U. S. again seeks Austrian museum's surrender of Nazi-stolen art

NEW YORK (Reuters) -- A federal judge ruled on Thursday that the U.S. government can renew its efforts to force an Austrian museum to forfeit an Egon Schiele painting stolen by the Nazis from a Jewish family during World War II.

U.S. District Judge Michael Mukasey, who dismissed the government's original case in July, said federal prosecutors could file an amended lawsuit containing new arguments.

The government is seeking the surrender of the painting, "Portrait of Wally," which had been loaned to New York's Museum of Modern Art (MoMA) by Austria's Leopold Museum-Privatsiftung.

Mukasey found in July that the Leopold could not be considered the holder of stolen property because the painting had been recovered by U.S. forces before the museum bought it.

In the earlier decision, Mukasey cited a federal doctrine that holds an individual or entity cannot be convicted of receiving stolen goods if the property had been recovered by the owners or their agent, including the police. Police in this case was interpreted to apply to U.S. forces.

However, in Thursday's decision, the judge said the government now wanted to argue that paintings seized during and after the war were not held by U.S. forces with an eye to returning them to their true owners.

The judge said that while there was a need to protect the finality of judgments in ordinary cases, "this is not the ordinary case."

"This case involves substantial issues of public policy relating to property stolen during World War Two as part of a program implemented by the German government," Mukasey said.

Although the Leopold accused prosecutors of withholding the arguments from the original case for strategic reasons, the judge said there was no evidence that the government was pursuing some tactical goal.

Federal prosecutors filed the suit last year alleging the painting was stolen property under Austrian law and thus illegally imported into the United States. A federal magistrate issued a warrant that allowed the government to seize the painting from the MoMA.

Although Mukasey dismissed the suit during the summer, he stayed the dissolution of the seizure warrant until prosecutors could appeal. Mukasey said on Thursday the stay would remain in effect pending further rulings.

Court papers said the work by the Expressionist painter had been owned by Lea Bondi Jaray, a Viennese Jew. It was confiscated in 1939 by Friedrich Welz, a Nazi party member.

After the war, Welz was interned on suspicion of committing war crimes. His possessions were seized and placed under the authority of U.S. forces in Austria, which erroneously listed the painting as belonging to a Heinrich Rieger and placed it in his collection.

Rieger's heirs sold the "Portrait of Wally," which was eventually purchased by the Leopold. The Leopold argued that even if the painting was stolen by Welz, it "ceased being stolen when it was recovered by the United States forces."

The painting's value was not immediately known.

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