance, Responsibility, and Future (German Foundation) agreed to pay a minimum of $3,000 per policy for those who perished during the Holocaust and $4,000 for those who survived. But even with these improvements, German payments are still only about 15 percent of the reasonable benchmark system of determining current value. As a result, the average payment for German policies is less than half that of the already discounted East European policies.
By mid-September 2004, ICHEIC received nearly 80,000 relevant claims for life insurance containing about 135,000 policies (the average claim contains 1.7 policies). About 4,700 claimants received offers (some 8,000 policies) valued at $74 million. Perhaps as many as 6,000 claims (10,000 policies) may eventually be paid that will amount to about $110 million. Another $16 million was paid to some 16,000 claimants ($1,000 each) based on nondocumented hearsay information that a policy had existed. In all, the amount eventually paid could reach $150 million or about 1 percent of the benchmark amount owed.
The companies and government restitution schemes are also slated to pay roughly $300 million for social welfare purposes to account for the many unpaid policies in which no claim was filed. It has been known from the beginning that the vast majority of the claims would never be filed because sixty years have gone by and because of the almost total annihilation of many European Jewish communities. But even by including these humanitarian payments along with those paid directly to claimants-about $450 million-ICHEIC efforts will recoup only about 3 percent of the total value of insurance policies still owed Holocaust victims. Even by ICHEIC’s discounted valuation standards, which produce about $3 billion (2003 value) in unpaid life policies, less than 15 percent will be paid.
In all, while issues can always be raised about the methodology used to derive the above estimates, it is clear that any sound interpretation would still suggest that only a small fraction of the outstanding life insurance amount will be paid. Moreover, although ICHEIC’s charter calls for resolving all Holocaust-era insurance policies, nothing serious has been done to investigate, publicize, handle, and set rules for the very large numbers of nonlife policies. This includes the substantial losses stemming from Kristallnacht during November 1938.
Governance and Management
The Successful First Period
During ICHEIC’s first eighteen months, extensive cooperation among the parties involved led to the development of the needed framework for the effort. The insurance companies pledged to meet the cost of ICHEIC’s operation, expeditiously pay claims, and contribute to a humanitarian fund to account for the many Holocaust-era policies that all sides recognized would remain unpaid. The cooperative negotiations and compromises in the various committees created a system of rules allowing for relaxed standards of proof, a means to value unpaid policies at current prices, and a way to handle the companies’ obligations for policies caught up in communist nationalization in Eastern Europe. This shared system was highlighted when the ICHEIC commissioners adopted “consensus-based decision-making” at the January 1999 ICHEIC meeting in Washington.
All parties realized that after more than sixty years and the horrors of the Holocaust, few surviving policyholders or their heirs still had documents indicating the existence of a policy. With the acceptance of claims, this fact became abundantly clear. Only about a third of the claimants were able to name the company with which the policyholder was insured and only 5 percent could provide evidence-policy, premium notice, and so on-that a policy had existed. Thus, from the beginning it was recognized that considerable emphasis had to be placed on obtaining policy information from company records and government archives, and on publishing the names of the policyholders.
Another lesson quickly learned is that matching the names, dates of birth, and other information provided by claimants with similar data in company records and government archives is not a simple exercise. Differences often occur in the spelling of both the policyholders’ surname and given name, reflecting the numerous languages being compared. To make matters worse, the names in the ICHEIC claimant database were changed to English while they were provided in Hebrew, Cyrillic, and other languages. The matching of names also became difficult because of the many common surnames. In the case of dates of birth, claimants often lacked the exact date for policyholders who were born mainly in the 19th century. Moreover, company records sometimes did not provide a date of birth. Even comparing residences had to be undertaken carefully. For example, the Austrian spelling of Vienna is Wien.
