FROM THE OFFICE OF PUBLIC AFFAIRS

I want to thank you for inviting me to testify before this committee today. Although I have tried to make my statement comprehensive, I hope you will permit me to supplement this statement at a later time should there be additional points which need to be raised.

I want to start by commending Germany for its efforts on this truly historic initiative. For the past fifty years, Germany has set an example for the rest of the world on how to deal with a horrific aspect of its past. Despite having provided more than 100 billion Deutsch Marks in compensation to victims of Nazi persecution and having proposed to cut some 30 billion Deutsch Marks from the government's budget, your government was willing to provide 5 billion Deutsch Marks to a Foundation that should be viewed as a culmination to Germany's efforts to deal with its past. This is truly remarkable. The fact that the overwhelming majority of German citizens support this initiative, despite the fact that the government is attempting to reduce drastically the budget, is also truly extraordinary.

At the historic December 17 announcement in Berlin of the German Government's and German companies commitment to contribute a total of DM 10 billion to the Foundation, Count Lambsdorff and I both pointed out that there were a number of implementation issues that needed to be addressed before any funds could be distributed. One of the most significant of these, and one that all of the participants have been focusing on since Berlin, is the German legislation that is necessary to establish the Foundation.

We fully recognize and respect the constitutional role of the Bundestag and understand that it is your prerogative to approve the legislation. I am particularly grateful for this opportunity to testify before you and recognize just how unusual it is to have a foreign government official testify concerning domestic legislation. I appreciate the government's willingness to share its draft legislation for comment by the victims' representatives and the United States Government, as well as your openness. This is more than a courtesy. It is a recognition of the moral dimension of our common efforts. But it is also essential if there is to be legal peace for German companies.

This is not an ordinary piece of legislation, however. As you begin your review, I know that you will appreciate the unique nature of this legislation and will view this historic initiative in the proper context. For almost one year, the United States Government, the German Government, the Governments of Israel, Belarus, the Czech Republic, Poland, Russia, and Ukraine, as well as representatives of German companies and victims' groups, have engaged in extensive discussions on a "bracketed text," a document that was to set the parameters of the Foundation Initiative of the German Economy, initially to be established as a charitable foundation. Members of the Bundestag attended each of the plenary sessions, and I am sure that you have a good appreciation of this.

This negotiation was a carefully balanced process in which every effort was made to recognize the interests of all the participants. It resulted in a document that reflected a series of compromises that are necessary for everyone to accomplish what we all want accomplished. Now that the German Government and the German companies have agreed on a unified Foundation, the Foundation will be established instead by a public law. It is critical that those compromises be reflected in the public law.

I want to note how important is was that members of all five of the parties represented in the Bundestag could participate in all of the plenary meetings, including the most recent Washington plenary. These members have had the opportunity to hear first hand the views of the different participants interested in the draft legislation. All of the victims' groups made it clear to the Parliamentarians that the legislation needs to reflect the compromises and agreements that were reached during the many months of discussions of the substantive issues. If it fails to do so, it is unlikely that the plaintiffs' lawyers will in fact agree to dismiss their cases or that the U.S. Government can provide the breadth of legal peace the German companies desire and deserve.

I believe the German government fully recognizes the importance of passing legislation that the victim groups and the United States Government can support as faithful to our negotiations, and that it recognizes the importance of creating a structure and a process that, once enacted, can allow the legal peace German industry seeks. For this same reason, it is important that the Bundestag approve legislation that can be supported by all the parties to this process.

As you know, the early drafts of the legislation proposed for submission to the Bundestag by the German cabinet contained provisions over which a number of victims' representatives, as well as my government, expressed grave concern. We believed they did not accurately reflect the results of our prior negotiations. At the recent January 31-February 1 plenary session in Washington, we had a very productive discussion of these concerns. Bundestag members participated actively. I am very gratified that the German government has reaffirmed its intention to revisit these provisions in light of our discussion.

