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Mr. Flechtheim.

On a fall day in 1935, a broke and broken Jewish émigré from Nazi Germany named Alfred Flechtheim sat down and wrote a pleading letter to a New York art world potentate. Before the Nazis ran him out of Germany and turned his visage into the caricature of the “degenerate ArtJew,” Flechtheim had been Weimar Germany’s pre-eminent dealer, representing dozens of modern masters from Picasso to Klee. Now, he had a single modernist piece left in his possession, he said, and he desperately needed money. How much, he wanted to know, would donors to the new Museum of Modern Art pay?

Not too much, it turned out. 

Nearly eight decades later, last September, the U.S. Supreme Court refused to consider claims by the heirs to the German émigré artist George Grosz (also at one time represented by Flechtheim) to three paintings in MoMA by the Expressionist master. A lower court had agreed with MoMA’s contention that the clock had run out on the family’s claim, allowing MoMA to keep the paintings. But that quiet little case has cracked open a door into the creepy attic of 1930s Europe, revealing a ghost haunting not just MoMA but much of the modern art world.

The specter is Flechtheim, who before being hounded out of Germany by the Nazis sold works by such giants of modernism as Max Beckmann, Rudolf Belling, George Grosz and Karl Hofer, as well as Picasso, Braque, Chagall and Renoir. The son of a grain dealer, Flechtheim had married an heiress named Betti Goldschmidt and, using her money, built a gallery empire representing the greatest artists of the era, who in turn sometimes depicted him in their work. German sculptor Rudolf Belling even sculpted his nose in bronze, and casts of that work are held by Harvard and MoMA.

“Flechtheim was the Nazis’ poster boy, literally as the symbol of the Jewish-Bolshevist conspiracy to pollute the German people, and his visage was presented in Nazi propaganda as ‘the ArtJew Flechtheim,’” said Raymond Dowd, one of the Grosz heirs’ lawyers. “Yet despite being the dealer of Picasso, Braque, Derain, Grosz, Klee and many others and having his entire inventory ‘Aryanized’ by the Nazis, he is forgotten by American art historians, and artworks stolen from him hang in the world’s museums.”

Flechtheim died in 1937 of blood poisoning after stepping on a rusty nail in London. He was then 59 and bankrupt, having fled Germany just after Hitler came to power. He left his wife, Betti, behind and they divorced in 1936 in hopes of protecting her from persecution; it didn’t work—she swallowed an overdose sleeping pills on the eve of her deportation to the death camps in 1941.

By then, Flechtheim’s galleries had long since been “Aryanized.” Many of the works that had been in his galleries found their way to museums and private collections around the world. At least 16 of them, according to the Grosz family lawyer, are in the MoMA collection. A German lawsuit is underway by Flechtheim’s own heirs, although MoMA is not a defendant in that case.

Museums like MoMA holding art with provenance from Flechtheim’s galleries can claim that they have legal title to them under American law, which recognized the right of the Nazis to sell off art in the state collections and also to sell art not obtained through persecution.

But Jonathan Petropolous, chair of the history department at Claremont McKenna College in Claremont, Calif., and author of The Faustian Bargain: The Art World in Nazi Germany, said that while it is technically true that Flechtheim was free to leave Germany when he did, the Nazis had deliberately destroyed his business.

In 1933, trying to stay afloat, Flechtheim authorized his assistant to try to raise money by auctioning some important works. The local Nazi storm troopers got wind of the event and staged a public protest, encircling the gallery and stopping the sale. “The auction was a fiasco and Flechtheim was devastated,” Mr. Petropolous said. “That started things. Nazis began harassing him about his financial affairs. They assigned a trustee and forced him to sell off his stock. They gradually escalated the pressure. He may appear to have had some degree of freedom, but in fact he was told to sell off this stuff. He would not have done it had he not been persecuted. He was a symbol of the Jewish art dealer promoting modern art and they went after him.”

Around the same time the auction was sabotaged, on April 1, 1933, Reich Propaganda Minister Joseph Goebbels published a vicious defamatory article on Flechtheim in his paper, Volksparole. The attacks continued after his death when Flechtheim was featured in a photo-montage associated with the notorious Degenerate Art Exhibition of 1937.

As the Nazis rose to power, Goebbels and Hitler eagerly scapegoated the Weimar artists who had invented what came to be known as Expressionism. Nazis organized book burnings and began banishing modern artists from teaching positions. In 1932, they “purged” 20,000 works from state collections, encouraging government-approved artists to return to Classicism.

