German Bonds Case Moves Forward

German Bonds Case Moves Forward

By Janet Leiser

Senior Editor

International reparations lawyer Ed Fagan says he won round one in a federal lawsuit intended to force the German government to make good on bonds issued shortly after World War I.

"This is a big win for us," Fagan says. "This decision means perhaps the greatest securities fraud case in the world will go to trial in Florida. Most importantly, this decision means that the 70-year-old bond claims will finally be addressed by U.S. courts."

Commerzbank AG asked U.S. District Judge Elizabeth Kovachevich to dismiss the lawsuit for lack of jurisdiction. The Tampa judge, instead, ordered the appointment of a special master in the case that could potentially cost Germany billions of dollars.

"It has become clear to the court that this is an unusual case," the judge wrote. "In addition to the unique subject matter, the court notes that there is a recurring need for court attention, that voluminous pleadings continue to be filed, and that there is a certain amount of contentiousness."

New York City lawyer Janis M. Meyer of Dewey Ballantine LLP, which represents Commerzbank, declined to comment on the ruling.

Rosa E. Scavo, a Miami lawyer who represents defendant Prince Guilio Bissiri Mekonen Selassie of Rome, says: "This wasn't really a victory for either side. It was more of a procedural decision."

Fagan - a New York City class-action lawyer who successfully sued Swiss banks on behalf of Holocaust victims in the late 1990s - says it's a common procedure in important cases to appoint a master.

"The appointment of special masters was done in the Holocaust cases, by every judge," he says. "Persons such as former deputy secretary of the U.S. Treasury Stuart Eizenstat, Kenneth Feinberg and Sen. Alfonso D'Amato were all appointed in the Holocaust cases."

The lawsuits

Fagan represents Ronnie D. Fulwood, a Plant City native and former farmer who has collected the gold-backed bonds for about two decades. Fagan and Fulwood are seeking more than $50 billion for the 3,506 bonds, which Fulwood owns or controls.

Fagan amended the Tampa complaint to add Deutsche Bundesbank, known as the German National Bank, as a defendant. Other defendants include Commerzbank, Selassie and his related companies, Amdec Worldwide Holdings SA and Etienne Real Estate.

As far as Fulwood is concerned, it's a simple issue: the German government must make good on the bonds it issued to U.S. citizens to pay for reconstruction following the first world war.

He and others around the world have faced harassment and even jail when they attempted to collect on the bonds. One Canadian businessman was imprisoned for years, his conviction based in part on the testimony of a former Nazi officer. The man was released after an appellate court overturned his conviction.

In the late 1990s, Fulwood met Prince Selassie - who claims he's a descendant of the late Ethiopian Emperor Haile Selassie. Fulwood says the prince, acting as an agent for the German government, convinced him to place his bonds in a trust account at Commerzbank in Germany for verification and redemption.

Fulwood deposited the bonds, he says, but he never received payment and he doesn't know what happened to the bonds. That's why he filed the Tampa lawsuit in January.

"From June 2004 forward, Commerzbank, The German National Bank and Bissiri were actively conspiring and engaged in a fraud that was designed to interfere with Fulwood's rights to the bonds," states the amended complaint.

The prince, who's also known as Aklile Berhan Makonn Haile Selassi Giulio Bissiri, brought a lawsuit against Fulwood in Tampa federal court. Fagan has asked the court to consolidate the lawsuits. But a decision has not yet been made.

In August, as Fulwood faced possible dismissal of his original lawsuit, he filed another federal lawsuit, naming the Federal Republic of Germany as a defendant.

Bond history

The Dawes bonds were issued in 1924 and the Young bonds in 1930. The gold-backed bonds were for $500 or $1,000.

Prior to World War II, Adolf Hitler stopped payments on the bonds. Then in 1953, the London Debt Accord was reached to ease Germany's financial woes.

Under that agreement, bondholders could trade for bonds of lesser value or wait for the occurrence of three events: The repayment of all exchange bondholders, the passage of 40 years and the reunification of Germany.

Only after those three events occurred would the bondholders be repaid, Fagan says, adding: "Whoever thought that would happen?"

German magazine Der Spiegel reported in November that a $1,000 bond would be worth as much as $840,000 today, with interest. And the combined value of the bonds, as high as $500 billion, would break the German government.

Fagan previously told the Review (See 'History's Greatest Fraud?' July 22-28) that the court's decision on Commerzbank's request for dismissal was crucial.

"If the court decides in our favor and exercises jurisdiction over Commerzbank ... the case stays here in Florida and what Commerzbank just did for the entire German industry of bondholders is made bad law they can't get away from," he told the Review. "Commerzbank just brought all of them into Florida, into the United States for liability on the bonds."

Then discovery begins, Fagan says. And it would be the first time the German government has produced documents related to the bonds.