I want to use today's hearing to provide you with what we believe has been agreed to by all of the participants and our views as to what would need to be included in the legislation in order for this historic initiative to be successful. Again, we fully recognize that it is the Bundestag that will determine the final shape of the legislation. But it would be highly unproductive to pass legislation that could not lead to the legal peace which is essential for the German Foundation Initiative to succeed. Before I begin discussing the legislation, however, I want to note that the DM 10 billion capped amount has been agreed to by all of the participants and nothing I will say would increase the obligation of either the German Government or German companies by one pfennig or reopen any issues closed over the years since the end of the Second World War.

One issue we resolved in the recent negotiations in Washington concerned offsets -- whether the payments by the Foundation should be offset by payments previously made under German government compensation programs. The most recent draft of the legislation provided that there should be offsets for prior BEG and other government payments. In response to the unanimous concern expressed by the victims' groups that such offsets did not reflect the agreements reached during the previous nine months of negotiations, the German Government agreed to remove this provision. All parties now agree there will be no offsets, except for payments victims have already received from the companies, either directly or through third parties, for which they performed slave and forced labor. Your government's responsiveness to the legitimate concerns of the victims' groups should be praised, and I hope you will reflect that result in the legislation. We hope that this spirit of cooperation continues as all of the participants work to make this historic initiative a reality.

I. Scope

One of the seminal elements to this process has been the legitimate demand from German companies that, in return for their participation in funding a German Foundation, they receive legal peace in U.S. courts from pending and future lawsuits arising out of the Nazi era. One of the major breakthroughs in our negotiations occurred when we reached agreement with the German companies on the mechanism for achieving such peace. This would involve the named plaintiffs voluntarily dismissing their cases and the United States Government filing "Statements of Interest" in current and future cases, consensual and non-consensual, against German companies involving Nazi era acts. This Statement would provide that the Foundation should be regarded as the exclusive remedy for claims against German companies arising out of the Nazi era and that dismissal of such cases would be in the foreign policy interest of the United States. While under this mechanism, German companies will not be "immune" from suits in the United States, the fact that the United States Government will file a Statement of Interest in all cases brought against German companies, asserting that dismissal of such cases would be in its foreign policy interest will, we expect, contribute to the legal peace we all desire.

From the beginning, the German companies have insisted that the United States file statements of interest in all cases. From the beginning, we have said that in order for the United States to do so the Foundation would have to provide a potential remedy in all such cases. This includes providing a potential remedy for any claimant, whether an individual or legal person, and for any type of claim, including for property damage or personal injury. In short, the breadth of legal peace achievable is coterminus with the breadth of potential claimants who can utilize the Foundation - otherwise it is not the "exclusive" remedy - all within the DM 10 billion capped amount.

In order to satisfy the concerns of their clients, the German companies' own attorneys suggested, and all the victims' representatives agreed, the idea of including a "catch-all" clause which would provide a potential remedy for all cases not explicitly covered by other sections of the legislation. They and we agree that there are multiple protections that will prevent this catch-all from undermining the other purposes of the Foundation, such as the overall cap and the subcap for this catch-all provision and the ability of the Foundation Board to deny claims given prior treaties and agreements. Under the current draft, while Section 11's so-called "opening clause" allows payments for all personal injury claims, including medical experimentation and Kinderheim cases, no similar catch-all exists for property-related claims. Currently, the Foundation covers only a partial subset of racially-motivated property claims, but fails to cover other property claims where German companies were directly involved - even though German companies support their inclusion so they can achieve comprehensive legal peace.

An important part of ensuring that the Foundation provide a potential remedy for all types of claims against German companies so that the United States can file its Statement of Interest in all such cases is that all claimants, including individuals, legal persons, and all legal heirs, have the right to present their claim to the Foundation.

The most recent draft provides that only individuals are eligible for benefits from the Foundation. Thus, legal persons, such as victims' organizations would be precluded from filing a claim with the Foundation. We are told that in at least one of the current lawsuits the plaintiff is not an individual, but rather an organization. In order for us to file a Statement of Interest in this and all cases involving legal persons, as the companies insist, the Foundation would have to allow both individuals and legal persons with a potential remedy.

