Business Week Europe
By William Boston
Amid concerns over Holocaust survivors’ ability to hold on, pressure mounts for German retailer KarstadtQuelle to settle one family’s claim
The long-enduring battle between German retail giant KarstadtQuelle and the heirs of the Wertheim family, a prominent Jewish retailing clan in the years before the Nazis came to power, has been emotional and often bitter. But one thing is clear: The courts have consistently ruled in favor of the family’s heirs.

Yet KarstadtQuelle, which may owe up to €145 million ($184 million) to the Wertheim heirs, won’t settle. Instead, it keeps pushing the case into other courts. But amid concerns about how much longer aged Holocaust survivors can hold on, the Wertheim family is urging KarstadtQuelle to come to an agreement, if for no other reason than on moral grounds.

The battle is a stark reminder of German industry’s complicity with the Nazi regime in the years leading up to and during World War II. It has also unearthed a mind-boggling tale of how the spoils of that war often were not returned to their rightful owners afterward—and in some cases wound up under the ownership of modern corporations.

DIRECT APPEAL. The controversy centers on several pieces of real estate near Potsdammer Platz in central Berlin that are now valued at more than $500 million, according to lawyers for the Wertheim heirs. KarstadtQuelle is involved only with a piece of land called the “Lenne triangle.â€? Beyond the large sums involved, the case has stirred intense interest because it’s likely the last major restitution case involving Jewish property seized by the Nazis. Most others have long since been settled or abandoned.

Until recently, the Wertheim heirs have fought KarstadtQuelle through legal channels, but on Sept. 18 they launched an emotional public appeal to Germans and directly to Thomas Middelhoff, the chief executive officer of KarstadtQuelle. “Even though they [KarstadtQuelle] have no hope to win, they want to delay,” says 73-year-old New Jersey resident Barbara Principe, whose father shared control of the Wertheim department store with his brother. “We have battled for years to get where we are, and even if I do not personally see the day, I know that our family will win.”

At a news conference held at a hotel built on the property to which the Wertheim heirs lay claim, Roman Haller, director of the Jewish Claims Conference, urged Middelhoff to “recognize all of the previous court decisions. It would be good for the legitimate heirs, for the Holocaust survivors, and it would be good for Germany.”

The Jewish Claims Conference, a social welfare organization, supports Holocaust survivors and often represents them in restitution cases. It shares part of the compensation with former owners, but uses the bulk to support poorer Holocaust survivors. The JCC is representing the Wertheim family in its legal fight.

BACK TO THE COURTS. KarstadtQuelle responds that it is fighting the court decision to protect itself against shareholder lawsuits. Company spokesman Jörg Howe, the only KarstadtQuelle representative who will discuss the case publicly, portrayed the Sept. 18 event as an “unacceptable” effort to embarrass the retailer. “The Jewish Claims Conference is using emotions in an attempt to put KarstadtQuelle under pressure in public.

“We have always made it clear that without a final legal clarification it is not possible for us as a stock corporation to settle out of court,” Howe said in an official statement released Sept. 18. “Furthermore, there are good reasons to believe that KarstadtQuelle’s legal claim in the dispute will prevail.”

That may be, but so far the courts have backed the heirs. In October, 2005, for instance, the Federal Administrative Court in Leipzig ruled that KarstadtQuelle had no claim to a disputed 20,000 square meter (4.9 acre) plot of land on the “Lenne triangle,” adjacent to the Sony Center on Potsdammer Platz. During the cold war, the strip of land was on the west side of the Berlin Wall, though technically it belonged to the Soviet sector.

NAZI SEIZURE. So how did Germany’s largest retailer and one of the country’s best known CEOs get entangled in this tale of Nazi plunder and cold war intrigue? The story begins more than a century ago with Georg Wertheim, a Jewish merchant who came to Berlin from the Baltic seaport of Stralsund. He was among the first businessmen to operate department stores in Germany in the late 19th century, and converted to Christianity in 1906—a move that didn’t save him from later Nazi persecution.

In 1933, members of the Tietz family, Jewish owners of a Wertheim competitor called Warenhaus Hermann Tietz, were forced to sell their department store to the Nazi government, which renamed it Hertie. The family fled to the U.S. Wertheim saw the writing on the wall and transferred his shares in his business to his non-Jewish wife. But to no avail: Wertheim’s property was expropriated by the Nazis in 1937, and he died in 1939 of natural causes in Berlin. His nephews Günther and Fritz—the sons of his brother Franz—subsequently left Germany for the U.S.

After the war, Wertheim property in East Berlin was expropriated by the Soviets, but the business headquarters remained in West Berlin. Wertheim’s nephews tried to get that property back in 1951. But their uncle’s lawyer, Arthur Lindgens, who had by then wed Georg’s widow, convinced the brothers to accept a payment of about $5,100 for rights to the business. Four days before striking the deal with Günther and Fritz, Lindgens secretly sold the business to Hertie.

ILLEGAL SALE? Soon after the Berlin Wall fell in 1989, the city of Berlin officially transferred ownership of the property on the Lenne triangle to the Hertie retail group. Then, in 1994, KarstadtQuelle acquired the property for $161 million when it took over Hertie for $1.03 billion. In April, 2000, KarstadtQuelle sold the property for $184 million to billionaire Otto Beisheim, the founder of the Metro retail group. Beisheim invested another $553 million to develop the property, which now hosts the Ritz Carlton and Marriott hotels, as well as office buildings and swank apartments.

If the property now belongs to Beisheim, why are the Wertheim heirs and the Jewish Claims Conference going after KarstadtQuelle? Because they claim that the property fell into KarstadtQuelle’s hands unlawfully— which means it wasn’t KarstadtQuelle’s to sell in the first place.

In 1999, Barbara Principe’s attorneys were able for the first time to see the Wertheim files at the Berlin Restitution Agency. That’s when they discovered that Lindgens had sold the land unlawfully. Property confiscated by the Nazis was supposed to be returned to its rightful owners.

“That got the whole thing started for us,” says Gary Osen, a lawyer for the Wertheim heirs. “If Lindgens wasn’t authorized to sell it in 1951, then Berlin had no right to give the property to Hertie, and that means the sale to Beisheim wasn’t valid.”

“NEW MORAL CODE.” In August, the Bundesamt für zentrale Dienste und offene Vermögensfragen (BADV), a federal agency charged with sorting out property claims in the former East Germany, sided with the heirs, a major setback for KarstadtQuelle. The BADV ruled that the Jewish Claims Conference, acting on behalf of the Wertheim heirs, is the rightful owner of the Lenne triangle property. KarstadtQuelle is appealing the ruling, and spokesman Howe says the company expects the matter to be heard in administrative court next year.

KarstadtQuelle CEO Middelhoff won’t comment on the Lenne triangle dispute, which riles some observers. Henryk Broder, a German commentator and author, calls Middelhoff’s refusal to acknowledge the claims of the Wertheim heirs “a new moral code.”

Any such dispute involving Jewish war restitution invariably receives heightened scrutiny. But according to Gerhart Baum, a former German federal interior minister, no German should duck the issue. The Wertheim affair “is deeply connected to our past, and that is also Herr Middelhoff’s past,” Baum says. “This is a case of restitution, and that means it has a moral dimension.”