Liechtenstein Tax Scandal Blackmailer's Chance of Deal with Prosecutors Fades

A hardened criminal is offering details of 2,700 accounts in a Liechtenstein bank -- in return for a much lighter sentence. But heavily incriminating new evidence against him is making a deal seem unlikely.

By Ulrich Jaeger


The tiny principality of Liechtenstein. New evidence against alleged blackmailer Michael Freitag could prevent a deal.
AFP

The tiny principality of Liechtenstein. New evidence against alleged blackmailer Michael Freitag could prevent a deal.

If anticipation is the greatest joy, the presumed extortionists Michael Freitag, 48, and Thomas K., 43, must have experienced a few pleasant hours in the northern German city of Wilhelmshaven in May 2005. It was there that the two men planned to meet a millionaire named Mr. P., to sell him his own account statements with the Liechtensteinische Landesbank (LLB). The two men made it clear that if P. wasn't interested in the documents, tax investigators would be. They also took the opportunity to pay a visit to the local Mercedes-Benz dealer -- perhaps to come up with a few ideas on how to spend the money they hoped to collect.

But anticipation was all they got. Over the past few months, the sequel has played itself out at the district attorney's office in the northern port city of Rostock, and on Monday what began as attempted extortion turned into a medium-sized affair of state. It's when Freitag's attorneys began discussing a possible deal with the district attorney's office.

Freitag is offering data on 2,700 German customers of LLB, a treasure trove almost twice the size of the one that triggered a recent wave of indictments against customers of the Liechtenstein-based LGT Bank, including former Deutsche Post CEO Klaus Zumwinkel. But the extortionist is demanding a hefty reduction in his sentence. However, this will be particularly difficult for prosecutors, now that they know that Freitag has been convicted of several violent crimes. As has now been revealed, his life as an extortionist was closely documented with cameras.

The trip to Wilhelmshaven is part of an extensive body of evidence that has been in the hands of the Rostock investigators for about two weeks. It covers more than two years of undercover surveillance by ESPO, a security firm located in the western German city of Wiesbaden, who worked on behalf of Liechtensteinische Landesbank. The tapes show Freitag and his accomplices in various places in Germany and Switzerland, visiting LLB customers at home, in negotiations and receiving payments. Especially interesting is the fact that ESPO turned over the incriminating material with the consent of LLB, thereby narrowing the scope of a settlement that could jeopardize its customers.

The charge of extortion against Freitag was previously based on the testimony of an ESPO employee who had negotiated with Freitag, on behalf of LLB, over a repurchase of the documents Freitag had obtained through an imprisoned former bank employee. The bank paid Freitag €9 million ($14 million) in August 2005 and August 2007 to regain the account information for about 1,600 German LLB customers. Freitag was to be paid another €4 million ($6.3 million) for an additional 11 sets of data in August 2009.

But then Freitag unwisely deposited €1.4 million ($2.2 million) of the Liechtenstein profits in cash with the Rostock branch of German bank Commerzbank. This brought him to the attention of investigators, who arrested him a few days later.

Freitag was released again, because the investigators were unfamiliar with the Liechtenstein connection and therefore unable to prove that he had committed a crime. But the LLB, which was aware of Freitag's attempts to blackmail bank customers, finally brought itself to point investigators in ESPO's direction. When ESPO employees implicated Freitag, he was put behind bars again.

With the most recent delivery, ESPO puts Freitag in an even more tricky situation, but it also puts the government in a predicament. The documents are a gold mine for the district attorney's office, but they are poison for tax investigators. Given the "bonanza of evidence," says one investigator, there is little leeway for a deal. The tax investigators' hopes of embarking on a hunt for the LLB's tax evaders are fading, much to the delight of the bank and its customers.

These are the circumstances under which talks have now begun between the prosecution and Freitag's attorneys. Freitag apparently made a copy of the 1,600 data sets before selling them to the bank. This means that now he can presumably offer his entire inventory, which comprises the data for roughly 2,700 customers for a period leading up to 2003. In return, however, he expects a radically reduced sentence. Freitag's attorney, Astrid Denecke, has made it clear that her client expects more than a mere "six-month" reduction of his sentence.

But Freitag is no Heinrich Kieber. Germany's foreign intelligence agency (BND) paid Kieber, a former employee of the Liechtenstein-based LGT Group, €4.6 million ($7.2 million) for bank data he had stolen. Freitag, on the other hand, has had violent encounters with banks dating back to robberies he committed in the early 1990s. He was captured in 1994 after kidnapping the son of a businessman. During his arrest in France, Freitag shot and seriously injured a police officer lying on the ground.

German Finance Minister Peer Steinbrück celebrated the purchase of the LGT documents from Kieber as "the deal of my life." However, when Freitag's attorneys appeared at the Finance Ministry last month on behalf of their client, in the wake of the Kieber deal, officials were frosty. Freitag's case, they told the attorneys, was the prosecutors' business.

Translated from the German by Christopher Sultan

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