In addition, Section 13 of the current draft limits the heirs who are eligible to receive payments for property damage to surviving spouse and children. There is currently a case pending against German banks in which the plaintiff is the legal heir of the original owner of the property. The original owner had never married. Not only would it be patently unfair to exclude this and other legal heirs from receiving a payment for property damage, but if this limitation is maintained, the United States would not be able to file Statements of Interest in cases for property damage where the plaintiff is a legal heir, but neither a surviving spouse nor child.

In my meetings with Count Lambsdorff last week, we once again proposed that a "catch-all," such as the German companies support, be added to the draft to cover these cases and any others. In addition to covering all racially-motivated property claims, Category C would be expanded to cover all other claims submitted by those who believe they suffered injustices during the Nazi-era where German companies were directly involved, not otherwise covered by the Foundation law. One of the issues that was discussed at length was the need to allocate a separate amount of the DM 10 billion for property claims (Category C) and to create a mechanism to rule on such claims. It was agreed that the Claims Conference and the plaintiffs' attorneys would have to reach agreement on how the amount allocated to deal with property issues would be split between a humanitarian and claims portion. It is understood that the mechanism to address these claims would be outside the Foundation. On Monday I had a very productive discussion with the Claims Conference and the plaintiffs' attorneys concerning how such a mechanism might be structured. In addition to further developing ideas for this mechanism, we need to ensure that all property claims against German companies and other claims against German companies not covered by other provisions of the law are covered by this category.

We are aware that elements within the German Government have rejected the notion of allowing the Foundation to address non-racial property claims. Frankly, this is a mistake. We hope that this decision will be reviewed and reversed by the German Cabinet. The German Government believes these are really reparations claims and that the issue of reparations is closed. The issue of reparations is sensitive, and I do not believe a debate on that issue will be productive. What I can say -- and what I have assured your government -- is that we have no intention of allowing the Foundation legislation to affect the wording or interpretation of any pre-existing treaty. We have proposed the following language to make this clear, which could be included in the Executive Agreement:

Recognizing that unilateral declarations as well as bilateral and multilateral treaties and agreements, which were intended to deal with the consequences of the Second World War and the Nazi-era, including reparations issues, shall not be affected in their wording and existing interpretation by the Executive Agreement or the Foundation Law and that it is not intended to affect any issue which might have been treated by such documents, including reparations issues.

We received initial positive reaction from Count Lambsdorff last week, but await a formal response.

We understand, however, that the German Government would like us to go further. We are therefore reviewing whether we can provide any additional assurances to the German Government regarding any reparations claims against it. This, however, will not dispense for the need for inclusion of a catch-all as outlined above. I want to make clear that the language concerning reparations and any additional steps we might consider taking are only offered in connection with the inclusion of a comprehensive catch-all. Such claims against German companies that would be covered under this catch-all are highly unlikely. In fact, we do not believe any of the cases currently pending against German companies concern non-racial property claims. Moreover, the inclusion of such a catch-all adds no additional cost to anyone -- government or companies.

Let me stress again one essential point. United States has no independent interest in the Foundation covering non-racial property claims. We understand and sympathize with your reasons for not wanting to do so. This issue only arises because of the companies' demand that the Foundation lead to universal legal peace. The United States has no objection to excluding non-racial property claims from the scope of the Foundation so long as it is clear that the U.S. will not file Statements of Interest in cases asserting such claims in U.S. courts, either in the cases currently pending or in the future.

II. Eligibility/Payment Criteria

At our last plenary in Washington, Count Lambsdorff confirmed to us that the current provisions in the draft legislation on allocation are in some respects a place holder. If the parties to the negotiations can reach agreement on allocation amounts and rules, he told us, the German Government is willing to ask you to put that agreement into the law. This week I had several productive discussions with various groups on allocation and we hope to continue those tomorrow during the plenary. I found a great amount of agreement among victims' representatives. I hope that we can reach an agreement soon on this very sensitive issue and that such agreement can be incorporated into the law. A number of items, however, can be addressed now.

