In their 2018 book, Billion Dollar Whale, Bradley Hope and Tom Wright detail how Jho Low looted billions of dollars from 1MDB (then part of the Malaysia sovereign wealth fund). Low’s criminal activities between 2007-15 resulted in the largest financial heist of all time – and make even Bernie Madoff’s Ponzi scheme look like small potatoes.
Even a cursory reading of Billion Dollar Whale reveals that fine art, especially portraits, is an ideal vehicle for money laundering. Unlike monetary transactions, art transactions are not reportable to the US government. Art is liquid and easily transportable. Many people throughout history have taken advantage of these facts including the Nazis who were able to successfully loot roughly 20 percent of the art in Europe between 1933-45.
Hermann Göring, a connoisseur of luxury, amassed “thousands of paintings, sculptures and other works during his tenure as the second-most powerful man in Nazi Germany.” Even the so-called “Good Nazi,” Albert Speer, stole so much art that he left his daughter a fortune.
The Nazis looted art to enrich themselves. Yet because the looted objets d’art were too hot to immediately launder, they were hidden in mine shafts, railroad cars, and other places that were deemed safe.
In order to recover the stolen art, the Allies established the Monuments, Fine Arts, and Archives Section. Yet, despite the Monuments Men’s best efforts, much of the Nazi looted art was not immediately recovered and what was ultimately recovered often became the fodder for decades of litigation.
The Guelph Treasure Litigation & the Expropriation Exception
Over the years, LLS has been involved in several cases concerning looted Nazi art. One case that proved particularly interesting was the Guelph Treasure litigation. In this case, the heirs of several Jewish art dealers who were doing business in Frankfurt in the 1930s sought to recover a valuable art collection allegedly taken by the Nazis. The plaintiffs contended that Göring was the criminal mastermind behind this theft. The Federal Republic of Germany moved to dismiss this case claiming that Germany was entitled to immunity under the Foreign Sovereign Immunities Act (FSIA).
Under the FSIA, foreign sovereigns and their agencies enjoy immunity from suit in US courts unless an expressly specified FSIA exception applies. One such exception is the “expropriation” exception, which applies to situations where a foreign government has nationalized privately owned property. Consequently, the heirs in the Guelph Treasure litigation asserted jurisdiction under this exception.
The “expropriation” exception has two requirements
- that “rights in property taken in violation of international law are in issue,” and
- that “there is an adequate commercial nexus between the United States and the defendant”
Germany needed to prove that the heirs allegations did not, in fact, bring the case within this exception.
Requirement 1: Was there a Violation of International Law?
As stated above, in order to successfully prove that the expropriation exception applies, both requirements must be met. As regards the first requirement, the “intrastate taking” (i.e. a foreign sovereign’s taking of its own citizens’ property) does not violate the international law of takings, unless taking “amounted to the commission of genocide.” Genocide, even “against [a country’s] own nationals” is a violation of international law. Moreover, looting of individuals’ incident to the commission of an act of committing genocide fits “squarely within the terms of the expropriation exception.”
After considering Germany’s arguments to the contrary, both the trial and appellate court concluded that allegations “that the Nazis took the art in this case from these Jewish collectors as part of their effort to ‘drive [the Jewish people] out of their ability to make a living” were unchallenged. Accordingly, both the Guelph Treasure trial court and the DC appellate courts ruled that the Nazis’ action of expropriation of Jewish Art in this case was a violation of international law.
Requirement 2: Was there a Commercial Connection to the United States?
As to the expropriation exception’s second requirement, “an adequate commercial nexus between the United States and the defendant is satisfied only when the property is present in the United States.” In both Simon and de Csepel, the plaintiffs offered only a “bare, conclusory assertion” to show that the property (viz., the art at issue in these cases) was ever present in the US.
This same situation was at issue in the Guelph Treasure litigation – the plaintiffs could not demonstrate that the Guelph Treasure was ever in the US. Accordingly, both the Guelph Treasure trial court and the DC appeals court ruled that there was no nexus between the art at issue and the US. Consequently, both courts dismissed the cases against Germany.
Other Cases Concerning the Recovery of Nazi-looted Art Under FSIA
In addition to the Guelph Treasure litigation, there have been two other interesting cases concerning the recovery of Nazi-looted art under FSIA.