Little or No Progress during the Second Period
During the second period, from the February 2000 launch of the process to accept claims until October 2002, cooperation among participants faded, the insurance companies’ financial pledges evaporated, and the idea of determining a global settlement to cover the value of all unpaid insurance gave way to much smaller payments via agreements with individual companies. Meanwhile, the claims process got bogged down in uncertainty and errors. Several highly critical reviews of this process pinpointed the same problems and suggested recommendations. They included my (and Jolanta Goldstein’s) in-depth/onsite appraisal of the management of the claims process in December 2000 and a review of decisions on individual claims in October 2001. An investigative study was undertaken by a group headed by Lord Archer of Sandwell in early 2002. In the public realm, the insurance commissioner of Washington State, Deborah Senn, issued a critical “Status Report on Holocaust Era Insurance Claims” (December 2000). Hearings before the U.S. House of Representatives Government Reform Committee in November 2001 enumerated the many ICHEIC problems. But ICHEIC management paid little attention to these numerous reports and their recommendations or to the knowledge gained from experience.
As claims received climbed rapidly in 2000, a number of severe shortcomings became apparent in the system to process them. Such initial deficiencies are not abnormal, especially in cases like this one where the effort is groundbreaking. But ICHEIC management of claims processing, run by an office in London, failed to make the necessary and obvious corrections that were clearly pointed out in various reviews. To make matters worse, the ICHEIC London office provided little oversight of the contractor that had been hired to handle the processing of claims. This was a grave shortcoming since this contract involved the heart of ICHEIC’s claim processing and such a groundbreaking operation needed constant tinkering. There should have been an ICHEIC person onsite to see that the operation was effective and efficient, to handle the daily issues that arise, and to suggest needed changes in operation or in the contract.
Moreover, no system was put in place during this period to ensure that offers or denials made by the insurance companies on documented claims followed ICHEIC rules, despite the fact that all critics mentioned above made that suggestion and Chairman Eagleburger promised to do so at the November 2001 congressional hearings. Documented claims are those involving information that a policy existed based on documents provided by the claimant or found in government archives or company files. In these cases, under ICHEIC rules the company must pay the claim unless it can show that the policy was previously paid. The numerous problems with documented claims pointed out by several reviews stemmed from a combination of company mistakes, ICHEIC processing errors, and the uncertainty of unresolved ICHEIC rules.
At a strategic level, there was also a management failure. No effort was made to present an overall view of how the various elements of the ICHEIC should proceed and be integrated in terms of priorities, timing, and costs. For example, it was necessary to move quickly to have companies publish names of Holocaust-era policyholders so that potential claims could be filed. But this effort never received the priority that was needed and by the 31 December 2003 deadline for filing claims the companies had published few policyholder names, except in the case of Germany. Also, while some progress was made in developing archival information, the effort fell considerably short of what was needed. For example, nearly all the archival names came from three countries-Austria, Czechoslovakia, and Germany-that accounted for less than 20 percent of the Jewish population of Nazi-occupied Europe, excluding the USSR.
A major stumbling block was the management of the London office. Its head and deputy chairman of ICHEIC, Geoffrey Fitchew, insisted that ICHEIC’s role was simply to be a “post office” that sends claims to the companies for decision. Although ICHEIC’s head office in Washington stated numerous times that this was not the case, the London office failed to significantly alter its course of action. For example, even though Chairman Eagleburger promised to establish a system to verify documented claims at the November 2001 congressional hearings, the London office failed to do so and was not pressed by the chairman. When combined with other problems, such as the failure to address unforeseen issues, the result was an expanding number of unresolved system errors that persist to date.
Inept governance made the ICHEIC’s situation worse. No effective means existed to set priorities or deal with issues that naturally arise with any operating system, especially one that is groundbreaking. This not only impaired the management of ICHEIC but also created a corrosive atmosphere among members and greatly undermined public confidence in the organization. Except for occasional decisions on some issues by the chairman, the effort essentially drifted in disarray. The effective committee structure of the earlier period was basically disbanded. It was replaced with the Executive Oversight Committee (EOC), which rarely met and was too large.
The ICHEIC commissioners never solidified as a group and never acted as a board of directors voting on key issues. Rather than a consensus-building process, the major decisions by the chairman were based on input from the head of the London operations and on his discussions with those ICHEIC members the chairman felt necessary. Such actions may have been effective in terms of secret diplomacy but caused dissension within ICHEIC and undermined public confidence.
Another major culprit was the long-drawn-out negotiations to reach an accord with the German Foundation to handle all insurance claims for Jews living in Germany during the Holocaust era. Many ICHEIC-stipulated rules were not accepted by the ICHEIC member companies, which waited to see the outcome of the German Agreement. Further adding to the woes was the diminished political pressure, which initially had raised the public awareness of restitution and led to the early efforts to resolve the issue. In all, through the second period, the ICHEIC chairman did little to correct the problems, the insurance companies’ performance in handling claims was lackadaisical at best, most state regulators lost interest, and the Jewish participants essentially put up with the difficulties, seeing no alternative.