During our nine-months of negotiations on the bracketed text, a number of agreements were reached concerning the eligibility and payment criteria. It is important that these are reflected in the legislation. First, there was broad agreement that while the partner organizations should be given discretion to vary the per capita payments to Category B beneficiaries, all Category A beneficiaries should receive the same amount. It is very important to the victims' groups that the law require that all Category A laborers receive the same amount. The current draft provides that Category A beneficiaries may receive up to DM 15,000. Acquiescing to this request of all of the victims' groups would have no effect on the exposure of either the German Government or companies. Therefore, we hope that the legislation can take into consideration this consensus.

Second, in our last plenary session in Washington it was agreed that payments to those victims who suffered separate wrongs should not be limited to a fixed amount. The draft should make clear that one's ability to receive payment under Category A will not have an impact on the amount of money the claimant can receive under Category C. The current draft provides that if someone was a slave laborer and suffered property damage would be allowed to receive only DM 15,000 in total. This should be revised to reflect the agreement reached at our last plenary in Washington.

Third, there was general agreement that, recognizing the consensus that the vast majority of the Foundation funds should be used to be living victims, any funds allocated for labor or property claims that are not used should not flow to the Future Fund. Rather, these unused funds should be redistributed to the different partner organizations for distribution to survivors. In addition, funds not needed by one partner organization should be made available to other partner organizations to meet any shortfalls. The current draft provides that the Board of Trustees shall decide on the use of all unused funds. However, because there is general consensus that these unused funds should, in the first instance, flow to survivors, it does not seem necessary to postpone this decision for the Board to make.

Fourth, all of the victims' groups believe that there needs to be a separate sub-allocation for non-labor related personal injury cases, such as cases involving medical experimentation and Kinderheim cases. We agree. The draft currently combines these cases in the so-called "opening clause" in Section 11, which allows the partner organizations the discretion to make payments to relocated and agricultural forced workers. This would not require allocating any additional funds to those to be distributed to partner organizations. Rather, it would simply set aside an amount in each partner organization's allocation to be used for non-labor personal injury cases. Any funds allocated for these personal injury cases, but not used, could then be used for Category B distributions. It is important to keep this separate so as not to risk dilution of funds allocated for forced laborers in the event of an unanticipated number of miscellaneous personal injury claims.

III. Definition of German companies

It is important that close attention is paid to the definition of "German companies" in the legislation, as, among other things, this could have an impact on which companies benefit from the Statement of Interest we would be committing to file in our Statements of Interest. The current definition in the draft provides that German companies are "all companies headquartered in the territory of the German Reich in its 1937 borders as well as their parent companies and subsidiaries, even if they were located outside of Germany," as well as those enterprises in which German companies hold or have held at least a 25% interest. This current definition is problematic. None of the victims' groups support such a broad definition.

From the beginning of this process the concept has been that the German Foundation Initiative is a German project, involving the German Government and German companies. Thus, we had only contemplated committing to file Statements of Interest in cases brought against German companies, that is those headquartered in Germany, as well as against their foreign subsidiaries if sued for the same acts. We had not anticipated filing Statements of Interest in cases being brought against foreign parents of German subsidiaries, for example Ford, which is not participating in the German Foundation Initiative.

Recently, however, the German Government and German companies have pressed us to broaden our commitment so that foreign parents of German companies would benefit from our Statement of Interest. We have taken this issue under review and are currently considering whether to commit to file a Statement of Interest where a U.S. parent is being sued exclusively for acts committed by its German subsidiary. In any event, we would not contemplate filing our Statement of Interest in cases against U.S. companies for Nazi-era activities not involving activities in Germany of its German subsidiary. It is important that the definition mirror the commitment the United States is able to make with respect to filing its Statement of Interest and that once we work out our position on this issue conforming changes would need to be made in the legislation.

As the Bundestag takes the legislation under review, it is important to note that one of the conditions the victims' groups insisted upon when they accepted the DM 10 billion capped amount was that this would not include any contributions made by United States parent companies. Some United States parent companies have expressed interest in contributing to a mirror fund in the United States. Any funds contributed separately by United States companies would not go to the German Foundation, and thereby reduce the German companies' DM 5 billion obligation. Rather, U.S. companies would contribute to their own fund in the United States. It is very important that we not dilute potential additional contributions. The DM 5 billion must come exclusively from German companies. Non-German contributions should be above and beyond that amount.

