Lawyer Edward Fagan: Czech authorities “sadly mistaken” about what they are facing

Edward Fagan

The high-profile US reparations lawyer Edward Fagan is waging a battle with the Czech authorities over bonds issued in 1924 by the town Karlovy Vary. Mr Fagan made his name in the 1990s when he successfully sued Swiss banks on behalf of Holocaust victims for more than a billion US dollars; he now says he is one of the owners of the Karlovy Vary bonds that were never fully paid off, and whose total value would now amount to some 500 million dollars. But Czech officials say these bonds expired a long time ago, and when the media-savvy lawyer showed up at Karlovy Vary town hall and at the Czech Finance Ministry, no one was willing to meet with him

Edward Fagan
“I have to follow the protocols that are in place when a bond holder wants to authenticate, prove, and demand payment on his or her bonds. So I have to follow strict rules.

“[Czech officials] can play this game, they can hide in the city hall, they can close the door and say, ‘you’re not welcome’ but all they do when they do that is that they put zeros behind the amount that they’re going to end up paying. And they look stupid. It’s embarrassing. I’m not a bad guy; I believe I have a valid bond and I’m just coming to present my demand in a proper, polite, business way. If they want to hide inside city hall, that’s ok. Sooner or later they’ll have to come out.”

How did you become involved in the bonds business?

“I came across the bonds by accident. I came across the Czech bonds most recently but in 2004 or 2005 I was asked to consult on bonds that came out of the Weimar Republic in Germany. I continue to work on that issue, and those bonds led me to these Karlovy Vary bonds, the city of Prague bonds, Czechoslovakia state bonds, they all came by accident.”

Why do you think that these bonds are still valid after everything that happened in Czechoslovakia in the 20th century?

“There are some simple basic principles. The first is, they are securities, debts. As long as they are not paid, they are like insurance policies: until the debt is paid or until the bond is cancelled, it’s out there, and it has to be paid.

“The issue is, is the debtor still around, is the bond still valid, and is the claim in time. The answer to these three questions in this case is, yes the debtor’s still here, yes the bond is still valid, and has there been a lapse of time? The answer is no.”

Some people say that part of these 1924 Karlovy Vary bonds were already paid before the war, and another part was paid in 1946. Then, the communist finance ministry of Czechoslovakia reached an agreement with the owners of the remaining bonds in 1984. How did you calculate today’s value of the bonds that was put at around 500 million US dollars?

“Actually, the 500 million dollar figure is not mine. That’s a creation of the finance minister, the Czech National Bank and Karlovy Vary. I never made a demand for that amount of money. What I said was, ‘I have bonds’. I gave an estimated value, based on the amount of interest payments per year over the 87 years, and the present value, and I brought that per bond to a specific number.

“Based on the research that I’ve done, I also gave what I believe to be a reasonable calculation of how many bonds are actually still out there. Not bonds that I have, but how many bonds are still out there. So when I approached the authorities, the debtor – Karlovy Vary – the Czech National Bank and I copied the Finance Ministry, I let them know the scope of what they might be facing. That’s this number, the 500 million dollars.

“There was an agreement in 1984 because Czechoslovakia’s government wanted gold back from the US that had been seized by the Nazis and Americans froze. The communist government wanted to make a deal to free up the gold, and the US delegation said, ‘you need to make arrangements to pay these bonds. The problem is they didn’t pay all of the bonds, and they didn’t establish a procedure through which bond holders could make claims. In 1986, they paid 2.5 percent of sort on a down payment towards the debt on the bonds. But the bonds are still out there, and nothing happened since then.

“The authorities in the Czech Republic are sadly mistaken about what they are facing. It’s not just one or two bonds; there are potentially probably a thousand or more of just the Karlovy Vary bonds out there. So this is an enormous problem for them.”

Karlovy Vary, photo: CzechTourism
How much are your claims worth?

“In the millions of dollars. But what the Czech authorities and these debtors really need to do is they have to follow to principles that are established with regard to defaulted securities. And that’s not a thing of the past – Greece just defaulted on its securities. This is a crisis that’s been going on for years. Countries, cities borrow money, they don’t pay it back, and then they create a mechanism of how to pay the bondholders. That’s what the Czech authorities have to do.”

“And by the way, that 1984 agreement only covered American bondholders. If bondholders were from another country, they are not bound by this agreement.”

If you bring the case to court, will you do it in the Czech Republic or in the US where the Karlovy Vary bonds were issued?

“I’m not going to sue in the Czech Republic, why in God’s name would I sue here? There is no need to; the bonds were issued in the US, so there’s where I’d sue. I don’t know if in New York where the bonds were issued, or in Florida where I live… I can pick.”

In the Czech Republic, you became known some ten years ago in connection with your case against the Temelín nuclear power plant which you said you were going to get closed down – but nothing happened. Are you surprised that perhaps you are not taken as seriously here as you might feel you should be?

“Yes and no. In the old days, I took on some cases and had business relationships with people I trusted, and so I handled certain parts of the cases and they were supposed to handle other parts. The people that I worked with on the Temelín case were paid 50,000 dollars to do a job they didn’t do. I was not able to continue that case because I was involved in other things.

As far as whether I’m taken seriously: I have failed in some cases, and that’s ok. If you want to focus on the failures, that’s fine. But if you want to focus on successes, they far outweigh the failures. Think of it as of a sports match. As a plaintiffs lawyer, you only have to bat a third of the time. If you are successful a third of the time, you do good. My successes brought in more than eight billion dollars for the victims in some twenty Holocaust related cases. At the same time, other cases were lost. But if you want to weight them, I probably have a better batting average than most.”

You have been coming to Prague a lot in the past years – has the city become your European base?

“It has because the Czech Republic has actually become a centre for efforts to recover properties stolen during the Holocaust that have yet to be restituted. So the centre for that is here; there were declarations in the last few years, there is the European Shoah Legacy Insitute, or ESLI. I’m going to focus on the Czech Republic, Hungary and the artwork that’s in Russia.”