ICHEIC’s public standing plummeted as complaints grew from claimants. There were numerous highly disparaging newspaper articles, including a 25 January 2002 piece in the Financial Times (p. 12) declaring the ICHEIC claims process as “rotten.” After two investigative reports by its reporter Greg Garland, a Baltimore Sun editorial stated: “The scandalous record has abused once again the thousands of Holocaust survivors and heirs, many of whom have unsuccessfully sought for six decades the dignity that might come with proper compensation. ICHEIC is in need of immediate and deep reform.” In his book Holocaust Justice, Michael Bazyler provides details on the many problems faced by claimants and recounts much of the public dissent in a section called “The Claims Process Is a Failure.”
Raised Expectations Frustrated by Little Progress in the Third Period
With the signing of an agreement in October 2002 with the German Foundation, it was hoped that a new period would begin and the process would be reinvigorated. Despite all the delays in reaching the agreement and numerous difficult compromises, there were clear benefits. All German claims would be considered rather than just those from the participating ICHEIC company members, a promise was made to publish a list of Jewish policyholders in Germany, and ICHEIC received the necessary funds to sustain its operations. This additional money made up for the amount the participating companies had originally pledged and then reneged on.
These hopeful expectations were strengthened when at about the same time Mara Rudman, a staff member of a U.S. consulting company, was hired in July 2002 to act as ICHEIC chief operating officer (COO) to tackle its many problems. But through October 2003, progress was minimal in terms of most key claims-processing issues. The one important step forward was putting in place, after more than three years of promises, a scheme to verify that claims processed by the insurance companies follow ICHEIC rules and that there are no system errors. The effectiveness of the verification system, however, still remains unclear as errors and questions persist. A major problem is that no system was put in place to clarify previous rules and produce new rules to deal with unforeseen issues.
During the same period, ICHEIC published on its website some 350,000 possible Jewish life insurance policyholders in Germany from the Holocaust era. This effective effort was not handled by the COO but by committees made up of representatives of the ICHEIC participants, its staff, and the German Foundation. Their cooperation was reminiscent of the first ICHEIC period, when the committee system worked effectively.
But the lack of cooperative overall governance persisted. The ICHEIC commissioners (Board of Directors) who represent all parties never met to provide basic rules, nor did specialized committees to clarify rules. Those decisions that were made were done in a haphazard fashion by Chairman Eagleburger or the COO with minimal consultation with ICHEIC members. In most cases, any discussion was held only with those who agreed with them. Indeed, a veil of secrecy as to what steps were or were not being taken descended over the ICHEIC effort.
Below are a few examples of dubious decisions resulting from inept governance:
● The interest rate for 2003 and 2004. At the beginning of each year the interest rate paid on offers is set for that year. For dollar payments, it is based on the thirty-year U.S. Government bond yield on the first business day of the year, usually January 2. In the case of Euro payments, it is the average of long-term government bond yields for individual countries for the same date. ICHEIC London announced that both the U.S. and European rate for 2003 was 4.75 percent. The Jewish participants immediately notified ICHEIC that while the Euro rate was correct, the dollar rate should be 5 percent. The response was that while it agreed the U.S. rate was not correct, the German Foundation had already been notified and had accepted the 2003 rates. Thus, the rate could not be corrected and would stand. It did. In 2004, the chairman raised the rate to 5 percent. But the U.S. bond yield was 5.28 percent, meaning that claimants whose offers are calculated in dollars-that is, most claims-would again be shortchanged. Again ICHEC was notified immediately by the Jewish side of the error and once more no change was made.
