The spectacular hunt for former Communist assets in Swiss accounts ties Julius Baer to UBS. The sum of damages is set to rise – and likely to pit the two Swiss wealth managers against each other.
$155 million – that's how much Julius Baer CEO Philipp Rickenbacher is setting aside to deal with the eventuality that the Swiss bank might lose a long-running court case. A German post-reunification agency is seeking assets stowed in offshore accounts by the German Democratic Republic before its collapse thirty years ago.
The Swiss private bank is appealing the ruling by a Zurich court, but will have little hope of a reversal when the case is heard before Switzerland's highest court. The highest instance has already ruled against the bank on the case – twice. And another, weighty actor in the messy drama is about to emerge: UBS.
«Red Fini» at Work
Julius Baer's current opponent is a German government agency set up to root out assets hidden abroad by the former east German government. Rudolfine Steindling (pictured below), an Austrian political activist, maintained close ties to the Communist government and was key to its foreign financial dealings.
(Image: Keystone)
East German officials came to rely on Steindling, or «red Fini» as she was later nicknamed, to tap foreign currencies. She did so by maintaining a sprawling network of foreign accounts – including in Switzerland.
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After the Berlin Wall fell, the reunited German government began going after assets stowed by «red Fini». Their claims includes funds held at Cantrade, a subsidiary of Ehinger & Armand von Ernst, one of the banks UBS sold to Julius Baer.
The now 30-year-old «special» agency has virtually limitless funds to track and go after the lost money – and it has done successfully until now. The agency first went after Steindling, a fixture in Viennese high society nicknamed «Chanel and champagne communist» because of her penchant for luxury.
Changing Tack
By 2009 the tireless German agency extracted 100 million euros ($110 million) from Steindling, money she had hoarded as the former regime's fiduciary. It is believed she had been savvy enough in hiding the rest in an intricate network of accounts elsewhere – and in covering the tracks – to prevent more from being found.
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