A NAZI war trophy once owned by Herman Goering is to be sold to pay the debts of a blackmailer.

The chalice, said to be worth £2m, was at the centre of a bizarre blackmail plot hatched by Derick Smith, who wanted to retrieve it from a former friend.

Smith, 52, of Tuscan Road, Sunderland, held a boxer dog named Benji to ransom in a bid to get back the treasure, given to him in 1979 by a former soldier, who was one of the first to raid the home of Goering, Hitler's right-hand man.

He was jailed for nine months last year after he admitted blackmail. Newcastle Crown Court heard how he snatched the dog from its owner's home in Sunderland while she was in hospital.

He then issued "sinister veiled threats" to her to claim back the chalice, which she said he had handed over to her as payment for a £40,000 debt.

Following Smith's release from jail, Northumbria Police Chief Constable Crispian Strachan requested the assistance of a judge to determine who owned it.

Judge Ben Nolan, sitting at Newcastle County Court, said: "If someone had said to me this morning I would be dealing with a case involving Herman Goering, a Nazi chalice and a dog called Benji, I would have regarded it as a joke. It is bizarre."

Joseph O'Brien, for the police, told the court that the German government, contacted through the German embassy, did not wish to claim the artefact.

No attempts have been made to contact Goering's daughter, Edda, who lives in South Africa, to see if she would like to claim it.

Mr O'Brien told the court that because Smith was in possession of the chalice when he was made bankrupt in February 1983, it must be sold to settle his outstanding debts of £360,000.

The chalice is in a Co-op bank vault in Sunderland for safe keeping. It was given to Goering when the Nazis invaded the Rhineland in 1935.

Mr O'Brien said: "If that is the case and its provenance can be established, it clearly does have significant historical interest and significant financial interest also.

"Its provenance and whether it is a genuine artifact is unknown.

"No valuation has ever been carried out."

Mr Smith accepts that the ownership of the chalice will be passed to his trustee in bankrupcy, Robin Upton, who will sell it at auction to pay his debts.

After it is sold, any remaining money left after the bankruptcy debt is settled will go to Smith.

Speaking after the hearing, Smith said: "I have had two heart attacks and don't know how long I have got left.

"I have fought this from day one to ensure I have something to leave my daughter in my will."

He said a US auction house in San Diego had valued the chalice at £2m.