● Definition of a subsidiary. For several years the Jewish participants raised without response the issue as to what constituted a subsidiary. The chief of London operations said he had told the Claims Committee in the early ICHEIC years that a subsidiary was when the parent company owned 51 percent or more of its subsidiary. Although he had no documented proof on which to base his decision and no committee member recalled his statement, he insisted that percentage be used. Many memos were sent to ICHEIC on the issue, indicating the common international norm was 25 percent and indeed that this share was used in the German, Austrian, and Swiss agreements. Finally, Chairman Eagleburger made a decision on 16 June 2003 that made no sense. He decided that several companies in which the parent ownership was between 25 and 50 percent would be considered as subsidiaries. But the subsidiaries on the chairman’s list sold mainly nonlife policies and ICHEIC never developed rules to pay nonlife claims. At the same time, he excluded subsidiaries in the 25-50 percent range that sold life insurance. This bizarre decision meant that some two hundred claims probably will not be considered for payment under the normal valuation rules.
● ICHEIC valuation and other rules. Based mainly on actual claimant cases, the Jewish side constantly provided a list of uncertainties in ICHEIC rules that naturally arise in any system, especially one that is so groundbreaking. As with other problems, the request to deal with or clarify these issues was delayed for years. In 2003 the new management team at ICHEIC simply denied that there were any outstanding issues.
To make matters worse, the appeals process for company offers and denials in which the claimant names a company has been a costly endeavor because the appeals panels have had to adjudicate the many rules ICHEIC has failed to resolve or clarify. Moreover, there are three separate appeals panels that decide issues on different standards and there is no retroactivity to ensure that all claims involving the same issue are handled in the same manner.
How the many ICHEIC shortcomings were creating problems for individual claimants in his state was described in a report by the Washington State insurance commissioner, Mike Kreidler. He mentioned the lack of enforcement of ICHEIC rules, the need to clarify the valuation system, and recent errors with the ICHEIC claims verification system. Moreover, the report found that “[a] significant number of Washington claims submitted to ICHEIC appear to be missing or lost.” The commissioner recommended that the regulators audit ICHEIC’s claim process.
As The Economist magazine said in a 2 August 2003 editorial, “If ICHEIC fails to improve its performance and quickly, by demonstrating greater independence, acting more openly and paying claims faster, then those who have not yet filed a claim may choose to go directly to the law. That would hardly help insurers or claimants to resolve this issue speedily.” It must be added the same is true of those who have already filed claims.
The Fourth Stage: Late Attempts to Respond to Longstanding Problems
To resolve the governance crises, the Jewish group met immediately before the October 2003 ICHEIC meeting and decided on corrective actions that should be undertaken immediately. This included the reestablishment of the committee systems, the appointment of an ombudsman to handle the numerous complaints from claimants, and the development of a program to accelerate the handling of claims by the insurance companies. At the ICHEIC meeting, it was decided to discuss and move ahead with these steps.
In all cases, through mid-April 2004, ICHEIC did almost nothing. The pace at which companies handled claims did not change significantly and the ombudsman effort never materialized. After a six-month delay, the chairman finally initiated an Operating Committee to discuss longstanding issues, but appointed mainly only those who would not challenge his views. Through mid-September 2004, the Operations Committee rarely met and only a few of the many outstanding issues were addressed. Thus, little was done to make up for the protracted time and money poorly spent as well as the disregard of claimant interests that resulted from years of faulty management and governance. At this point the two parties-the Jewish group and the state regulators-that could make a difference seem to have been worn down by years of inaction, discord, and a turnover of participants that undercut institutional memory.
ICHEIC management meanwhile increasingly stifled criticism by relying strictly on those who do not raise concerns and ostracizing those with legitimate questions. Most distressing was the sudden removal from office of Dale Franklin, the chief of staff of the Washington office, who was the only one within ICHEIC management who diligently worked to overcome the longstanding problems.
The ICHEIC meeting in April 2004 reiterated its hopes to close down ICHEIC by year’s end. This goal was not achieved. At the end of April 2004, and after four years of processing claims, only about 38 percent of claims have been completed by the companies. Additionally, the important tasks of claims verification and appeals must take place after the company decisions, extending the time frame even further. Finally, the matching process was lagging and with minor exceptions the companies belonging to ICHEIC-outside of Germany-have not made available their list of names of Holocaust-era policyholders even for use in the internal matching process. No effort has been undertaken to handle nonlife-insurance policies as pledged in ICHEIC’s initial charter. It seems that the policy of the ICHEIC chairman and the COO is to close the effort as soon as possible and declare victory.
