A BLACKMAILER who hatched a bizarre plot involving stolen Nazi silver and a boxer dog named Benji is to take legal action to recover the priceless artefact.

The silver chalice, thought to have belonged to Hitler's evil henchman Hermann Goering but kept since the war in an attic in Sunderland, is being stored by police at a secret location until its future can be decided.

Today, Derek Smith of Tuscan Road in Sunderland, appeared before Newcastle Crown Court and pleaded guilty to blackmail.

The 51-year-old is accused of holding the boxer dog to ransom to demand the return of the £2m treasure.

Now the case looks set to spark a tug-of-war over the 12-inch chalice, which was originally taken from the Gestapo leader's lair in Germany at the end of the war by a British soldier who eventually left it to Mr Smith.

Speaking after today's hearing, Det Sgt Chris Sybenga explained that Mr Smith had originally given the chalice to the blackmail victim, who cannot be named for legal reasons, as payment of a £40,000 debt.

But when its potential true value dawned on Smith, he tried to get it back by snatching her dog while she was in hospital, bundling Benji into the back of a waiting car.

The court was told he alarmed the woman when he rang her to say: "I can vouch for your dog today but I may not be able to tomorrow."

The detective said: "He took the dog obviously to persuade her and that is the essence of the blackmail.

"We recovered the dog safe and well. When he came for the exchange, the police swooped."

Northumbria Police now have the chalice in a secure location and are believed to have insured the object for £2m.

Smith, who the court heard today has a heart condition and suffers depression, will be sentenced on March 15 at Newcastle Crown Court.

Judge David Hodson today told him all sentencing options would be considered and adjourned the hearing for reports. Smith was granted conditional bail.

After the hearing he said: "I pleaded guilty because it could be construed that I did threaten her - but it was only with regard to the recovery of something that belonged to me.

"I feel so sinister, having pleaded guilty to a charge of blackmail, but this is really just a domestic situation that has got out of hand."

Police have not tried to determine the object's history. "It looks authentic but we are not experts," said Det Sgt Sybenga.

He added: "Auction houses have been reluctant to value the chalice because they didn't want to offend Jewish investors.

"There's certainly going to be some form of civil proceedings to decide the ownership of the chalice.

"The German government or relatives of Hermann Goering may feel that they have a claim."

But Smith, speaking before the case, said he had taken it to Berlin a few years ago to have it verified by a German expert and hoped to have it returned by police.

"I have owned the chalice for about 27 years and I have been told I will be getting it back.

"I threatened the police with civil action as they are holding onto it and had said they were willing to send it back to Germany but no one has a greater claim on it than I."

Updated : 19:11, 12/02/02