Swiss bank ordered to pay compensation for missing East German millions

Germany has an extra reason for cheer on Saturday when it celebrates 30 years as a united country: the vanished East German regime is picking up the tab.

After a long search – and lengthy court battle – Switzerland’s highest court has ordered Julius Bär bank to pay out 150 million francs (€140 million) that a subsidiary helped hide for East Germany’s ruling party in the dying days of the socialist state.

It’s the latest tranche of money clawed back by German authorities in a 30-year game of financial hide-and-seek.

The Swiss ruling ends a particularly colourful episode involving suitcases of money, a mysterious holding company and an ageing society grande dame who acted as a western intermediary for East Berlin apparatchiks.

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By its end in 1989-1990, the 40-year-old East Germany may have been heading for bankruptcy, but its ruling party – and associated mass organisations – owned an impressive portfolio: more than 6,000 properties, publishers, a film studio and an estimated six billion Ostmarks in cash savings, largely party membership subscriptions.

Rather than hand over their wealth to the new unified German government, SED officials spread the wealth as widely and quickly as possible.

A party secretary showed up at a bank in Luxembourg in the summer of 1990 with three billion Deutschmarks (€1.3 billion) in cash, in bulging plastic bags. Some 69 million Deutschmarks (€35.3 million) was donated to an Islamic group controlled by a Palestinian arms dealer and former PLO terrorist.

By the time the SED changed its name to the Party of Democratic Socialism (PDS) in 1990 and agreed to divest itself of half its assets, just 205 million Deutschmarks (€105 million) were left.

Concealing €1bn

The inter-party committee tracking party assets said the PDS had tried to conceal at least €1 billion worth of assets it inherited from the SED.

“The party has no interest in laying plain its fortune,” a report said in 1998. In its final report in 2006 the inter-party commission said its 16-year hunt had tracked down €1.6 billion, the vast majority of which, it said, had been acquired illegally.

A key figure in the missing millions hunt was Rudolfine Steindling, also known as “Red Fini”. A banker’s wife and member of the Austrian Communist party, she was also a key contact person for GDR foreign trade in the west.

In the 1980s, as head of a company called Novum GmbH, she oversaw manufacturing contracts for East Germany with western companies such as Bosch. As East Berlin denounced the decadent, imperialist west in public, in private the chronically stretched regime was increasingly dependent on Steindling’s contacts and contracts for foreign currency.

In December 1989, weeks after the Berlin Wall fell, Steindling transferred a reported €500 million from Novum bank accounts in Zürich and Vienna to Tel Aviv, the city of her birth and then of her retirement. She died there in 2012 and spent her last years locked in legal battles with the German authorities over money that is now part of the Swiss court settlement.

The legal question involving her bank, Cantrade, taken over by Julius Bär in 2005, hinged on whether bank employees 30 years ago could tell Steindling was moving around money that wasn’t hers in light of political developments in Berlin.

The bank’s lawyers argued that, to spare blushes in East Berlin, the SED made great efforts to hide its ownership of Novum GmbH through the Communist party of Austria.

In the first instance, a Zürich court ruled that the bank employees had acted in good faith by allowing the transfers go through. But on appeal, Switzerland’s highest court found against the bank, ordering it to pay 97 million francs (€89.8 million) plus interest.