On June 19, 1937, three months after Flechtheim died penniless in London, the Nazis inaugurated an exhibit of so-called Degenerate Art in Munich, featuring paintings by the likes of Chagall, Picasso, Beckmann, Klee and Dix, which they had removed from state galleries. The pieces were hung unframed, crowded together and at skewed angles, to emphasize their purported ugliness. Nazi “curators” displayed the prices museums had paid for the paintings in Weimar German marks, a time when the price of a loaf of bread was 233 billion marks, to further inflame public fury.

The poster advertising the exhibit was a distorted modernist-style painting of a visage suspiciously like that of Flechtheim, with a crude, shadowy caricature in the background. Goebbels later wrote that the exhibit was intended to display to the German people “the perverse Jewish spirit” infecting German culture, though as it happened, just six of the 112 artists in the Degenerate Art exhibit were actually Jewish.

As the Nazis sold off thousands of works and burned thousands more, curators across the Atlantic watched nervously, but also with an eye out for a bargain. One of these interested spectators was Alfred Barr, the first head of MoMA.

In the 1930s, the Museum of Modern Art did not yet have a permanent collection. A 1930 MoMA press release announcing the museum’s fourth exhibition acknowledged that “the large majority” of paintings by Paul Klee “were sent from Germany by the Flechtheim Gallery of Berlin.” Five of those Klees are now in the museum’s permanent collection, two of them with provenance linking them to Flechtheim through two dealers—Karl Buchholz and Curt Valentin—who were fencing works for the Nazi propaganda ministry. Flechtheim even took out an ad promoting that MoMA exhibit in March 1930, in Cahiers d’Art. Flechtheim also donated to MoMA its first permanent piece—a bronze of the German boxer Max Schmeling by Rudolf Belling. On June 5, 1930, The New York Times reported on the gift in a story headlined “Schmeling Statue at Museum Here.” The article noted that a “citizen of Berlin” named Alfred Flechtheim had donated the piece to MoMA. The statue, which was about three-quarter life size, depicted the boxer (who would lose to Joe Louis in a knock-out several years later) in fighting pose. It has since disappeared from the MoMA collection.

Flechtheim’s act of charity was not exactly returned in kind. In the fall of 1935, broke and exiled in London, he wrote a pathetic letter to Barr describing his plight and asking for help. “I lost all my money and all my pictures,” he wrote, according to Alice Goldfarb Marquis’s 1989 biography, Alfred H. Barr, Jr.: Missionary for the Modern. “The only things I didn’t lose are my name, my experience, my knowledge of nearly every French modern picture, my connections in Europe.” He asked Barr to find money for “nearly the only thing I saved,” a Lehmbruck called Standing Youth.

Barr rather cold-bloodedly referred to Flechtheim’s appeal in his own letter to a potential art buyer, Helen Landsdowne Resor, a noted ad executive with J. Walter Thompson. “I have had a letter today from Alfred Flechtheim, the unfortunate refugee owner of the [Wilhelm] Lehmbruck Standing Man. He seems to be in pretty desperate straits. I think he might possible [sic] take as little as $2,000. For this really great modern figure. We might offer him even less.”

By 1936, Abby Rockefeller (the wife of MoMA benefactor John D. Rockefeller) had purchased the sculpture for MoMA.

Ottfried Dascher, author of a new biography of Flechtheim published in Germany last year, told The Observer that in the 1920s, Flechtheim was trying to “intensify” his connections with American collectors and that “private bequest paintings with a label [linking them to] Flechtheim can be found in American museums.” Mr. Dascher said he researched and wrote the book to “restore the reputation and dignity of an outstanding personality.”

Works in the MoMA online database today with Flechtheim in their provenance histories were sold prior to 1933, meaning they are legally deemed to have been acquired absent any Nazi persecution, though, as Mr. Dascher put it, “Flechtheim was confronted with anti-Semitism already before 1933, even as a German officer during World War I.” Museums around the world that now possess works the Nazis sold off can and do claim that they have them legally, even though some of the art may have come through galleries like Flechtheim’s, shuttered under anti-Semitic persecution.

“There were two different kinds of art being acquired by MoMA and other museums outside Germany,” Mr. Petropolous noted. “The first kind are artworks purged from German state collections. Some went into the Degenerate Art exhibition which opened in Munich and traveled around Germany. After that, the Nazis had to decide what to do with them, and they wrote a law legalizing their sale. It is in the interest of American museums to recognize that German law.” The Museum of Modern Art, he added, “has tons of these works. MoMA was lapping this stuff up through a pipeline that ran from the Nazi propaganda ministry through Nazi-associated dealers in Europe and New York.”