California’s insurance commissioner, John Garamendi, who is also an ICHEIC commissioner, in an 8 June 2004 letter to ICHEIC Chairman Eagleburger tried to persuade him to take appropriate action to resolve ICHEIC’s problems. He stated, “Although ICHEIC faces serious problems, it continues to ignore those of its commissioners who dare to suggest improvements, make constructive criticism, ask incisive questions or call for better management…. ICHEIC management is sloppy. The current claims verification system is woefully inadequate. The Claims database still needs work. ICHEIC’s refusal to update the valuation guidelines is amateurish.”
Eagleburger’s 11 June response was a rambling public relations defense that showed the chairman and his staff did not even know the facts. For example, in his response to Commissioner Garamendi’s suggestion that ICHEIC’s Valuation Committee-which consists of all ICHEIC parties-should meet to deal with inconsistencies in interpreting the rules and unforeseen issues, Chairman Eagleburger stated that these rules had been finalized on 16 October 2002, when the agreement with the German Foundation was signed. He went on to say, “These are, in effect contractual obligations. As such they cannot unilaterally be set aside. That may be the way you do business in California but it would be my definition of truly amateurish.” Chairman Eagleburger obviously did not read or does not understand the agreement he signed with the German Foundation. That agreement stated: “The parties shall endeavor in good faith to resolve any dispute in relation to the interpretation or application of this Agreement amicably by negotiations between the parties.” These words were purposely inserted into the agreement in order to finalize it, being cognizant that all issues had not been resolved and others could arise in interpreting the agreement.
At the same time in response to Commissioner Garamendi’s criticism, ICHEIC’s COO made the most hypocritical remark. She said “…that all sides greatly underestimated the complexity and timeframe of settling claims and that the commission suffered from some poor communications.” This after years of criticism and having been told about the issues ever since she joined ICHEIC two years earlier.
At the ICHEIC meeting on 16 November 2004, a key issue was the completion of the claims process. It was now hoped that this task would be completed by the end of 2005 with appeals and audits finished by mid-2006. This compares with the initial planned ICHEIC closure date of late 2002 and later postponed to the end of 2004. Even the completion date set at the November 2004 meeting will be difficult to accomplish considering that only 42 percent of the claims had been processed by the companies as of 20 October 2004.
Achieving the completion goal has been made even more questionable by the termination “with cause” of the Israeli-based Generali Trust Fund (GTF) that had been handling the processing of Generali claims, which account for most ICHEIC claims. At the 16 November 2004 meeting, it still remained unclear whether the processing of these claims would be taken over by Generali headquarters in Italy or by a new organization in Israel.
Although Chairman Eagleburger in his termination letter tried to place the blame on GTF, this was clearly another ICHEIC management malfunction. Since signing a contract with GTF in April 2001, ICHEIC has failed to provide adequate oversight despite the fact that it had been told from the start that GTF’s manpower was inadequate. Moreover, U.S. state regulators constantly pointed out the many GTF processing errors and the numerous problems created by GTF’s insistence that it follow Israeli law rather than ICHEIC rules in regard to documents required of claimants, such as those that link heirs to policyholders.
ICHEIC initially was able to develop the rudiments of a credible system to meet the unpaid life insurance claims from the Holocaust era. But the implementation of this effort was seriously flawed by inept management and governance. Instead of the envisaged two-year endeavor aimed at avoiding prolonged lawsuits and government bureaucracy, the process will take at least nine years and be constantly plagued by justified complaints. As a result, ICHEIC’s reputation has sagged badly and the idea of resolving issues through an agreement among the parties to a dispute has suffered a major setback. Upon completing its tasks, ICHEIC will have paid claimants and provided humanitarian funds an amount equivalent to only about 3 percent of the 1998-unpaid amount of life insurance policies outstanding from the Holocaust era. This percentage does not even come close to achieving “rough justice.” ICHEIC also has done almost nothing to handle nonlife-insurance claims.
At the heart of the governance-management problem is a common human flaw. Those leaders with a political bent often are successful in fostering good ideas by drawing people together and effectively balancing conflicting interests. But they lack the skills, patience, and interest to deal with day-to-day governance and management. This is ICHEIC’s story.
