Liechtenstein's Shadowy Informant Tax Whistleblower Sold Data to the US
Part 2: 'The BND Did Everything Correctly'
Spanish investigators were after Kieber for a 1996 fraudulent real estate deal in Barcelona, which had earned Kieber 600,000 Swiss francs ($553,000). He apparently fled to Argentina before returning to Liechtenstein, where he began working for LGT Bank in April 2001. No one at LGT was familiar with his past history in Barcelona.
Liechtenstein's image has been damaged by the scandal.
Kieber knew that he had been convicted of fraud in Spain and was wanted by the police there. The pressure was probably what prompted him to make a copy of the LGT data. In January 2003, after resigning and going into hiding, he used the stolen data in an attempt to blackmail Liechtenstein authorities. According to Liechtenstein state prosecutor Robert Wallner, in return for being assured of free passage and given two forged passports, Kieber agreed that he would not turn over the stolen client data to "foreign media and authorities."
But the Liechtenstein authorities turned down the offer. Nevertheless, Kieber turned himself in -- and got off lightly. For the Spanish fraud charges, his attorney Müller negotiated a penalty of one year in prison, reduced to three years' probation, which would not be entered into his police record in Liechtenstein. He was not convicted of data theft and, on Jan. 7, 2004, Liechtenstein authorities closed the Kieber case. The bank and the judges were convinced that Kieber had learned his lesson and, out of remorse, would return all of the client data unused.
How wrong they were.
Kieber must have begun his final mission shortly after the court issued its decision. He negotiated with the Americans first, then with the British. He obviously came to some agreement with the Americans, because US tax investigators have apparently hit pay dirt in 50 cases since the summer of 2007.
The government of then Prime Minister Tony Blair, on the other hand, refused to pay Kieber until it had collected on its tax claims. The Germans would probably never have found out about the Liechtenstein goldmine if British tax authorities hadn't taken so long to recover the money owed to them. Kieber became impatient, cancelled his negotiations with the British and contacted the BND instead.
On June 21, 2006, Kieber gave the BND a sample of the ultimate prize -- 14 sets of data from the Liechtenstein bank. At first, he would only allow the German agents to read the data on a laptop screen, but eventually he gave them excerpts. On July 10, 2006, tax investigators in the western German city of Wuppertal, who were working with the BND, confirmed that what Kieber had delivered was "important material." It was a signal for the BND to request another meeting with the man from Liechtenstein.
The meeting, which took place in the summer of 2006, was a kind of summit. It may have been the pivot point of the whole affair. The Wuppertal tax investigators spent two days, Aug. 16 and 17, talking with Kieber, first in the southwestern city of Offenburg and then across the border in Strasbourg in eastern France. The BND was there, but kept its distance. Its agents prepared a schedule for the meetings, rented the hotel space and provided security. The tax investigators asked Kieber for a list of names, preferably of people from the state of North Rhine-Westphalia -- where Wuppertal is located -- for which he could provide financial data. Ten days later, a list was delivered, through a BND courier, of 150 names from North Rhine-Westphalia -- and it was hot stuff.
But the negotiations dragged on. The Liechtenstein informant wanted 6 million ($8.9 million). The Germans offered to place him in the witness protection program of Germany's Federal Office of Criminal Investigation (BKA), but that wasn't enough for Kieber. He wanted a new identity -- and he got one. The investigators knew they needed his help to interpret the information: Kieber had not only collected the data but had also developed his own software to manage it.
On Dec. 14, 2006, the BND brought the Chancellery on board. The deal with Kieber was already in the works by then, but both the intelligence agency and the Chancellery wanted to make sure that it was completely watertight.
Kieber had contacted the BND at a time when it was under great pressure. A government panel in Berlin was investigating a number of the agency's foreign missions in which its director, Ernst Uhrlau, had played a key role. Because of his involvement, Uhrlau wanted to ensure that his agency's actions in the Kieber case were completely above reproach. The lawyers invoked Paragraph 116 of Germany's tax code, which stipulates that government agencies must report "circumstances of which they become aware professionally and that suggest tax fraud" to the relevant tax authorities.
The BND also took steps to cover its bases on a second level: It had the tax investigators issue a written request for assistance. Was Germany in fact acting as "a big-time receiver of stolen goods," as Liechtenstein's Prince Alois put it last week?
The debate mixes legal aspects with moral unease. There is a sense that a line was crossed when the German foreign intelligence agency started acting in an area -- tax evasion -- in which it shouldn't have been involved. Had the BND simply set up contact between the data thief and the tax investigators and then withdrawn, its involvement would have looked cleaner.
"The BND did everything correctly," says senior SPD politician Thomas Oppermann, who is chairman of the Bundestag supervisory committee which is investigating the BND. "Not only did it have the right to act, but it was in fact obligated to act the way it did."
But not every government agency can do as it sees fit in the name of helping other agencies, says Frankfurt constitution law expert Erhard Denninger, because that sort of assistance is acceptable only in isolated cases. But if the BND's claim that the informant contacted the agency of his own accord is true, the agents were in fact obligated to act on the information.
The courts will likely be called upon to resolve the question of whether the German investigators obtained the data legally and, therefore, whether the data can even be used in criminal proceedings against tax evaders. The BND already faces a lawsuit, and there is also likely to be an appeal to Germany's Federal Constitutional Court about whether the BND's actions were in accordance with the constitution. Klaus Zumwinkel's lawyers have also already publicly expressed their outrage. LGT has obtained a legal opinion that concludes that the BND may have "abetted the betrayal of business and company secrets," and that breach of trust could also be an issue. But the Liechtenstein bank's argument doesn't sound very convincing.
There are some indications that the material can be used, after all. Of course, says Denninger, the DVDs, "are tainted, being stolen goods." However, this "fruit of the poisonous tree," as this type of evidence is known in the United States, is not automatically disqualified from being used in court.
When BND President Uhrlau approved the administrative assistance request on May 11, 2007, the most important question on his mind was whether he was authorized to pass on the DVDs to domestic authorities. On June 12, 2007, Kieber turned over the DVDs to the tax investigators, while the BND provided security for the meeting.
German authorities paid close to 5 million ($7.4 million) for the DVDs. The money, which was withdrawn from a BND account, includes an informant's fee of just over 4.6 million ($6.8 million). In an ironic twist, the fee had to be taxed at a flat, 10-percent rate for informants, leaving Kieber with 4.2 million ($6.2 million) after taxes. In addition to the fee, the government paid the cost of notary fees and of establishing the informant's new identity. As a result, the BND used up almost the entire budget of 5 million ($7.4 million) approved by the Finance Ministry.
The BND divided Kieber's fee into three checks, each for between 1 million and 2 million, drawn on accounts with three different banks. Two of the banks allowed the transfer to proceed without a hitch, but employees at the third bank became suspicious. The amount of the check seemed too high and the procedure seemed unusual. They held up the payment and contacted the tax authorities, saying that they suspected money laundering.