Europe, Headlines

GERMANY: Corruption Feeds the New Market

Julio Godoy

BERLIN, Mar 5 2008 (IPS) - The revelation that hundreds of wealthy Germans have made illegal investments in Liechtenstein to avoid taxes, and the unearthing of new cases of corruption in top enterprises, raise new questions about the way the market economy is going.

Liechtenstein is a tiny country between Switzerland and Austria with a population of around 35,000. It is better known in Europe as a tax haven.

On Feb. 14, the prosecution in Bochum city, some 400 km southwest of Berlin, searched the home and offices of Klaus Zumwinkel, then chief executive officer of Deutsche Post, the state-owned mail company. The prosecution accused Zumwinkel of illegal transactions in Liechtenstein.

The prosecutors announced that hundreds of other wealthy Germans are under investigation for similar offences. In the week following the search at Zumwinkel’s home and offices, the police carried out searches in Berlin, Munich, Frankfurt and several other cities.

The raids were based on data on a compact disk that a former Liechtenstein bank employee sold to the German secret service Bundesnachrichtendienst. The informer sold similar information to the U.S., the British, and other European governments.

Preliminary estimations put the tax evasion in Germany from these cases at some 3.4 billion euros (4.8 billion dollars). Dieter Ondracek, president of the German Fiscal Workers Union, says Germans evade taxes worth 43 billion dollars a year through illegal transactions abroad.

“We estimate that Germans have so far made illegal investments abroad of some 420 billion dollars, especially in Switzerland and in Liechtenstein,” Ondracek told IPS.

Zumwinkel, until recently respected as a sober CEO, paid a bail deposit of 5.6 million dollars to avoid prison. He accepted that he had evaded taxes through creation of a personal foundation in Vaduz, capital of Liechtenstein. He faces a prison sentence of up to 10 years.

Several private banks are being investigated for helping transfer money to Liechtenstein.

The corruption cases also in leading private companies such as Siemens, Volkswagen and Daimler, have raised further questions about the way German capitalism is going.

Spokespersons at the German car-maker Daimler and the prosecution office in the enterprise’s hometown Stuttgart, some 400 kilometres south of Berlin, confirmed last month that German officials had searched the company’s offices in Istanbul in a case of bribery of foreign officials.

Daimler’s subsidiary Evobus is accused of paying illegal commissions to Turkish officials to win a contract for 450 buses that the Istanbul city administration bought in 2005.

In late January, a former Daimler manager was found guilty of breach of trust, tax evasion, and falsification of documents, and sentenced to five-and-a-half years in prison. Several other Daimler managers have been sentenced in other corruption cases.

German high-technology giant Siemens has admitted paying 590 million dollars in illegal commissions to foreign state officials to win public contracts. Last October, Siemens paid a 280 million dollar fine to close investigation into the case.

The former leader of Volkswagen workers council Klaus Volkert was last month sentenced to three-and-a-half years in prison in a corruption case. Two other former VW managers, Peter Hartz and Hans-Joachim Gebauer, were given suspended sentences in the case.

This proliferation of corruption cases has led political commentators and also government high-ranking officials to question the lack of ethics in Germany.

“Societies collapse when popular confidence in their political and economic system is hollowed out by such frauds,” Stephan-Andreas Casdorff, leading political commentator at the Berlin-based daily newspaper Der Tagesspiegel wrote in an editorial comment. “What many citizens feel right now is the loss of ethics in our democracy and economy. They follow these (corrupt) examples. Who can blame them?”

Oscar Lafontaine, leader of the new Left Party, and former minister for finance and economics, has accused the government of passing laws that have “opened all gates to encourage greed and illegal enrichment. Now nobody can be surprised that some high-earning managers prefer to ignore all laws.”

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