At the same time, the lack of sustained political pressure undercut the motivation for ICHEIC to correct its problems. Press coverage has been minimal in recent years as public interest in the issue of Holocaust restitution declined significantly from its peak in the late 1990s. Most Jewish and state regulators participating in ICHEIC were worn down by the many years of ICHEIC’s inflexible stance and did not push for remedial actions. In recent times, the court system provided no alternative counterforce. As a result ICHEIC’s chairman and managers could effectively ignore any criticism of the process, while most participants succumbed to the idea that there was no alternative to ICHEIC and its serious shortcomings.
A major lesson learned is that such private endeavors such as ICHEIC must face and fix problems early on. The longer they fester, the more difficult and costly they are to resolve.
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 Note: Much of the discussion of ICHEIC is based on material in possession of the author or on his conversations with ICHEIC participants.
 Dutch Insurance Association (May 2000), German Foundation, “Remembrance, Responsibility and the Future” (October 2002), La Commission pour le Dédommagement des Membres de la Communauté Juive de Belgique (July 2003), and The General Settlement Fund of the Republic of Austria (December 2003). The Austrian agreement is on hold pending settlement of court cases.
 This list from the September 1999 ICHEIC meeting is somewhat different from the list of commissioners stated in the ICHEIC Memorandum of Understanding (MOU). In addition, the MOU lists observers from the World Jewish Restitution Organization, Claims Conference, EC Commission, and U.S. State Department.
 Basic life insurance data (sums insured and number of policies) by country from: Assekuranz-Jahrbuch, Band 56 to 62 (1937-1942), Verlag Fur Recht Und Gesellschaft AG, Basel, Leipzig, Vienna. Supplemented with: Life Insurance in Belgium, Leigh W. Hunt, U.S. commercial attaché, Brussels, April 13, 1945 (see U.S. National Archives RG 84, box 68).
 Country population data from: International Historical Statistics: Europe 1750-1988. Jewish population from: Israel Guttman, Encyclopedia of the Holocaust (New York: Macmillan, 1995), Appendix, p. 1799. For Germany, the Nazi Nuremberg law is used (persons with at least one grandparent of Jewish descent), provided in presentation by Allianz to ICHEIC (2000) and confirmed by telephone by Israel Guttman.
 Jewish propensity to buy insurance in value terms: Western Europe, three times more; Eastern Europe, four times more. Data from numerous reports presented to ICHEIC by Jewish representatives and discussed in Report to Chairman Eagleburger on the Estimation of Unpaid Holocaust Era Insurance Claims in Germany, Western and Eastern Europe, December 12, 1999 (internal report). ICHEIC ultimately accepted a Jewish propensity of three, when calculating the valuation of valid claims that had no record of face value (see Valuation Guidelines, paragraph 7.1, on ICHEIC website).
 Life insurance share of total Jewish assets: Sidney Zabludoff, And It All But Disappeared: The Nazi Seizure of Jewish Assets, Institute of World Jewish Congress, Policy Forum 13, 1998.
 Foreign exchange rates on 31 December 1938 published by the Board of Governors, Federal Reserve System: Randall Hinshaw, Purchasing Parity Rates in World Income (1929-1937), Division of Research and Statistics, Board of Governors, Federal Reserve System, June 1945. The dollar and the Swiss franc are the only two currencies that provide a stable series from the Holocaust era to the present. Consistent time series for other European currencies were disrupted by World War II, the high postwar inflation, and the communist takeovers in Eastern Europe.
 U.S. Government thirty-year bond yield: Annual Reports of the Board of Governors, Federal Reserve System.
 Full methodology on the current value calculation is presented in Appendix A, table, “Jewish Life Insurance Holocaust Era.”
 The estimated country percentages (by value) of pre-Holocaust-era life insurance not paid to policyholders or beneficiaries from 1945 to 1997 are considered at the high end of the plausible range in that almost no policies were repaid in Eastern Europe and few in Austria. In Western Europe, although a majority of policies likely were repaid, many were done so at the cash surrender value of the immediate pre-Holocaust period. On average this amounts to approximately 25 percent of the face value. The German number provided ICHEIC by the German insurance association (BAV) shows 32.48 percent of policies were “not subjected to examination by the BEG [Bundesentschädigungsgestez] or other restitution authority.” But this includes numerous policies that were paid policyholders who had to turn over the funds to the Nazi regime.
