Hundreds of rich Germans may be snagged in tax evasion scandal

Homes and offices across Germany were raided Tuesday in a widening tax evasion scandal linked to Liechtenstein that has already claimed the chief executive of Deutsche Post, the German postal service.

Klaus Zumwinkel's home was searched last week. Accused of evading $1.47 million in taxes, the powerful executive has since resigned. Officials say more than 100 raids are planned for this week with 1,000 individuals targeted in the investigation. On Tuesday, investigators seized data from private banks seeking information on individuals suspected of funneling their millions into secret bank accounts in Liechtenstein to elude German tax authorities.

The scandal has riveted Germany where the rich have long hidden their money outside the country to avoid high taxes, The New York Times reported. Several hundred police searched suspected tax evaders' homes and offices in Frankfurt, Munich, Stuttgart, Ulm, and Hamburg.

"The political implications of this are going to be great," said John C. Kornblum, a former American ambassador to Germany. "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," he told the Times.

German officials have reported that they began untangling the scandal in 2006, when the country's Federal Intelligence Service received a CD-ROM with data on German clients of a bank in Liechtenstein. That person, who has not been identified, received a large payment from the German finance minister for the information. Reports have ranged from $5.9 million to $7.3 million.

Liechtenstein's Prince Alois von und zu Liechtenstein, on Tuesday, accused Germany of mounting an "attack" on the principality, and he said the decision to pay for allegedly stolen data was "unacceptable," the Financial Times reported.

Prince Alois's family owns the private bank LGT, which announced last week that data on some of its clients was stolen six years ago, Reuters reported.

The Organization for Economic Cooperation and Development (OECD) in Europe, which coordinates global efforts to reduce tax haven secrecy, called for greater transparency. Angel Gurria, the secretary general of the OECD, called Liechtenstein's banking rules a "relic of a different time," in the Financial Times. Liechtenstein, along with Andorra and Monaco, are the only three countries on OECD's blacklist of uncooperative tax havens.

A spokesman for the Liechtenstein government said it would soon announce a "toughening of controls" on banking, adding that the timing of the changes and the German scandal was a "coincidence."

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