In addition, we have received information that suggests that under German law, 25% stock ownership, or even 50% or more stock ownership, does not provide "control" over a foreign company. We understand that at least one company that has majority ownership of another German insurance company is resisting joining the International Commission for Holocaust Era Insurance Claims, which I will discuss in greater detail shortly, because it claims such ownership does not provide it with "control" over its subsidiary's policy. Again, we believe this is a German project, and therefore, to the extent foreign subsidiaries are included in the definition, it should be only those subsidiaries actually controlled by a German company, not just those that happen to have partial German ownership. It may be that the best measure of such "control" is whole ownership.

IV. Banking/property claims

As I noted previously, during our recent plenary in Washington we discussed the need to allocate a separate amount for property claims, within the DM 10 billion capped amount and to create a mechanism to rule on such claims. This mechanism, which would fall outside the Foundation, would need to receive and process all non-insurance property claims against German companies. There was general agreement that the division of money between property claims and humanitarian funds will need to be agreed upon by the various victims' groups.

With respect to the mechanism to address non-insurance property claims, we intend to work closely with those interested in this issue, and would hope that the legislation could be conformed to reflect the agreements that are reached.

We have had extensive discussions with the German Government concerning the broadening of the scope of Category C. It currently covers only a sub-set of racially-motivated property claims, mainly claims by those living in Central and Eastern Europe. We share the views of all of the victims' groups that it needs to be extended to include all racially-motivated property claims, as well as other claims not otherwise covered by the Foundation as determined by the panel charged with receiving and processing these claims. We recognize that the extensive German Indemnification Laws provided compensation or restitution to the vast majority of those who suffered property damage during the Nazi era and do not suggest that the Foundation should reopen these cases. It is our view that all claims that were or could have been addressed under the extensive German Indemnification Laws are barred, except under special circumstances to be determined by the panel. Although the German Government has rejected the notion of broadening the coverage of Category C to cover, among other things, all racially-motivated property claims, we hope that this decision can be reconsidered by the German Cabinet.

I have already discussed a number of the other outstanding issues concerning property issues in the context of the scope of the Foundation. I would like to note one more: the victims' groups have unanimously criticized the provision in the current German draft which places a DM 15,000 per capita cap on Category C payments. We share the victims' groups concerns. There simply should not be a per capita claim cap on these payments. Those who have brought cases against German companies alleging damage to property will never not agree to dismiss their suit in favor of a process in which their ability to recover is so limited. They recognize, however, that they should only be able to receive a pro-rata recovery up to a sub-cap for this type of claim. We and the victims' groups support a scheme whereby if the awards approved by the Category C panel exceed the amount allocated for property claims then the awards should be pro-rated within this sub-cap.

We hope that, since this proposal is supported by the vast majority of victims' representatives, and would not increase the exposure of the German Government and companies, that it will be looked upon favorably and incorporated in the legislation.

V. Composition of the Board of Trustees

The victims' groups have asked that victims' representatives and survivors themselves be adequately represented in the composition of the Board of Trustees. In addition, there is some concern that other groups which have not participated in the discussions are not adequately represented. We recognize that it would be very difficult to increase the size of the Board, without diminishing its ability to be a timely decision-making body. In order to address these concerns, we have the following recommendations.

First, the current proposal provides that the United States Government would appoint an attorney to the Board. We suggest that the group of plaintiffs' attorneys that has participated in this process, rather than the United States Government, appoint such an attorney to the Board.

Second, we suggest that the legislation establish two advisory committees -- a Lawyers' Committee and a Victims' Committee. These five person committees, whose members would serve in a voluntary capacity, would report directly to the Board of Directors. In order to address the attorneys' concerns that they are not adequately represented in the decision-making apparatus of the Foundation, this Committee should fairly represent the lawyers who have participated in the Foundation discussions. The Victims' Committee could consist of at least two members of groups that do not have representation on the Board of Trustees and at least two survivors.

