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Some German Bond Owners Want Money

Some German Bond Owners Want Money
04.19.2005, 11:49 AM
Associated Press

The gold-backed bonds were issued in the 1920s by a Germany seeking to rebuild after World War I.

When Hitler stopped paying them in 1933, they might have been consigned to history. But a small group of bondholders, led by a lawyer who has sparred with Germany's government before, are demanding they be paid - at today's prices.

Ed Fagan, the lawyer leading the effort, said several investors are holding 13,356 gold-backed bonds and want US$7.8 billion (euro6 billion) in compensation for them, noting that they are valid despite their age and the fact that Germany's current government is far removed from the Weimar Republic.

"This is not speculation," he said. "There's a bond and it has never been paid."

Lawsuits seeking payment of the bonds by Germany's current government have been filed in federal court in Florida and New York, but have yet to be heard.

The bonds, backed by gold, not currency, were issued by the Weimar government and put up for sale in the United States in an effort to raise money to pay for reconstruction. The face value of the bonds varied; some were US$1,000 and others were US$500.

Hitler stopped paying the bonds because he didn't feel his government should have to abide by the terms of the Treaty of Versailles that ended World War I.

Fagan said a bond valued at US$1,000 would be worth about US$840,000 (euro646,000) today.

At a news conference in Frankfurt this week, Fagan said he and others, including a Florida strawberry farmer named Ronnie Fulwood, filed suit against Germany's government, the Finance Ministry, and Commerzbank and Deutsche Bank for defaulting on payment of the bonds.

Deutsche bank didn't immediately return a call seeking comment, nor did Germany's Finance Ministry.

Beate Schlosser, a spokeswoman for Commerzbank denied the allegations.

"Our legal department has researched this," she said. "These claims are completely unfounded and have no basis in fact."

But Fulwood said he was told to send his bonds from Luxembourg to Commerzbank for evaluation and authentication, a process he said was done legally and documented.

After three months, he contacted the bank for information and was ignored.

"I didn't hear one word," he said. "It's been an uphill battle."

Schlosser said that "these bonds were never on our accounts."

Fagan said that when Germany signed off on the London Debt Accord in 1953, which settled its outstanding pre- and post-World War II debts, the nation didn't renounce its obligation on the bonds - and that is why the current government is liable for their payment.

"No one's saying we have a vendetta against Germany," he said. "It's really simple. We had a deal. I paid you my money, now give me my money."

The first lawsuit was filed in January by Fulwood in federal court in Tampa, Florida. The second was filed by Fagan this month in federal court in the Southern District of New York.

Fagan also sued the German government in New York last year, saying it had not tried hard enough to find the rightful owners of art works stolen by the Nazis. In 1999, he came to prominence in a landmark US$1.25 billion settlement with Swiss corporations on behalf of Holocaust victims.


LINK: http://www.forbes.com/home/feeds/ap/2005/04/19/ap1957131.html