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Swiss Court denies Berlin lost East German cash

Jon Shelton with dpa
April 24, 2018

Germany took Swiss private bank Julius Bär to court in its search for missing GDR millions. But Berlin's claims to the lost cash have suffered a damaging blow.

East German banknotes and flag
Image: picture-alliance/dpa/J. Sasse

The Canton of Zurich's Court of Appeals on Tuesday denied a German government claim to retrieve funds worth some 200 million Swiss francs ($205 million, €168 million) that disappeared from an account belonging to a former East German export company at a private Swiss bank.

The case is part of a larger attempt by Berlin to track down funds that disappeared during the tumultuous period brought about by the collapse of communist East Germany.

Read more: Berlin Wall — now down for as long as it once stood  

Details of the case

  • The appeal came after a court of first instance ruled in favor of Swiss bank Julius Baer in December.
  • The amount, 200 million Swiss francs, is based on the missing funds, estimated at 97 million Swiss francs, plus interest lost since 1994.
  • The court found that Swiss bankers had no reason to doubt the legality of accepting transferred funds.

Read more: The Hunt for East German Money

Why are the funds in Switzerland? The cash was transferred to Cantrade bank, which was subsequently taken over by the Swiss private bank Julius Baer. The bank accepted transfers until 1992, despite the fact that they had become illegal as a result of German reunification in 1990.

Follow the money: The Federal Agency for Special Tasks Related to Reunification (BvS) has launched dozens of lawsuits in an attempt to recover funds to which it is rightly entitled as the lawful successor to the German Democratic Republic (GDR). Berlin's most spectacular victory came in 2013, when a Swiss court ordered Bank Austria to pay Germany €254 million for funds that it had helped transfer between East Berlin, Vienna and Zurich.

Read more: East Germans still victims of 'cultural colonialism' by the West

The Vienna link: The money in question in the Zurich case stems from Novum, a Vienna-based company set up by the East German government in 1951 to oversee all business transactions with the West. When the Berlin Wall fell in 1989, Novum's holdings became the property of the GDR's successor, the Federal Republic of Germany (FRG).

"Red Fini": Rudolfine Steindling was a key figure in all financial transactions between East Germany and the West for four decades. The Austrian socialite, known as both "Red Fini" and the "Chanel Communist," maintained a lavish lifestyle and close connections to the most powerful men in East Germany. A member of the Communist Party of Austria, Steindling was appointed top manager and sole shareholder of Novum when it was founded. When East Germany collapsed, Steindling transferred millions from Vienna to Zurich and then made 51 withdrawals to drain the accounts. 

Rudolfine Steindling appearing in court in 2003
Rudolfine Steindling, a Viennese communist known as "Red Fini," is said to have used her connections to the East German government to transfer hundreds of millions of marks to Swiss bank accounts. Image: picture-alliance/dpa/A. Altwein

Where is the money? All traces of the money disappeared after the cash was redeposited into anonymous accounts and various investment portfolios. It remains unclear whether Steindling acted alone or in concert with others.

What happens next? The German government's current lawsuit against Julius Baer, initiated in 2014, is also connected to Steindling. It was she who transferred and then withdrew the cash funneled through Cantrade. Julius Baer, the private Swiss bank that purchased Cantrade from UBS in 2005, argues it bears no responsibility for actions that took place before 2005. Tuesday's decision upholds a municipal court ruling from December 2016, though it is not yet binding.