Third, the Chairman of the Board appointed by the Chancellor should be a person of international stature, with relevant international experience. During the negotiations there was unanimous support for this idea.

Finally, the legislation should provide that at least one of the three members of the Board of Directors should be a victims' representative.

VI. Waiver

One of the more sensitive issues during the entire negotiating process has been the scope of the waiver a claimant must sign in return for receiving payment from Foundation funds. There was agreement reached in Washington two weeks ago that no beneficiary under the Foundation should be required to waive entitlement to any government payment, for example, BEG or social security, in order to receive a payment from the Foundation. Once again, I applaud your government for agreeing to revise the current draft which had provided that a successful claimant would in fact have waive such entitlement. Once again, they have responded to the concerns expressed by all of the victims' groups.

There was no agreement reached, however, concerning other aspects of the scope of the waiver. The German Government promised to review this issue in light of the victims' concerns, which we share.

The current draft of the legislation provides that every beneficiary, when making application, "shall declare that by receiving a payment under this law he irrevocably waives any further claim against" both the Government and German companies. Requiring a waiver of such broad scope cannot be justified.

All of the victims' groups believe that the scope of the waiver should mirror the scope of the claim. We share this view. Thus, an applicant should be required to waive only further claims against the German Government or German companies that directly relate to his claim to the Foundation. Therefore, a Category A or Category B applicant should, upon payment, only be required to waive all labor claims against the German Government and German companies, but should not also be required to waive a claim for stolen art or property damage as well. Similarly, a Category C applicant, should only be required to waive further claims concerning the specific property that is the subject of the particular claim and not all labor related claims as well. Thus, a claimant eligible to receive a payment under Category C for an aryanization claim against a bank would not be required to forego the right to pursue a claim against a particular piece of property, such as a painting.

VII. Insurance

Since the announcement of the establishment of the German Foundation Initiative last February 16, we have worked on the assumption that this process would have to be coordinated with the International Commission on Holocaust Insurance Claims (ICHEIC), which had already been established and was designed to address all Holocaust-era insurance claims. While the relationship between the two processes is still being negotiated, I would like to provide the Committee with some background concerning the ICHEIC and a sense of how these two processes will eventually be coordinated.

The U.S. Government has strongly supported the international effort to bring justice to victims of Nazi persecution and is pleased that the ICHEIC is expected to announced the launch of its full-scale claims and outreach program yesterday.

The ICHEIC claims process will use relaxed standards of proof in dealing with outstanding claims from the Holocaust era and will ensure the opening of companies' files, the cross-checking of names with Yad Vashem's records of Holocaust victims, and further research into European archives to find names of potential claimants. The International Commission has tested its claims procedures in a "fast-track" process for existing claims previously submitted to regulators cooperating with the Commission. Substantial progress has been made through this "fast-track" process and has resulted in the payment of a number of existing claims to Holocaust survivors and their heirs.

All claims against German insurance companies brought to the Foundation will be processed under the International Commission's rules and procedures, and according to Section 11 of the draft legislation, the special provisions of the International Commission on Holocaust Era Insurance Claims shall be unaffected. This is an important recognition that ICHEIC will be the exclusive remedy for dealing with insurance claims.

The draft law provides that the DM 10 billion capped amount includes funds to pay insurance claims under ICHEIC, as well as administrative and any pre-paid amounts. The inclusion of this provision must await the outcome of ongoing negotiations in ICHEIC with German insurers. The International Commission's relationship with the German Foundation and the allocation of Foundation funds for insurance are the subjects of ongoing negotiations. However, the German Foundation will have a humanitarian insurance fund that shall be passed through to the International Commission, which shall have responsibility for administering such a fund.

Representatives of both European insurance companies and Jewish organizations have tabled proposals to pay outstanding Holocaust-era German insurance claims, to create a humanitarian fund for nationalized policies, heirless policies and policies against German companies no longer in existence, as well as for social purposes as determined by the ICHEIC. The outcome of these discussions should be reflected in the draft legislation.

