By Richard Z. Chesnoff

Beautiful paintings come back to haunt you.

I'm talking about the ones stolen by the Nazis during World War II and then "absorbed" by postwar European museums and private collectors. Two of them, works by the great Austrian expressionist Egon Schiele, are in New York right now, part of an Austrian-sponsored exhibit at the Museum of Modern Art.

Problem is, two New York families claim they belong to them as the legitimate heirs of the original owners -- Austrian Jews. One of the Schiele paintings, the somber 1911 landscape "Dead City," was stolen from the home of Viennese comedian Fritz Grunbaum after he was shipped to the Dachau concentration camp. The other, "Portrait of Wally," a striking 1912 painting of Schiele's mistress, had been confiscated from Austrian-Jewish art dealer Lea Bondi Jarray who fled to London in 1938. After the war, both paintings found their way into the collection of Vienna's Leopold Museum, which sponsored the recent MOMA exhibit.

The New York families asked that the paintings not be returned when the exhibit ended last Sunday. Now District Attorney Bob Morgenthau, no stranger to the problems of Nazi loot, is moving to make sure they don't -- as well he should. The Austrians want the paintings back and say they'll submit the ownership issue to arbitration once they've received them. But an arbitrator can decide just as well with the paintings here.

The Schiele paintings are but the tip of a mammoth art-berg that could sink the legitimacy of many collections and collectors. For just as they systematically stole gold and other assets from their victims, the Nazis systematically stole art -- very often from Jewish collectors. Hitler even maintained a special unit that travelled with his armies to loot collections and museums -- often with the Fuehrer's "want list" in hand.

A lot of that loot was returned after the war. But many treasures were never pinpointed -- at least not until now. France is a good example. As this column reported last July, the post-war Gaullist government recovered more than 61,000 stolen artworks. Many of them were never claimed. And the French never made any serious attempt to find their rightful owners, or the owners' heirs. Instead, they auctioned off 13,000 pieces and put the 2,000 best works on display at French museums without any public indication that they'd been stolen.

Thanks in large measure to an expose by American writer Hector Feliciano, the French finally 'fessed up last year, and have actually begun to return some artworks to the families from whom they were stolen.

Edgar Bronfman, President of the World Jewish Congress and the man leading the search for Nazi gold, told me the other day that he and his colleagues are now also going to concentrate on the recovery of stolen cultural treasures. They are finding that more than paintings is at stake. As the WJC recently revealed, the postwar Austrian government, for example, expropriated more than a quarter of a million precious books mostly stolen from Holocaust victims -- then dstributed the majority of them to Austrian libraries.

A few journalists are beginning to say the restitution battle is making them queasy -- that somehow it's unbecoming for the Holocaust and money to become so intertwined. Nonsense! As Bronfman insists this is not a battle for money or objects, but for justice and truth, not only about the Nazis but about their willing helpers throughout Europe.

I was reminded of that last week when I saw the soul-searing new Broadway production of the Diary of Anne Frank. The play had a profound affect on anyone who saw the original. But this Anne, played powerfully by the young Natalie Portman, touches truths left unsaid or underplayed in the earlier, sanitized version. Among them: that it was Anne's own countrymen, possibly neighbors, who betrayed the family to the Germans and sent them to their deaths. They then looted the Franks' belongings.