The German government is transferring one of its diplomats from the West Coast to Iceland after he tried for five years to save the investments of nearly 700 German citizens who say they were swindled by a Las Vegas land development firm. A spokesman for the embassy in Washington says the transfer is routine.
But the diplomat, Heinz Pallasch, a deputy counsul, said in an interview that the transfer from the San Francisco consulate is "against his wishes." He implied that it came after pressure was applied to "my superior colleagues in the West German administration in the U.S. to halt assistance of the German nationals' pursuit of justice." He did not say who applied the pressure, but implied that it was development interests in this country.
The decision to re-post Pallasch came three weeks after 81 German citizens filed suit against Preferred Equities of Nevada; Leonard Rosen, its major stockholder; the Bank of California, the firm's trustee, and 42 other defendents. The suit alleges that the defendents engaged in fraudulent land and securities transactions and seeks civil relief under the federal Racketeering and Interstate Commerce statute, as well as $100 million in punitive damages.
Karl Paschke, spokesman for the West German Embassy in Washington, said that the San Francisco consular official's involvement in the controversial land case had no bearing on the transfer, which Paschke called a routine rotation.
However, several officials in the Nevada attorney general's office and the state land sales division familiar with the intricacies of the complex case say that Pallasch will be missed. They said that the sudden transfer to the less desirable post raises questions about the West German government's commitment to aiding their nationals involved in international swindles.
Nevada Deputy State Attorney General James I. Barnes said that for years Pallasch was the only government official interested in aiding the investors and said that he had been effective in seeking a settlement.
Two Canadians who bought Nevada land have also signed on with an attorney to be litigants in the case filed against Preferred Equities, said Gregory S. Stout, the lawyer for the German investors. The Canadians, who had not filed formally with the court as of yesterday, contend that land purchase contracts they signed were illegal because they could not assume ownership until the property was completely paid off, Stout said.
Normally, buyers assume title after they have paid enough to constitute a down payment. Under the contracts the Canadians signed, the purchasers could forfeit their entire investments up until the day they were paid off -- even if they failed to make one payment, Stout said.
The key figure in these land transactions is Leonard Rosen, who has been under investigation for his land sale activities by state and federal agencies for the past 10 years.
Rosen pleaded nolo contendere in 1978 to charges that he failed to report the sale of two parcels of land worth $5.5 million, and in a plea-bargaining agreement, promised to help the Justice Department investigate off-shore tax havens and Las Vegas casino skimming operations. According to Justice Department investigators familiar with the case, however, his testimony provided no relevant information.
Rosen first came to public attention in Florida, where his Gulf American Corp. pleaded guilty in 1968 to five counts of using misleading sales methods in the sale of lots. Gulf American was ordered to halt sales for 30 days and refund $2 million to investors.
In a report to the state government that year, the Florida Land Sales Board revealed that three of the five members of the regulatory body that preceded the land sales board were associated with Gulf American. The previous board had approved Gulf American's operations in Florida.
After the corporation ran into trouble in 1968, Rosen sold his shares and formed Parfund, an investment fund in Germany that claimed ownership of land in the United States. Parfund's West German board of directors included a former cabinet minister, a former mayor of West Berlin and Prince Michael of Prussia.
In the eight months before Parfund's security sales were halted in 1971, Rosen had sold $10 million in securities to hundreds of West Germans. Ordered to make restitution to the investors, he instead offered them Nevada land instead, the Germans later told Pallasch.
The Germans said in their suit that Rosen had artifically inflated the value of the Nevada land, by selling it numerous times to different paper corporations he controlled.
According to the complaint, shortly after they accepted the deeds, the German investors -- who say they were told there would be no taxes on the land -- began receiving tax bills from the Nye County, Nev., assessor's office.
More than 150 of the Germans, who in some cases had invested their life savings and either could not or would not pay the assessment, said they lost their property to tax sale. Preferred Equities purchased the land at auction for the average price of $760 a parcel and then offered to sell the property back to the Germans at the lower price plus some additional handling charges.
Unable to interest U.S. authorities in their plight, the German investors sought help from their consulate in San Francisco.
For the past several years Pallasch has attempted to negotiate a settlement, but Nevada officials involved in the negotiations said they and Pallasch could not get the land development firm to bargain in good faith.
After attempts to arrange a meeting collapsed early last year, the Germans filed suit to recover their investments.
Stout said that as more investors join the suit he will petition for class action status before the courts.