German business chiefs under fire in tax scandal

Germany's fat cat tax dodgers were under fire from government ministers on Saturday after it was revealed that possibly billions of euros had been channeled into accounts in Lichtenstein.

Economy Minister Michael Glos called on business leaders to adopt ethical behaviour and get rid of their bad habits, in an interview to appear on Sunday in the Bild am Sonntag paper.

They should "be aware of their function as a model for society," he said. "Otherwise our social market economy will no longer be credible."

Weekly Der Spiegel, in its edition to appear on Monday, quoted conservative Interior Minister Wolfgang Schaeuble as saying, "These people are destroying everything. When the elite do not understand that they must respect the law, it is serious."

"The economic elites are undermining the system," Finance Minister Peer Steinbrueck already said in an interview carried on the Website of the weekly Die Zeit on Friday.

The head of the Social Democrats in parliament, Peter Struck, warned in a radio interview that extremists on both left and right would be strengthened by the scandal.

Officials said on Friday they were investigating hundreds of cases of tax evasion, including key figures, via banks in the tiny principality wedged between Austria and Switzerland.

Press reports on Saturday said up to 900 search warrants had been issued to be put into effect this weekend, concerning around 1,000 cases of alleged fraud totalling several billion euros.

Der Spiegel meanwhile said investigators paid millions of euros for secret bank data from Liechtenstein, enabling them to launch the monster tax evasion probe.

Some EUR5 million (Dh26.9m) from the budget of the German secret services (BND) was paid to an informer who contacted the BND in early 2006, the weekly said, without naming its sources.

It said that during 2006 the BND held several meetings, also attended by North Rhine-Westphalia tax inspectors, to verify the quality of the documents provided by the informer.

In the end, the money was deposited in an account in exchange for data identifying those behind the tax fraud in Germany, but also including secret instructions from Liechtenstein on how to hide the flow of money.

Liechtenstein's LGT Group, which was named in press reports as a focus of the probes, said on Friday that lists of clients had been stolen in 2002 by an employee at its LGT-Treuhand subsidiary, without confirming links to the German inquiry.

The affair erupted after a prosecutor in the western city of Bochum announced that Deutsche Post head Klaus Zumwinkel was suspected of involvement in a case of tax fraud.

Zumwinkel handed in his resignation as head of Deutsche Post on Friday. He told Bild newspaper in an interview appearing on Saturday that he would cooperate with the investigation.

Zumwinkel also quit as head of the supervisory board of Deutsche Telekom, the telecommunications company said in a statement.

A finance ministry spokesman on Friday declined to comment on precisely who was under investigation, saying only that they were "known and unknown, especially people whose revenues are at the high end of the scale."

The prosecutor in charge of the probe spoke of "the financial deposits of several hundred" people, "in particular with Liechtenstein foundations, that seem to have been created to avoid taxes."

Germany, which puts a high value on social and financial probity, was shocked last year by scandals at engineering giant Siemens and the biggest European car maker, Volkswagen.

German Chancellor Angela Merkel told reporters on Friday: "This goes beyond anything I could have imagined."

A visit by Liechtenstein Prime Minister Otmar Hasler to Germany is scheduled next week and the tax probe "could be a topic of talks" with Merkel, her spokesman said. (AFP)