 Offers to claimants via ICHEIC are shown on the ICHEIC website (ICHEIC.org) and normally updated every two weeks. The percentages presented in this paragraph are rounded upward to account for the fact that the values of offers made before 2003 are not in 2003 prices but at the value for the years 2000-2002 when the offers were made. This factor is partly compensated for claims paid in 2004. Humanitarian payments are essentially equal to the amounts provided by the companies and country organizations minus claims payments and ICHEIC’s operating costs. Total amounts are about $500 million, which includes 279 million euros ($316 million at 2003 exchange rates) from the German Foundation, $100 million from Generali, $25 million combined from AXA, Winterthur, and Zurich, and the remainder (roughly estimated at $59 million) from initial company contributions, interest, and contributions by the Austrian, Swiss, and Dutch country organizations. From that is subtracted $125 million for claims payments and $100 million for ICHEIC administration, leaving about $275 million for humanitarian purposes. ICHEIC in 2003 committed $132 million over the next ten years (later reduced to nine) for social welfare programs for Holocaust survivors. See ICHEIC Quarterly Report for May 2004 (on ICHEIC website).
 See Appendix B.
 ICHEIC Committees: Public Access Working Group, Audit Working Group, Claims Working Group, Valuation Sub-Group, Outreach Support Group, and the Historical Working Group. The various agreements were put together in a Chairman’s Memorandum of 6 August 1999.
 Budget reports at the end of 2001 indicated that ICHEIC lacked the funds to complete their operations as then planned by the end of 2004. The companies at that time were not pledging the necessary funds to fill the gap.
 A major finding of the December 2000 study was the need for distinguishing documented and other claims and a verification system for the documented claims. The October report was a sample of seventy-eight documented claims and showed that, “Of the 32 offers examined only 17 were in accordance with ICHEIC principles. Of the 46 denials that were examined only 5 were in accordance with ICHEIC principles.”
 Baltimore Sun editorial, 14 July 2002.
 See: http://www.democrats.reform.house.gov/investigation.asp?issue=Holocaust-Era+insurance+restituion Era+insurance+restituion.
 Michael J. Bazyler, Holocaust Justice: The Battle for Restitution in America’s Courts (New York: New York University Press, 2003), p. 140.
 Agreement Concerning Holocaust Era Claims between ICHEIC and the German Foundation for Remembrance, Responsibility, and Future, October 2002.
 Ibid. Section 6 provided $60 million (or more if necessary) for ICHEIC administration between 2002 and completion.
 Appeals Tribunal (AXA, Winterthur, and Zurich and those of Allianz before 16 October 2002); Appeals Panel (German Fund); Generali Trust Fund Appeals (Generali).
 “The View from Washington State: Work of ICHEIC, the ‘Value’ of Memory ‘Discounted,’ A Status Report,” July 2002-October 2004, Mike Kreidler, State insurance commissioner, October 2004.
 Footnote 19, section 11(3).
 See note 12.
 Tom Tugend, “In Broadside, Official Says ICHEIC Is Bungling Shoah Insurance Claims,” JTA article, 15 June 2004.
 The U.S. Supreme Court (21 June 2003) ruled in a 5-4 decision in American Insurance Association v. Garamendi that California’s law calling for the publication of Holocaust-era policyholder names “interfered with the President’s conduct of the nation’s foreign policy and was therefore preempted.” Opinion of the Court, pp. 28-29. A class action suit against ICHEIC in the California state courts (Case #BC303004) was dismissed for lack of jurisdiction (August 2004). U.S. District Judge Michael Mukassey dismissed some twenty class action and individual suits against Generali on the basis of the U.S. Supreme Court’s June decision (12 October 2004).
 See http://www.icheic.org/, “Presentation: Meeting of ICHEIC, Washington DC, 16 November 2004.”
 See note 12.
 Letter from Chairman Eagleburger to ICHEIC Commissioners, Alternatives and Observers, 1 November 2004.
 See note 27.
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SIDNEY ZABLUDOFF is an economist who worked for the White House, CIA, and Treasury Department for more than thirty years. Upon retirement in 1995, he focused on issues related to the restitution of Jewish assets stolen during the Holocaust era. He has published numerous detailed studies on the issue and was the principal analyst for Jewish participants involved in insurance claims.