The U.S. Government has supported the International Commission on Holocaust Era Insurance Claims since it began, and we believe it should be considered the exclusive remedy for resolving insurance claims from the World War II era. As stated in the MOU signed by the five ICHEIC member companies, those companies cooperating with the Commission deserve "safe haven" from sanctions, subpoenas, and hearings relative to the Holocaust period. I recently wrote to the state insurance commissioners in Washington and California, emphasizing my strong support for the international efforts to create a claims settlement process under the International Commission and stressing that, in their legitimate concern for Holocaust survivors, proposed actions in these states could undermine the work of the ICHEIC.

We have strongly encouraged and will continue to encourage all insurers that issued policies during the Holocaust era to join the International Commission and participate fully in its claims, outreach, and humanitarian programs. The ICHEIC is the best and most expeditious vehicle for resolving insurance claims from this period, and membership in the International Commission provides the only real way of both ensuring that valid claims are paid and resolving international moral and humanitarian responsibilities, i.e., for heirless and nationalized claims or companies no longer in existence.

As it currently stands, with respect to German insurance companies, only those who are beneficiaries of policies with companies participating in the ICHEIC process have a potential remedy outside of litigation. Currently, only Allianz is a member. Efforts need to be undertaken to persuade or require all German insurance companies that issued policies or today own companies that issued policies, to join ICHEIC and participate fully in its programs, including claims, humanitarian fund, public outreach, and audit programs. How can we do justice if people with real claims for real insurance policies have no redress?

We have repeatedly stressed that it is essential that all those who are beneficiaries of insurance policies issued by a German company prior to the end of World War II should have a forum for their claims. In order for the United States to file Statements of Interest in all cases against German insurance companies arising from the Nazi-era, there must be an alternative potential remedy for all those with Nazi-era claims against any German insurer. If the ICHEIC proves unable to attract all German insurers, other methods need to be used to ensure that no policy with a German insurer goes unpaid.

In all of the discussions of the draft texts, all parties assumed claims on insurance policies would be paid over and above the fixed amount agreed upon. We are now told by German companies that claims must be paid within the DM 10 billion. I believe we can use a capped reserve in the Future Fund, inside the DM 10 billion to cover claims written by German companies for the German market. It is not possible, however, to include policies written outside of Germany, for example in Central and Eastern Europe, by non-German subsidiaries of German companies within the DM 10 billion. Why should RAS, an Italian company which wrote policies in Central and Eastern Europe, receive the benefits from this German Foundation, including a Statement of Interest, simply because it was acquired by Allianz in the 1980s?

VIII. Heirs of Forced/Slave Laborers and the Future Fund

One of the major breakthroughs during this complex nine month negotiation was reaching unanimous agreement that heirs of those forced and slave laborers who have perished would not be entitled to direct payments from the Foundation. It was also agreed, however, that the heirs of those forced and slave laborers who died subsequent to the February 16, 1999 announcement of the establishment of the German Foundation Initiative would be eligible for direct payments. All of this was done largely for practical considerations, as the number of such heirs would be in the millions and there would simply not be enough money available to make payments to both survivors and heirs. Instead of receiving direct payments from the Foundation, it was agreed that the Future Fund would "support projects that serve to benefit the heirs." This could include, among other things, educational scholarships for heirs of former forced/slave laborers.

Section 2 of the current draft provides that the Future Fund will "take appropriately into account" heirs. This Section, however, needs to incorporate the language that was agreed to during the negotiations. In order for the plaintiffs' attorneys to dismiss cases brought by heirs and for the United States' Statement of Interest to say that the Future Fund is a fair resolution for heirs, it is imperative that the legislation provide for specific non-compensation benefits for heirs.

The current draft also provides that only the surviving spouse and children of those forced and slave laborers who died on or after February 16, 1999 are entitled to receive payment from Foundation funds. All of the victims' groups believe that the heirs eligible to recover should not be so limited. We share this view. Rather, all legal heirs of those forced and slave laborers who died on or after February 16, 1999 should be entitled to receive payment from Foundation funds. Again, broadening this provision is not only the fair thing to do, but will not increase the exposure of either the German Government or companies.