In Hulton v. Bayerische Staatsgemaeldesammlungen, the plaintiffs were heirs to Alfred Flechtheim, who was a prominent German Jewish art collector. Before fleeing Nazi Germany, Flechtheim was “forced to place his property at the disposal” of a “Nazi tax adviser” by the name of Alfred Schulte. After the war, Flechtheim’s art collection ultimately ended up in the possession of the Bavarian State Paintings Collection (BSPC). In 2014 when the Flechtheim’s heirs brought suit to recover the Flechtheim’s art work under FSIA’s expropriation exception, the BSPC filed a motion to dismiss.
It is axiomatic for a US court to have jurisdiction in a FSIA action, the alleged wrongdoing must be “done by a sovereign — not a private entity.” In this case, the plaintiffs did not allege “that Schulte acted on behalf of, or at the direction of, the German government when he ‘took possession of all of Flechtheim’s belongings’ and sold them.” Failing to demonstrate that a state actor had expropriated Flechtheim’s art collection, the court dismissed the plaintiff’s complaint against BSPC.
On January 7, 2019, SCOTUS declined to hear the appeal of de Csepel v. Republic of Hungary. We have already discussed the key aspect of the de Csepel case – that because it is very difficult to show that the art at issue was ever in the US, it is not possible to demonstrate expropriation.
Both the Bayerische Staatsgemaeldesammlungen case and SCOTUS’s unwillingness to re-examine de Csepel may signal that the era of Nazi-looted art cases is coming to an end. Major war criminals, like Göring and Speer — who can be clearly tied to the Nazi State — are no longer alive, and the majority of the art they stole has, for the most part, been identified and recovered. This means that smaller fish, like Schulte, are the criminal masterminds of many of the Nazi art heists that still filter into the courts. And therein is a major legalistic hurtle: Over and above the problem that virtually all of these men are dead, finding records that demonstrate they were state actors is exceedingly difficult.
 Jesse Hamlin: His mission — to save art looted by Nazis. Here’s how he did it. SF Gate, May 4, 2007; https://www.sfgate.com/entertainment/article/His-mission-to-save-art-looted-by-Nazis-2597361.php.
 Albert Speer received the moniker of being the “Good Nazi” for his performance in Nuremburg. During the major war criminals’ trial only Herr Speer accepted responsibility for his actions and plead guilty to all of the charges brought against. Göring and the other 18 major criminal defendants plead not guilty.
 Justin Huggler: The daughter of Hitler’s architect who sold her inherited art collection to help rebuild Jewish legacy. Telegraph February 2, 2019; https://www.telegraph.co.uk/news/2019/02/02/daughter-hitlers-architect-sold-inherited-art-collection-tohelp/.
 Christopher Klein: The Real-Life Story Behind “The Monuments Men.” History Channel, May 13, 2014; https://www.history.com/news/the-real-life-story-behind-the-monuments-men.
 Phillips v Federal Republic of Germany, 894 F.3d 406 (2018).
 Title 28, §§ 1330, 1332, 1391(f), 1441(d), and 1602–1611. In the instant case the court also considered whether domestic exhaustion of remedies is required under FSIA; and whether the US policy concerning Nazi looting was violated.
 28 U.S.C. § 1604.
 Id. at §1605(a)(3)
 de Csepel v. Republic of Hungary, 859 F.3d 1094, 1101 (D.C. Cir. 2017) (quoting 28 U.S.C. § 1605(a)(3)).
 Phoenix Consulting Inc. v. Republic of Angola, 216 F.3d 36, 40 (D.C. Cir. 2000).
 Simon v. Republic of Hungary, 812 F.3d 127 (D.C. Cir. 2016).
 Id. at 145.
 Id. at 146; see also de Csepel, 859 F.3d 1094.
 Simon, 812 F.3d at 146 (citation omitted).
 Supra, see notes 10 and 14.
 1:16-cv-09360, (S.D. NY Sept 28, 2018).
 Whether BSPC was an agency or instrumentality of the German government, and thus subject to FSIA, was not at issue in this case.
 Freund v. Republic of France, 592 F.Supp.2d 540, 553-54 (S.D.N.Y. 2008), aff’d sub non, Freund v. Societe Nationale des Chemins defer Francais, 391 F. App’x 939 (2d Cir. 2010); accord Williams v. Nat’l Gallery of Art, London, No. 16-cv-6978 (VEC), 2017 WL 4221084, at *4 (S.D.N.Y. Sept. 21, 2017) (“[C]onversion by a private individual is not a FSIA taking.”), aff’d 2018 WL 4293327 (2d Cir. Sept. 10, 2018).
 SCOTUS Docket Number 17-1165.
 859 F.3d 1094 (2017).