Liechtenstein's Shadowy Informant Tax Whistleblower Sold Data to the US
Part 3: A Political Bombshell
But Kieber eventually got his money. The material he delivered in return was divided up. The tax investigators in Wuppertal and public prosecutors in nearby Bochum dealt with the domestic cases, while the BND took charge of foreign cases.
The DVDs contain information on 4,527 Liechtenstein foundations and institutions, 1,400 of which are owned by German investors. According to rumors circulating in Berlin late last week, the list includes several members of the Bundestag, although the Bochum public prosecutor's office denies that it includes any current lawmakers. The DVDs contain data covering a period from the 1970s to approximately 2003, as well as some data through the end of 2005. About 65 of the foundations listed were still in existence at the beginning of 2008.
In most cases, the funds deposited into these foundations consist of inherited money, illicit earnings and unofficial profits from the sale of businesses and real estate. The size of the funds ranges from 100,000 ($148,000) to amounts in the high, double-digit millions. One of the investigators was perplexed over the 100,000 fund and said: "They would have been better off depositing their money with the postal savings bank; even after taxes, they would have had more money left over than they now have in Liechtenstein." A foundation is usually only worth its while with assets of 1.5 million ($2.2 million). Many asset management companies require a minimum investment of 3 million ($4.4 million).
Another problematic area, though not quite as significant as the foundation, revolves around so-called "establishments" (Anstalten), a legal entity unique to Liechtenstein which also utilizes LGT's fiduciary services. Liechtenstein's company law expressly provides for these entities. While family foundations are designed to allow estates to be passed on to heirs, these establishments provide many other options, especially for active businesspeople. For example, an establishment can write invoices and request expert reports, the purpose being to reduce taxable earnings in Germany.
The tax investigators with the German task force (known as EK Liechtenstein II) set up to investigate the Liechtenstein accounts have their work cut out for them, because it involves examining the entire accounts of suspicious companies. The Liechtenstein establishments can also be used to bring money back into Germany relatively unnoticed.
More than half of the investors and about 3,100 foundations and establishments on the DVDs are from abroad. Some are part of organized crime in the Balkans and in Russia, including both well-known and relatively unknown companies. This represents another, less high-profile element of this affair, and it is also the reason that German authorities believe that the informant's life is in danger. The DVDs he sold to the BND have provided the agency with a mountain of details about the international flow of money, so much information, in fact, that the agency would be hard-pressed to process it all on its own.
This explains why Germany's Federal Office of Criminal Investigation (BKA) was asked to help out. Its officers are looking into the possibility of launching investigations into money laundering, although the BKA has already said in advance that money laundering lies outside its jurisdiction.
The collection of data also includes material with a potentially devastating impact on relations between Germany and Liechtenstein. According to the investigators, the DVDs contain training material for LGT employees outlining a step-by-step process of enticing investors to put their money into Liechtenstein foundations. Internal dossiers explain how anyone seeking to defraud his or her government of tax revenues can circumvent the respective tax laws. The investigators even believe that they have uncovered a highly unusual service. The EK Liechtenstein II task force considered taking action against an LTG Group money courier who is alleged to have transported cash into the tiny Alpine state. A bank spokesman has "categorically denied" the claims.
Another reason that the BND documents are such a political bombshell is that they demonstrate that the principality did not, by any means, clean up its act after an intelligence affair that already harmed the Liechtenstein-Germany relationship at the turn of the millennium. At the time, the BND in a secret report accused the miniature state of being "an important hub for the movement of capital of all kinds" -- legal and illegal.
The report turned into a diplomatic incident, complete with mutual accusations between the governments in Berlin and the Liechtenstein capital Vaduz, before the country's then head of state, Prince Hans-Adam II, quietly met with officials at the Chancellery to explore ways to settle the dispute. In a number of high-level meetings with August Hanning, the head of the BND at the time, and his then intelligence coordinator at the Chancellery, Ernst Uhrlau, the prince promised that his country would more closely investigate suspicious flows of funds in the future.
This apparently didn't happen, which explains why there was so much anticipation surrounding Liechtenstein Prime Minister Otmar Hasler's visit to Berlin last week. His meeting with Chancellor Merkel had been planned for some time, but now it was more relevant than ever.
He arrived on Wednesday, and during an interview in his suite at Berlin's luxury Regent hotel, he came across as so friendly and respectable, with his hair graying at the temples and his trustworthy expression, that he could almost be Klaus Zumwinkel's brother. Hasler, a 54-year-old high school teacher, is the embodiment of harmlessness and honesty. He spent three quarters of an hour repeating the same mantra over and over again, no matter what he was asked: Liechtenstein is reforming itself and is on the right track.
Logically, any entity which is reforming itself must have a need for reform. Doesn't this suggest that something was amiss? No, said Hasler, he couldn't agree with this logic. Liechtenstein was super, is still super and can only become more super in the future. Liechtenstein is reforming itself and is on the right track.
A conversation with Hasler is a pleasant experience. He never loses his cool, he speaks slowly and not too loudly. He doesn't say anything unpleasant, nor does he say anything about stolen goods or an "attack by a large country."
His conversation with Merkel was just as pleasant -- that is, until the chancellor mentioned that Germany has yet to ratify a resolution that would allow Liechtenstein to join the Schengen zone of passport-free travel. It would not be an easy decision for Germany, she said, but the sooner Liechtenstein signed an agreement to provide legal assistance on matters of tax evasion, the easier it would be for Berlin to ratify the resolution. It was a threat delivered in a bouquet of flowers. Liechtenstein is reforming itself and is on the right track, the prime minister told the chancellor.