Paper chase

"I think it was in the early '60s," says Dr. Joseph V. D'Angelo, a 75-year-old West Palm Beach, Florida, doctor and businessman best known as the inventor of a home saliva AIDS test. (According to news reports, the test does work, though D'Angelo is not marketing it in the United States and has not sought approval from the Food and Drug Administration.) "I was in Romania, and a man came into the clinic. He had a German bond. He said, 'I know where there are a lot of these.'

"I bought the bond for $5. I wanted to know what he was talking about," D'Angelo said in a telephone interview. "So I went through Checkpoint Charlie, and he showed me a cellar built into a hill. I couldn't believe what I was seeing. They were stacked up to the ceiling."

According to D'Angelo, the bonds had come primarily from German death-camp victims. "I know that is the case, because in many cases I saw letters to children, letters to grandchildren, from people who had never come back from the camps."

D'Angelo mentioned his adventure to another American staying at his Berlin hotel, a trader whose ex-wife just happened to be the East German commandant at Checkpoint Charlie.

"She was very militaristic," D'Angelo says, "a real rough one. We started negotiating. She wanted $2,700 per suitcase of the bonds." Eventually, he says, they brought the stash--300,000 pieces--over the border in a car.

D'Angelo says he sold many of his bonds "years ago, when they went for a dollar or two." (He once sold 10,000 to a winery, which wrapped its bottles with the paper.) And while he believes that the German government will eventually be forced to settle something on the majority of bondholders, he is worried by some of what he sees going on. "There are lots of shady characters in the business now," he says. "They all have a peculiar role that they play.

"A lot of it [the figures being floated] is B.S. But I do know of some deals that have gone down. Still, I'm a little concerned about the gold clause business, that sort of thing."

Naturally, Morgan and his colleagues see things differently. With a passion that rivals Republic of Texas members, this tiny clique of laymen and lawyers, who are experts in neither private international law nor international finance, argue ceaselessly over the meaning of the London Debt Accord and whether the reunification of Germany might have triggered repayment of obligations. And that's before they get around to arguing about the effect various treaties, laws, executive orders, public statements, and constitutions may have on gold clauses.

But all their arguments are little more than idle wind when it comes to persuading today's Germany to honor the old regime's obligations. To do that requires considerably more clout than that carried by men such as Morgan and Meddoff. It requires unheard-of political muscle when it comes to persuading the State Department to convince Germany to voluntarily pay up to retire the old regime's obligations. Hence the plan for hefty donations to U.S. political campaigns.

In the early '90s, Morgan was meeting many characters from the strange new world of historical bonds. One of those was a Dallas attorney named Jim Choate.

"I had a client nine years ago who brought one of these [Weimar Republic] bonds in and asked me if I thought it was collectible," Choate recalls. "It was being offered to him as collateral for a loan."

Now 62, Choate, who for many years was a trial lawyer in Dallas, was at first suspicious. "I said I couldn't issue an opinion fast enough for him to be able to make a decision," Choate continues. "The fellow who brought the bond to me also brought a couple of memos done by a law firm in New York." (That memo, along with Choate's, is among the assorted pieces of paper in a homemade "German Gold Bearer Bond" book being circulated by dealers around the world.)

"So I got interested in them. It took me a couple of years before I got comfortable enough to write the opinion you've seen."

Choate is referring to an opinion on whether the Weimar Republic bonds can be collected upon. He has issued the opinion to dozens of traders around the world. It purports to show why "certain Pre-World War II gold bearer bonds issued by various German entities during the period from 1924 to 1936" are collectible. The opinion--a selective recitation of history and possible arguments--drew belly laughs from the legal and financial experts contacted by the Observer.