Several attorneys in San Francisco and Las Vegas - including flamboyant trial attorney Melvin Belli - may represent some of the several hundred German citizens who claim they have been victims of a classic land swindle in the Nevada desert.
"We are interested, and we are seriously considering representing them," Belli said from his San Francisco offices. Belli associate Bob Ingram pointed out that his firm has been actively representing the compensation claims of widows of German pilots who died flying Lockheed Starfighters.
The potential legal action may be the last hope for the estimated 700 Germans, mostly retirees, who became involved in an intricate financial scheme dating back almost a decade.
The Germans first became involved in 1970, when a Las Vegas wheeler-dealer named Leonard Rosen went to Munich, Germany, to sell shares in a mutual fund called Parfund. With the help of former German Postal Minister Werner Dollinger and former Berlin Mayor Franz Amrehn, Rosen convinced nearly 1,000 Germans to buy shares in his venture which he said would invest primarily in land in the U.S. Rosen introduced himself as president of Investment Management Corp. of America, S.A. (IMCA), a Panamanian-based firm.
But after Rosen sold an estimated $20 million worth of shares in the plan, funneling the cash through subsidiaries in such tax havens as the Cayman Islands, the German Federal Credit Control Board took note of the fact that much of the land Rosen was buying in the Nevada desert.
It began to impose sanctions and conditions on Parfund sales. Rosen balked, and quickly came up with a new scheme offering all of the worried Parfund shareholders a new deal.
He offered to trade the Germans $11 worth of land for every $10 they had invested in Parfund shares. "You have nothing to lose and everything to gain," read the exchange offer, made officially by Preferred Realty Ltd. of thge Cayman Islands and dated Feb. 1, 1971. The land offered was in the Pahrump Valley, 65 miles west of Las Vegas, in a development called Calvada.
Most of the Germans took the deal, fearing a total loss if they didn't. Timm Beckmann, an insurance broker in Munich said he took the trade "to save my investment (of $25,000)."
But all they really got in the deal, Beckmann and other Germans now say, are property tax bills for what they consider to be practically worthless land. The land Rosen bought with the Parfund money, and eventually turned over to the Germans, was desert property in the dersert bought from Preferred Equities of Las Vegas, a firm Rosen himself founded.
For nearly six years, U.S. authorities investigated the complex set of transactions conducted by Rosen through a network of off-shore companies. But because of a "catch-22" situation involving federal and state land sales laws, neither jurisdiction could bring any action against Rosen or Preferred. It appeared that the Germans would be out of luck.
Last October, the situation worsened when Nevada authorities, who had not received tax payments from many of the confused Germans, began to repossess and auction off the land. About 100 lots, which Rosen and Preferred had sold to the Germans at an average of $5,000 each were bought back by Preferred Equities for an average of under $800 each.
A week later, each of the Germans who had lost their land in the auction received a letter from Preferred offering to sell the land back to them for $800 more, plus some added handling charges.
Meanwhile, the Internal Revenue Service indicted Rosen for failing to report $5.5 million in income from certain land sales - which may or may not have involved the Germans' land. Rosen plead "no contest," but was sentenced to only three years probation and fined $5,000 after he agreed to cooperate with the federal government in a separate probe of possible tax evasion using off-shore tax havens.
But Rosen is not cooperating with state authorities in the case of the Germans. State Land Division attorney James Barnes, who has been investigating their plight, finally caught up with Rosen in March at Ceasar's Palace hotel in Las Vegas. He asked the elusive Rosen where the Germans' money was.
"He laughed, said Barnes. "and said 'I put that money in my pocket and you can watch me spend it at Ceasar's Palace," pointing to the gambling tables.
Barnes had already talked to officials at Preferred Equities, who told him they had no idea where the money is, and that Rosen was the only person who did. That statement was a marked contrast to the one he was reported to have made to the German's seven years earlier, to the effect that their entire investment would be used for "city-planning and city construction," in the Pahrump Valley.
But another link in the chain is provided by the Bank of California, which has acted as co-trustee for much of the land. In a letter to German authorities, the bank said it only followed instructions of Preferred in issuing the deeds.
Officials of that bank have told German authorities that the bank would cooperate in any efforts to help any Germans who may have been defrauded. But according to sources close to the situation, the bank has exerted little or no influence. In any case, there has been no action taken because of efforts by the bank.
Meanwhile the Germans have become targets for several speculators who are trying to capitalize on the situation by buying the desert land and distress prices, using the argument that some money is better than none. Presently, there are 1,500 residents of the Pharump Valley, a handful in the brochures given the Germans when they traded for the land.
And Las Vegas attorney George Rudiak, who said he represented Preferred Equities, reportedly flew to San Francisco earlier this year, and met with German Deputy Consul General Heinz Pallasch. According to sources, Rudiak offered Pallasch still another deal for the Germans. The offer would have given the Germans half of their money back.
After Pallasch, who has been actively working to save the investments of his countrymen, turned down the offer, Preferred Equities president Jack Soules, in an interview with a local newspaper in Las Vegas, denied the offer had ever been made. Both Rudiak and Soules would not return phone calls from The Washington Post.
Nevada attorney Barnes is still investigating Preferred Equities for possible violations that may fell under his jurisdiction, but he is not optimistic. "I just don't know what we can do for the Germans," he said. "The next move is probably up to them," he added, hinting at possible legal action.
Pallasch, too, is somewhat discouraged. "Of course," he says, "I did hope that Leonard Rosen, instead of defying the authorities, would come to make a decent offer to my 700 countrymen whose contributions to Parfund after seven years are only worth 15 percent of what they paid into it.
"What makes things worse," says Pallasch, "is the fact that Mr. Rosen, though he never denied having deprived the Germans of their money, seems to have great difficulty remembering what he did with these millions of dollars."
Pallasch said his only satisfaction to date has been the knowledge that he may have prevented further sales of Calvada land to Germans. A German newspaper advertisement last November called for salesmen to sell Calvada land there with the opportunity of huge profits, but adverse publicity because of Pallasch's campaign seems to have stopped that effort in its tracks.
Now, several attorneys, including Belli, are taking to the Germans about a possible class-action suit against Rosen, Preferred Equities, the Bank of California, and possibly the state of Nevada.
"We must turn this over entirely to the authorities or the attorneys," says a tired and frustrated Pallasch. "For me the war is over. I have done all I can."