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Court Spurns Investors Seeking $8 Billion on Hitler-Voided Bonds

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Feb. 22 (Bloomberg) -- The U.S. Supreme Court rejected an appeal by a Cyprus-based company trying to collect as much as $8 billion on German bonds repudiated when Adolf Hitler took power in 1933.

The justices today left intact a ruling that threw out a lawsuit against the German government by Mortimer Off Shore Services Ltd., a company founded by millionaire Fouad Al-Zayat.

The lawsuit is one of two filed by Mortimer over 83-year-old bonds whose potential value has soared because they are tied to the price of gold. The case acted on today involved 351 of the 1,611 bonds held by Mortimer while a separate suit filed last year in Boston concerns the entire group. Mortimer’s attorneys estimate each $1,000 bond is now worth $5 million.

The bonds were issued in 1928 by the Weimar Republic to assist farmers and pay for agricultural development. Five years later Hitler’s government suspended payment.

Al-Zayat began buying the bonds more than a decade ago. His company, now run by his son and son-in-law, has spent millions of dollars on the bonds and in pursuing court claims, according to Peder Garske, an attorney representing Mortimer.

In throwing out the lawsuit, the New York-based 2nd U.S. Circuit Court of Appeals said that sovereign immunity barred suits over bonds issued in what was formerly East Germany. The court also said Mortimer couldn’t collect on the bonds issued in West Germany because it didn’t comply with validation requirements set out in a 1953 treaty between that country and the U.S.

The case is Mortimer Off Shore Services v. Federal Republic of Germany, 10-814.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.

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