Evidence that Germany’s rich tucked away their cash in Liechtenstein and other tax havens is creating a new narrative in German politics: the betrayal of the elites, who have spent the last decade calling for a painful reform of the welfare state, even as they apparently avoided paying their fair share.
“The political implications of this are going to be great,” said John C. Kornblum, a former American ambassador to Germany who is a banker here. “In the U.S., we send people off to prison and say ‘good riddance,’ but it doesn’t actually shake people’s belief in the system. Here, it does.”
German authorities say they began unraveling the scandal in 2006, when a person, whose identity has not been disclosed, approached the country’s Federal Intelligence Service, its equivalent of the Central Intelligence Agency, offering a CD-ROM with data on German clients of a bank in Liechtenstein.
After checking out a sample of the information on the CD, the German finance minister, Peer Steinbrück, authorized a payment of about 5 million euros ($7.3 million) for the information.
By late last year, the material had passed through the tax agency in the state of North Rhine-Westphalia, officials said, and landed on the desk of a special financial crimes group in Bochum, a gritty industrial city.
There, the investigators recognized a kind of tax dodge they knew existed but could seldom document.
Liechtenstein, a tiny German-speaking principality wedged between Switzerland and Austria, has strict banking secrecy laws and grants favorable treatment to foundations. Many are filled with cash spirited out of Germany through various means, some as crude as stuffing a suitcase with cash and driving across the border. Smugglers are arrested regularly.
Foundations are taxed in the low single digits and are permitted to disburse money to their founders and to founders’ family members. The foundations are also permitted to open bank accounts in their own names outside the principality, which gives the owners access abroad to their cash.
Any effort to trace the owners of the foundations runs up against Liechtenstein’s tough banking secrecy laws.
Data from the LGT Group, a Liechtenstein bank with a subsidiary that specializes in foundations, appears to have formed the basis of the German investigation. The bank, which is owned by the royal family of Liechtenstein, has said it cannot confirm its part in the investigation.
But on Friday, the bank said that the German scandal might be linked to data stolen by a disgruntled employee in 2002, and it conceded that it was not sure how many clients had been exposed. “The scope of the presumed data transfer cannot be determined,” LGT said.
In Bochum, the prosecutors had enough information to obtain 13 search warrants against three people, Mr. Zumwinkel among them. With television cameras in tow, they arrived at his villa in an affluent suburb of Cologne on the morning of Feb. 14 and carted away boxes of documents.
Prosecutors announced that they had obtained an arrest warrant for Mr. Zumwinkel but did not execute it after he agreed to cooperate with them and posted a large bond.