IX. Miscellaneous

Before concluding, I would like to run through a number of procedural issues concerning the Foundation.

First, decisions by partner organizations will be made using relaxed standards of proof. This needs to be reflected in Section 11(2).

Second, given that the average age of survivors is approaching 80, every effort must be made to distribute the money to the victims as soon as possible. Section 17(2) currently provides that the Foundation shall make funds available to the partner organizations on a quarterly basis. However, this distribution approach should not be followed if it will slow down payments to beneficiaries. If a particular partner organization is able to process all of its claims within the first four months, then it should receive all of the money necessary to pay these claims at that time.

Third, Section 18(1) currently provides that "the Foundation and its partner organizations shall be authorized to solicit authorities and other public institutions such information as is necessary to the fulfillment of their mission." It is important that the Foundation and its partner organizations be authorized to solicit such information from private institutions as well. After all, the vast majority of these cases concern the behavior of German private companies and these companies might have information that would be useful in assisting the partner organizations in making decisions on the submitted claims.

Fourth, in order for the United States to state in its Statement of Interest that the Foundation is a fair and equitable remedy for these claims, it is important that the Foundation and its partner organizations be subject to a annual public audit. Section 8 currently provides that only the Foundation shall be audited.

Fifth, it is important to remember that this Foundation is more than simply about making dignified payments to likely more than one million survivors who suffered under the Nazi regime. It is also designed, through the Future Fund, to educate people around the world about what happened in Germany between 1933 and 1945 so as to ensure that these unspeakable acts are never repeated. It is vitally important that as part of this educational effort German companies archive all of their documents relating to this awful period so as to provide the public with all of the details regarding the activities of German companies during this period. To many of the victims' representative and victims, this archiving of company documents is just as important, and would have a longer-lasting impact, as the billions of deutsch marks that will be distributed to the survivors. A number of German companies have already begun to do so. The legislation should encourage or perhaps even require all to do so.

Sixth, it is critically important that the German companies deposit their DM 5 billion contribution as soon as possible in an interest bearing account. The interest should support the purposes of the Foundation and would be the source used to pay administrative expenses and negotiated legal fees. The legislation should support the agreement we have reached with Count Lambdorff and the companies on this point.

Finally, as you are aware, the Foundation will provide payments to survivors world-wide through partner organizations. Partner organizations have only been identified, however, to cover Jews worldwide and survivors in Belarus, the Czech Republic, Poland, Russia, the Ukraine. Partner organizations to cover the remaining non-Jewish survivors need to be identified as soon as possible. If such organizations are not identified, then the Foundation must be able to provide direct payments to individuals not covered by a partner organization. Section 10, however, currently precludes the Foundation from making payments directly to the beneficiaries. It would quite regrettable if the Foundation is operating, the funds are available, and a beneficiary living in Australia or some other country is unable to receive payment because a partner organization to cover Australia or that country had not been identified and the Foundation could not make the payment directly to the claimant. We understand the concern that such a system might leave the Foundation vulnerable to appeals in the German legal system. However, in order for the German companies to attain the legal peace we all believe the deserve, it is essential that a solution be found.

I have attempted to outline both the various agreements and compromises that have been worked-out during the nine-months of negotiation, which need to be reflected in the legislation.

In addition, I have given you the United States' views on a number of the outstanding issues. In almost every case, our views converge with those of the victims' groups.

It is my sincere hope that as you undertake this historic task of reviewing and approving this unique piece of legislation that you do so bearing in mind that all of the participants in this process need to be able to support the legislation. Otherwise, the plaintiffs' lawyers will not agree to dismiss their cases, the United States will not be able to file its Statement of Interest, over a million survivors will not receive long-awaited dignified payments in recognition of their suffering and the German Government and companies' unprecedented initiative will not become a reality.

Once again, I want to commend your country for undertaking this historic endeavor, one which in addition to providing a measure of justice to many victims of the Nazi era, will further strengthen the already strong U.S.-German relationship. I thank you for giving me this opportunity to address this Committee.