The second category of Nazi-era art, he added, “belonged to private individuals and people persecuted by the Nazi regime like Jews, communists and homosexuals. The Nazis sold off much of the art in Flechtheim’s gallery in what are considered legal—if ethically dubious—deals. But Flechtheim’s private collection also disappeared after his wife died. And the Grosz paintings are believed to have come from that.”

George Grosz left all of his artworks with Flechtheim on consignment when he fled Germany in January 1933, on the eve of Hitler’s seizing power. Three of them ended up at MoMA, and the evidence the family has submitted to the court includes a letter Grosz wrote after seeing them there, in which he claimed they were stolen.

Grosz was not Jewish, but he was a communist and a critic of the Nazis. Eighteen days after he left Berlin and moved to New York for good, Hitler became chancellor, and Nazi storm troopers raided the artist’s abandoned apartment and studio. “I have reason to believe that I would not be alive had they found me there,” the artist later wrote in his autobiography, according to The New York Times.

The MoMA legal team’s use of a technicality—the statute of imitations—to fend off claimants like Grosz’s heirs angers Charles Goldstein, counsel to the Commission for Art Recovery, which deals with Holocaust loot. “Using the statute of limitations is not consistent with a museum’s obligation to reach a fair and just resolution of Holocaust claims,” he said. “The statute is designed to limit commercial disputes, not to redress war crimes or crimes against humanity. In Western and Central Europe this defense is not allowed in claims against museums. MoMA, having committed itself to reach a just and fair disposition of claims for Holocaust loot, has an ethical obligation to allow dispassionate inquiry. It should not expect to be its own judge and jury.”

MoMA representatives declined to comment on the ethics of the museum’s legal case.

Today, MoMA’s Provenance Research Project—created precisely to identify possible Nazi loot in its collection—has found at least six items connected to Flechtheim, including a Picasso, a Braque and three Klees. Mr. Dowd, one of the Grosz family lawyers, claimed there are at least 16 works from Flechtheim’s 1933 gallery inventory at MoMA, and many more in museums around the world, including Harvard’s Busch-Reisinger Museum, which was founded after acquiring Rudolph Belling’s Portrait of Alfred Flechtheim, a bronze of the dealer’s nose. MoMA also had a copy of that limited edition piece, but its fate is unclear, Mr. Dowd said.

Mr. Dowd contended that MoMA hasn’t been forthcoming with requested provenance information and has actively or passively erased Flechtheim. He noted that Flechtheim doesn’t even have an English language Wikipedia page.

“Flechtheim has essentially been written out of MoMA’s history,” he said. Last year, the museum mounted an exhibition, “German Expressionism: The Graphic Impulse,” which made no mention of the man (his name did not appear in the catalog either). Mr. Dowd said that after he complained, “they updated the website to acknowledge his pre-eminent role.”

“Why has Flechtheim’s image and history been obliterated?” Mr. Dowd asked. “Why have America’s art historians and historians failed to honor Flechtheim’s role in 20th-century art? The artists of his time celebrated him, yet U.S. art historians have not even granted him a footnote in history. Is there not one honest art historian working in an American museum today? The damage Hitler caused in obliterating Jewish culture and contributions must be fought not by lawyers, but by art lovers and historians of good conscience who come forward and say enough is enough. Pretending that Alfred Flechtheim did not exist is unacceptable.”

MoMA declined to answer questions about Flechtheim, except to say that his 1930 donation of the Belling sculpture was technically not the first piece of the permanent collection, since the establishing donations were eight prints and a drawing that MoMA acquired in 1929. A spokeswoman referred The Observer to a comment MoMA director Glenn Lowry sent to ArtNews in response to its December story on the Grosz case: “From the time the Grosz heirs initially contacted MoMA in 2003 to the time they sued, MoMA engaged in nearly six years of detailed, good-faith research, spending vast amounts of its time and resources studying archives across the United States and Europe. MoMA shared the results of this research openly with the Grosz family’s representatives. In the end, MoMA’s research demonstrated that the claims were without merit.”

Visitors to MoMA today cannot see the Klees or the Grosz with the Flechtheim provenance; they are not currently on view. But thousands of museum-goers stroll past Picasso’s Cubist-style, earth-toned Woman With Pears, one of the paintings that came to MoMA by way of Flechtheim. Picasso painted his companion, Fernande Olivier, on the coast of Spain in the summer of 1909, when Hitler was just 20, and the horrors of the Holocaust were still decades off. The name of the art dealer who once handled the painting is nowhere to be seen.