By Christian Retzlaff and Kim Murphy
Los Angeles Times
February 27, 2008
BOCHUM, GERMANY -- Investigators have traced more than $296 million in
German assets to secretive foundations in Liechtenstein in a widening,
worldwide tax-evasion investigation in which 163 Germans have admitted
guilt, prosecutors said Tuesday.
Separately, the U.S. Internal Revenue Service announced that it was
initiating enforcement action against 100 American taxpayers in
connection with Liechtenstein accounts.
The probes were launched after a former Liechtenstein bank employee, now
in hiding, sold secret bank records to the German intelligence agency.
Authorities in the U.S. and Europe want to know whether shadowy
foundations in the tiny, mountainous principality between Austria and
Switzerland have sheltered billions of dollars on which taxes were never
German authorities said they had collected $39 million in back taxes
from 91 suspects so far, while 72 others had come forward and offered to
pay levies to avoid prosecution.
"This sum is increasing daily," said Hans-Ulrich Krueck, prosecutor in
charge of white-collar crime in Bochum, in whose jurisdiction many of
the purported crimes occurred.
He said the investigation was also focusing on a small number of
employees at four banks, three of them in Germany, suspected of helping
their clients hide their funds in anonymous trusts in Liechtenstein. In
an era of increasingly strict international financial transparency
regulations, the country is renowned for its powerful bank secrecy laws.
Tax administrators in Britain, Australia, Canada, France, Italy, New
Zealand and Sweden are also conducting probes as a result of the banking
British officials believe that more than $190 million in unpaid taxes
could be identified through the investigation.
Analysts said the inquiry marked the reversal of a decade of lax
international pursuit of tax-haven investigations they said waned
severely in the last eight years or so.
"They've had a free rein of it for years," said Richard Murphy,
London-based senior advisor to the Tax Justice Network, which has
campaigned to end tax havens around the world.
In Germany, skyrocketing salaries for corporate elites and the growth of
a poor underclass have stiffened the political will to pursue wealthy
"It's because of the extremely inflated executives' wages in the past
decade," said Jan Hagen, a banking expert at the European School of
Management and Technology in Berlin. "The gap is growing between the
super-rich and the super-poor, and ordinary people think those on top
are taking out Germany like one big self-service mart."
Estimates of the amount of potential unpaid German taxes have ranged
from $420 million to $5.6 billion. Authorities said Tuesday that they
were focusing on 120 cases involving 150 suspects.
The probe already has targeted former Deutsche Post Chief Executive
Klaus Zumwinkel, who was forced to resign this month after prosecutors
accused him of evading up to $1.4 million in taxes by sheltering money
in a Liechtenstein foundation.
"Citizens have become indignant about it -- including me," German
Chancellor Angela Merkel said Saturday in her weekly podcast.
The incriminating bank data were sold by Heinrich Kieber, 42, a computer
expert who worked from 1999 to 2002 for Liechtenstein's LGT Treuhand
bank. Kieber sold four DVDs containing the data to the German
intelligence agency, the BND, for $7.4 million ($6.2 million after
taxes), German press reports said.
British authorities reportedly paid an additional $190,000 for data on
British clients after the German investigation began bearing fruit.
But the fact that the new cases appear to be based on secretly
purchased, stolen data is providing fodder for defense lawyers and
general expressions of outrage from officials in Liechtenstein and at
LGT, the wealth and asset management group of the Liechtenstein royal
LGT officials have said it is "utterly refuted" that their foundation
clients are necessarily tax evaders, and Justice Minister Klaus
Tschuetscher said the issue of tax evasion had "nothing at all" to do
with Liechtenstein's laws of secrecy on foundations.
"If someone stuffs his untaxed money into a mattress, you wouldn't go
and tell the mattress maker he can no longer make mattresses," he said
at a recent news conference.
The foundations in question operate like trusts, but there is no record
of who created the foundations or for whose benefit, except for the
legal intermediaries. Tax rates are very low, but deposits are so high
-- by some estimates as much as $100 billion, though the exact amount is
not publicly known -- the revenue is thought to provide about one-third
of all the principality's tax revenues.
"You don't buy a zero-percent tax rate," Murphy said. "What you buy when
you go to a tax haven is secrecy. And that's the reason they're so
popular for those who have a great deal of money."
kim.murphy (at) latimes.com
Special correspondent Retzlaff reported from Bochum, Murphy from London.
Copyright 2008 Los Angeles Times
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