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Feb 18, 2008
Calls for more accounting as tax evasion probe expands in Germany
FRANKFURT (Germany) - STUNNED by the revelation that one of Germany's most respected chief executives was accused of evading more than 1 million euros (S$2.07 million) in taxes by stashing it in a foreign country, politicians called for more accountability aimed at protecting the country's business reputation.

The calls came even as Germany's Finance Ministry confirmed that an informant had been paid for a list of names from a Liechtenstein bank.

According to media reports, Germany's Federal Intelligence Service, or BND, paid between 4.2 and 5 million euros to an anonymous informant for the details.

Ministry spokesman Torsten Albig did not say how much money was paid, but said it was 'very well invested,' adding that Finance Minister Peer Steinbrueck and the chancellor's office were aware of the payment.

On Saturday, German news magazine Der Spiegel reported that an informant was paid approximately 5 million euros for the names along with how Liechtenstein gave advice on the best way to transfer funds.

Mr Albig said that the Finance Ministry was not given any information on the accounts or possible suspects and that it was only aware of the investigation when Mr Klaus Zumwinkel, the chief executive of Deutsche Post AG, was questioned by investigators in Bochum who also raided his home in Duesseldorf.

He did say that Germany's BND received a CD-ROM with hundreds of names of suspected tax evaders.

No banks have been named so far, but in a statement, Liechtenstein's LGT Group said that there were 'indications that client data' stolen from its LGT Treuhand AG subsidiary in 2002 had been 'unlawfully disclosed.' The group said that a then-employee of LGT Treuhand, itself a subsidiary of LGT Group, was convicted of the theft in 2003.

The group is independent of LGT Bank, which is known for setting up foundations that German investigators have alleged can be used for evading taxes.

'In summer 2007, LGT Treuhand ... first became aware of isolated indications that client data had been illegally disclosed and initiated an internal investigation to determine the source,' LGT said in a statement. 'Over the last few days signs have become clearer that this involves parts of the data stolen in 2002.'

The company said that it would 'immediately register a criminal offence against a person unknown and will do everything in its power to protect the interests of its clients.'

The BND did not immediately comment about the statement or say if the informer had gotten the information from LGT. German media have reported that LGT is a focus of the probes.

Mr Gerhard Schick, a spokesman for the Green Party, said that the grand coalition government led by Chancellor Angela Merkel must make it an imperative to stem tax evasion and called on her to ensure that the government of Liechtenstein cooperates in any probe by German investigators.

'Complaining about a lack of morals from managers isn't enough, but merely hides the fact that for years German politics has looked on at a rampant tax evasion in Liechtenstein,' he said on Sunday, ahead of a visit on Wednesday to the German capital by the principality's prime minister, Otmar Hasler.

'The chancellor must make it clear that things in Liechtenstein must change substantially,' Mr Schick said of the tiny principality nestled between Switzerland and Austria. 'Otherwise, the visit makes no sense.'

Economy Minister Michael Glos, in an interview with the newspaper Bild am Sonntag, urged Germany's corporate leaders to become more ethical in their dealings.

Business leaders should be aware of their function
Business leaders, he was quoted as saying, should 'be aware of their function as a model for society. Otherwise our social market economy will no longer be credible.'

The issue was blown wide open on Thursday when Klaus Zumwinkel, the chief executive of Deutsche Post AG, had his offices and home searched by investigators amid allegations that he evaded some 1 million euros in taxes. On Friday, he tendered his resignation to the company's supervisory board, which meets on Monday to decide whether to accept it. He will also step down as director of the supervisory board of Postbank AG.

Deutsche Post delivers mail in Germany and is a major worldwide player in the express delivery and logistical services business through its DHL unit. It is also the majority owner of Deutsche Postbank, which engages in retail banking and financial services.

Also on Friday, the Bonn-based telecommunications company Deutsche Telekom AG said that Zumwinkel would step down as chairman of the board. He is also a member of the supervisory boards of airline Deutsche Lufthansa AG; German retailer Arcandor AG; and New York-based Morgan Stanley's board of directors.

Prosecutors in Bochum said the Zumwinkel investigation was just one in their probe into hundreds of cases of tax evasion related to foundations in Liechtenstein. -- AP

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