Very clearly you can not explain why the museum considers the ownership rights of Dr Mengele to be superior to those of the artist who created the work
The Mengele remark was unfortunate, but it was from 1973 and there's no trace of it on the current museum position link.
From a reading of that link, I think the museum's position is that anything that was left at the site and/or which came into the museum's possession is seen as historical evidence and not subject to return to anyone. They could phrase it better certainly.
They could also make the point that the portraits were done without the consent of the subjects and doubtless she was cooperating with the persecution of the Roma in the camp (under duress and in a desperate situation herself, but still....) If the link is to be believed Roma survivors and Roma organizations are siding with the museum (and their wishes are probably stronger than her claim for me).
You might disagree with the museum's current position but it's very different from what some commie official said over thirty years ago and your refusal to state it in any other way is disingenuous at best.