Paper chase

William Morgan says he's just an innocent document dealer snared in a campaign finance scandal. And if you believe that, he has some old railroad bonds he wants to sell you.

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.

"It's sort of a late-life crusade for me, to make them honor their debts," Choate continues. He neglects to mention that it could be an immensely profitable crusade if his views of history and international law were to prevail, since at some point during the early '90s, he, too, began to buy and sell Weimar bonds. Though he began with the German bonds, he has since expanded into others: Chinese, Japanese, Mexican, even American railroad bonds. He also makes a good living issuing opinions and travels around the world testifying as an expert witness in court cases involving various sorts of paper.

Morgan and Choate soon hooked up with historical document dealers on the East Coast. In 1989 or 1990, a consultant at the Boca Raton, Florida, office of Bear, Stearns introduced Morgan to Warren Meddoff, former air traffic controller turned car-dealership manager turned real estate broker who wanted to turn historical-document dealer. At the time, Meddoff, who had recently been canned by the real estate brokerage he worked for, was interested in Weimar Republic bonds. Like Morgan, Meddoff was working his way into the business as a broker for bond-owning and -holding principals.

Somewhere along the way, Meddoff acquired as a client a Miami businessman named Jed Baron. Baron, now 40, is the son of one Alvin Barone. According to news reports, Barone, an associate of Jimmy Hoffa's, served time in federal prison in the late '70s for taking kickbacks from the Teamsters.

In '91, Baron moved to Las Vegas. A wealthy young man, he apparently began buying up Weimar bonds, using a corporation called Jelico. (It's sometimes hard to tell who actually owns the bonds, since, as Morgan explains, many dealers get the serial numbers and try to do deals claiming they own the bonds--and then try to buy the bonds from the actual owners if they hook a deal.) According to Meddoff's testimony before the Senate Governmental Affairs Committee, Baron's partner in the bonds is a San Diego-based businessman.

By late '94, Meddoff, Jelico, and the San Diego businessman were trying to unload Weimar bonds on former Eastern Bloc countries.

By 1995, Meddoff, Baron and the San Diego man had a contract to sell 493,000 Weimar Republic bonds to the badly strapped Republic of Bulgaria. According to Meddoff's testimony before the Senate committee this fall, they "approached the Bulgarian government to utilize documents that we had in our group's possession to...offset debt to Germany."

In other words, at the suggestion of Meddoff and his clients, Bulgaria intended to use the full face value of the bonds--$3 billion, based of course on the gold clauses--to set off against debts it owed Germany.

Before they could complete the deal, however, someone in Bulgaria apparently got wise. "I [was] informed by high-level officials within the Bulgarian government," Meddoff testified, "that they had been approached by individuals from our embassy...[who] were saying, 'Well, maybe you shouldn't go ahead with this deal.' "

Naturally, Meddoff and his associates thought their elected representatives could help.

In February 1995, Meddoff sent a letter to then-Sen. Bob Dole. The letter offered to donate $5 million to the Republican's presidential bid, if and when the Bulgarian deal closed. It also mentioned the trouble they were having with meddlesome U.S. embassy personnel. "You have been previously notified of individual government employees interfering in this transaction, contrary to policy...We appreciate your attention to this matter and will keep your staff informed of our progress."

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