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German tax probe in full swing


Latest update : 2008-02-19

German officials have begun raids on 700 suspects implicated in the country's biggest-ever tax evasion scandal. Members of Germany's business and social elite are thought to have hidden four billion euros in banks in Liechtenstein.

BERLIN - German officials on Monday began swooping on 700 suspects implicated in the country's biggest-ever tax evasion scandal as Berlin defended paying for information leading to banks in Liechtenstein.

Prosecutors in Munich confirmed early morning raids on suspects' homes and offices in the Bavarian capital, while press reports said searches also took place in nearby Ulm, in Germany's financial capital Frankfurt and in Hamburg.

Members of Germany's business and social elite are said to have hidden 4 billion euros (5.8 billion US dollars) in banks in Liechtenstein, a tiny principality between Switzerland and Austria considered a tax haven.

The finance ministry said on Monday it believed its fiscal investigators were bound to uncover tax evasion "totalling hundreds of millions of euros" through secret bank transactions.

Chancellor Angela Merkel described the scandal as "regrettable" and said she would press Prime Minister Otmar Hasler of Liechtenstein for closer cooperation in uncovering tax fraud when they meet in Berlin on Wednesday.

"We have to investigate this and get to the root of the matter," she said.

"In Liechtenstein, progress has been made," she said: "Of course, we are going to talk about questions that still have to be settled, including details on regulation of banks and foundations."

The scandal broke late last week and claimed its first high-profile victim in Klaus Zumwinkel, the powerful boss of the logistics group Deutsche Post and president of the supervisory board of Deutsche Telekom.

Zumwinkel resigned from both posts on Friday after television stations ran footage of a raid on his house and it emerged he could face charges of evading taxes by placing money in a secret account in Liechtenstein.

A finance ministry spokesman, Thorsten Albig, confirmed that the government had paid an informant in Liechtenstein "between 4 and 5 million euros" (5.8 million and 7.3 million dollars) for information on hidden assets.

Zumwinkel's lawyer, Martin Wulf, told AFP it was "unlikely" that the evidence would stand up in court if charges that the informer had sold German investigators client data stolen from Liechtenstein's LGT group were true.

The pay-off has also sparked political controversy, and a parliamentary committee is due to start investigating on Wednesday how the scandal had been uncovered.

The finance ministry said it had acted within the law and was convinced the information provided by the whistle-blower could be used as evidence in court.

"It is absolutely admissible legally," Albig said.

The Berliner Zeitung reported that Germany's BND secret services had spied on banks in Liechtenstein for years and persuaded staff to pass on information in exchange for large sums of money.

Merkel's spokesman Ulrich Wilhelm insisted that the BND "received an unsolicited offer of information".

Finance Minister Peer Steinbrueck confirmed however that his ministry had requested the BND's help in the tax evasion probe, but said the methods used were "entirely above board".

"Members of the elite had become greedy and lost all sense of proportion," Steinbrueck told a party conference of the Social Democrats in Hamburg, where regional elections are scheduled for Sunday. "We behaved correctly. The people of Germany would have been furious if we had not acted in the way that we did."
Observers have suggested that the scandal could strengthen the hand of left-wingers within the Social Democrats, partners in Germany's ruling coalition, who want business leaders to be forced to declare their income in full.

A study published on Monday found that the pay of top German business bosses rose some 17.5% last year.

The Rheinische Post newspaper said the tax fraud probe targeted "entrepreneurs and top managers, but also sports figures, artists" and media personalities.

Other media reports predicted that more heads would roll in coming weeks as investigators continue to raid at least 20 affluent suspects a day.

The Handelsblatt business daily cited sources close to the probe as saying prominent businessmen have offered to work with investigators and to pay outstanding taxes in a bid to escape prosecution.

Date created : 2008-02-18