Cheryl on the Web

I thought I’d heard it all when, on Thursday of this week, the CEO of the German postal service was taken in for questioning on a warrant for tax evasion: tax evasion to a sum of more than 10 million euro. The man, named Klaus Zumwinkel, had (until this week) a prestigious reputation in the business world, and he is (or was until this week) member of the Board of many large companies such as German Telecom, Lufthansa and Morgan Stanley. Apparently he grounded foundations in Liechtenstein and used them to hide money from German tax authorities. It has come as a huge shock to most of Germany that this man would commit tax fraud to such an extent, not to mention the resentment felt by many that someone with so much money would find it necessary to avoid paying taxes, so that the less well-to-do can pick up the slack.

Yesterday the story took a new turn worthy of consideration: it seems that the information which lead to the case against Zumwinkel (and against many others German tax “sinners”, not yet named) was turned over to the German government by a secret informant in Liechtenstein for the sum of between 4 and 5 million euro, paid by the German secret intelligence service. The information included memo’s, details of financial transactions, and Liechtenstein bank account numbers that were involved in the tax evasion schemes. Two large Liechtenstein banks are implicated by the information, and the press as well as the banks have yet to establish how the information was obtained by the informant. Tax evasion is not officially a crime in Liechtenstein; foundations incorporated there are allowed to benefit the founder; and Liechtenstein banks have a strong policy of secrecy and confidentiality - so the value of this information to German tax authorities and the embarrassment it presents to Liechtenstein should not be underestimated.

This entire saga brings to mind a number of fascinating moral questions. First, am I morally opposed to the actions taken by the informant? Do I agree with the decision taken by the intelligence service to pay for the information? Is it legitimate to prosecute tax “sinners” with information obtained under questionable circumstances? And last but not least, what should be done with the tax evaders who turn themselves in before the prosecution turns to them?

I have to say, I am most disturbed by the informant’s actions. The information he turned over is clearly confidential, and either it was obtained illegally or he was contractually obliged to keep it confidential; either way, since tax evasion is not a crime in Liechtenstein and it’s not the Liechtenstein government that was the recipient of the information, I am morally opposed to his actions. That is not even considering the amount of money this person demanded as compensation; if you had any remaining doubts about the morality of the informant it seems to me that the money demanded would serve to confirm his culpability in this matter. Rumor has it that the informant has requested protection from the German government, because now that the whole scandal is starting to break he is beginning to realize the mess he is in; could be he dug his own grave on this one.

That the intelligence agency in Germany paid for the information is a positive thing for me. In theory, the amount they paid will more than be recovered in the course of the investigation (given the number and size of tax evaders implicated). Not to mention the satisfying concept of justice that I find plaguing my thoughts. Go get those tax “sinners” (literal translation from German), I’d say. The Germans are so shocked by the entire concept of the government paying anyone so much money for anything that they are calling it a “finance scandal” in the news and questioning the morality - though I figure that once they get used to the idea they won’t be so opposed to it.

I would hope that, before prosecution of these people begins, the government would obtain formal evidence of the fraud from the Liechtenstein banks themselves. According to statements by the banks in the press, they have not been requested to release any additional information. However, the press does report that Liechtenstein routinely refuses to release any bank information to anyone - or any governments. That’s quite interesting to me given that the EU continues to lower internal borders. I wonder if the German cases against these people can be made on just the information from a morally questionable informant.

As for those who turn themselves in before this whole thing breaks, I don’t think they should receive any lesser punishment. Maybe they could arrange to keep their names out of the press; that would seem fitting compensation to me for turning yourself in.

Hope to read your comments on this. If you want to learn more, Spiegel.de is a great place to follow developments in this story; they offer English coverage in addition to the German content - look in the menu for the ENGLISH link.