Taxable Talk

Liechtensteinische Landesbank AG (LLB) is the oldest bank in the principality of Liechtenstein. It’s also very much involved in the current European tax evasion scandal centered around Germany. Two related stories emerged this past week.

First, a German court has convicted three men of attempting to blackmail LLB. The ringleader, identified only as Michael F., obtained 2,325 LLB statements of German clients. Given the high German tax rates many citizens used banks in Liechtenstein as a tax haven for their money. Michael F. decided to engage in a little blackmail; he demanded €13 million in exchange for returning the data. Given the principality’s rules on informing other countries of bank account holders (i.e., don’t ask and don’t tell), this might have been a wise strategy…until he got caught.

Blackmail is just as illegal in Germany as in the United States. Presiding Judge Dirk Fischer in Rostock, Germany delivered the verdict: “Michael F. claimed that he was only proposing a deal to the bank and didn’t coerce anybody. Well, we see that quite differently.” Michael will spend 63 months in a German prison; his two accomplices received suspended sentences. Attorneys for the convicted men promise appeals. Prosecutors will also appeal the sentences as they felt they weren’t harsh enough.

Meanwhile, Klaus Zumwinkel, the former CEO of Deutche Post AG, confessed in Bouchum, Germany to tax evasion. He sequestered €970,000 through another Liechtenstein bank (LGT Group). I doubt the Federal Central Tax Office (BZSt, the German equivalent of the IRS) is pleased and I suspect Mr. Zumwinkel will have to make restitution, pay a fine, and might end up in prison.

We’ve reported on the scandal before. A few Americans may have used Liechtenstein banks, too. If you reported your income, fine. Having a foreign bank account isn’t illegal (though you must report it). If you haven’t, it’s time to seek legal advice. Whether in Germany or in the United States, tax evasion isn’t a good idea.

This entry was posted on Sunday, January 25th, 2009 at 10:20 pm and is filed under Tax Evasion. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.