- Associated Press - Tuesday, July 20, 2010

NEW YORK (AP) - A 12-year dispute that illustrated the difficulty of proving art was stolen by Nazis in World War II ended Tuesday with an agreement that a 1912 oil painting entitled “Portrait of Wally” will be returned to a Vienna museum and displayed with an acknowledgement that it was stolen from a Jewish art dealer by a Nazi agent.

The settlement calls for the Leopold Museum to own the painting by Austrian expressionist Egon Schiele after paying $19 million to the estate of Lea Bondi Jaray and allowing it to be displayed for three weeks at the Museum of Jewish Heritage in lower Manhattan.

The painting has been the subject of court proceedings in New York City since it was lent 12 years ago to the Museum of Modern Art in New York by the Leopold Museum. At least three times, a judge had ordered it returned to Austria without acknowledgement it had been stolen.

U.S. Attorney Preet Bharara said in a statement that the settlement among the U.S. government, Jaray’s estate and the Leopold Museum “marks another small step toward justice for victims of property crimes during WWII.”

The deal comes less than a year after U.S. District Judge Loretta A. Preska rejected the Leopold Museum’s argument that the painting was not stolen property and days before she was to preside over a trial to decide whether the museum knew it was stolen property when it was brought into the United States in September 1997.

In January 1998, the Manhattan district attorney’s office began investigating claims that the painting was stolen more than a half century earlier when Jaray was forced to sell it on the cheap to a Nazi art collector.

After a state judge refused to let prosecutors seize the painting and an appeals court upheld the ruling, federal prosecutors obtained a federal seizure warrant from a magistrate judge, blocking its return.

The painting was among more than 100 paintings lent to MOMA by the Leopold Foundation for a three-month exhibit that ended Jan. 4, 1998. At the time, it was estimated that “Portrait of Wally” was worth about $2 million.

The Leopold Museum has always insisted that it acquired the painting in good faith from legitimate postwar owners.

Henry Bondi of Princeton, N.J., filed the claim that said the painting had been taken from his late aunt, a Viennese Jew, as she fled her home in 1939 to go to London when Germany annexed Austria. She died in 1969. Henry Bondi also has since died.

A lawyer for the Leopold Museum did not immediately return a telephone message for comment.

In a statement, representatives of the Bondi estate said the settlement reflects the true value of the painting.

They also said the public display of the painting at the Museum of Jewish Heritage will let visitors view it in a setting that memorializes the suffering of Holocaust victims and the resilience of those who escaped and survived.

“Justice has been served,” the statement said. “Finally, after more than 70 years, the wrongs suffered by Lea Bondi Jaray are at least being acknowledged and, to some degree, corrected.”