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By Edward Taylor, Matthias Inverardi and Mark Hosenball
DUESSELDORF, Germany, Nov 21 (Reuters) - In the digital age,pen and paper are useful tools for intrigue. In 2007, SinaLapour, an assistant to a private banker at Credit Suisse,hand-copied the names of potential tax evaders listed on two ofthe firm's internal computer systems. By not downloadinginformation, Lapour avoided leaving electronic fingerprints. Hisemployer did not detect his actions.
He put the notes in his briefcase and took them home, wherehe created an Excel spreadsheet which he called"Mappe1-test1.xls." The spreadsheet held names, addresses, andamounts held by clients.
Despite trying to cover his tracks, Lapour was eventuallyconvicted of economic espionage, among other crimes. Accordingto a statement he made in a plea bargain, the data he stole gavedetails of as many as 2,500 clients with combined assets up to 2billion Swiss francs ($2.2 billion). He sold it to a middleman,who then sold it to German tax inspectors. The information ledto police raids in 2010 on Credit Suisse's main offices inGermany.
Lapour's spreadsheet was one of a half-dozen sets of stolendata for which Germany has paid millions of euros over the pastfive years. Those purchases pushed the boundaries of German law;Reuters' inquiries have found Germany's 16 federal states allcooperated in making them.
German parliament and court records, Swiss legal documentsand interviews with bankers and politicians show the states andthe central government in Berlin gradually constructed a system,partly funded by Germany's federal finance ministry, to buyinformation on tax evaders. It's a campaign which involveshundreds of Germany's roughly 2,500 tax inspectors, includes aformula to calculate each state's share of a purchase, andcontinues to this day, German tax officials say.
Some German politicians say buying stolen data added topressure on Switzerland to share more information about taxevaders. Last month, Switzerland, which for decades has nurturedbank secrecy as a cornerstone of its offshore wealth industry,signed a convention to exchange some tax information with othercountries. If approved by the Swiss parliament, it could be theend of a long and passionate battle.
Swiss officials accuse the Germans of breaking Swiss laws onbanking secrecy and of committing economic espionage. Accordingto arrest warrants seen by Reuters, the Swiss prosecutor isseeking the arrest of three German tax inspectors on thesecharges. Swiss finance minister Eveline Widmer-Schlumpf declinedto comment, but a spokesman for her ministry said Germany'shandling of stolen goods "is highly questionable with respect tothe rule of law."
In June this year, Germany's parliament received a draft lawwith a clause to exempt from prosecution civil servants whohandle stolen data. As Berlin parties haggle over a newgovernment, it has yet to be passed.
Nonetheless Norbert-Walter Borjans, finance minister forNorth Rhine-Westphalia, the state which bought the Lapour data,says he would support the purchase of such information "so longas there is data containing valuable tips to be bought." Hispredecessor, who signed off on the Lapour deal, could not bereached. Switzerland has filed no charges against thepoliticians involved.
Buying stolen data is an "emergency remedy", a spokesman forGermany's federal finance ministry told Reuters: It wasjustified because Germany and Switzerland did not have a dealthrough which Germany could enforce its tax claims. None of thetax inspectors could be reached, and the state declined tocomment on their behalf.
THE DECEASED WITNESSThe Swiss prosecutors suspect the German tax inspectors of morethan handling stolen goods. They allege the taxmen evensolicited the theft of specific information, according to aninternational request for legal assistance that Switzerland sentto Germany on the case.
In that confidential document, seen by Reuters, Lapour isquoted as saying a middleman showed him a text message in whichtax inspectors allegedly requested specific information.
Tax inspectors in North Rhine-Westphalia say they don'tsolicit data stealing. Ingrid Herden, a spokeswoman for thestate's finance ministry, said German tax authorities had notactively encouraged theft of client data from Swiss banks."There is no evidence that tax inspectors from NRW did such athing," she added in a written statement to Reuters.
However, Herden added that she could not rule out that amiddleman may have incited Lapour to steal information.
That go-between, named in the Swiss request as an Austriangraphic designer called Wolfgang Umfogl, committed suicide inprison in Switzerland in 2010, weeks after his arrest onsuspicion of money-laundering, according to police in Berne,Switzerland.
Lapour, who was given a two-year jail sentence but spentless than six months in custody, could not be reached forcomment. His lawyer declined to be interviewed. NorthRhine-Westphalia declined to comment on the details of the case. THE FITNESS CENTRE Lapour was born in 1983 in Tehran, Iran. By the mid-2000s he wasworking at Credit Suisse in Zurich and would meet up with Umfoglat the Banane Fitness Centre in Winterthur, according to theSwiss request for assistance, which is also based on Umfogl'stestimony and other material gathered by Swiss police. How thetwo got talking about stealing data is not revealed.
Lapour created a data file on March 2, 2008, containingnames, addresses, net worth and contact details for clients, therequest for assistance says; Umfogl flew to Duesseldorf to meetGerman tax inspectors at the end of that month to see what thisinformation was worth. His opening price: 6.75 million euros($9.13 million).
By that time, North Rhine-Westphalia already had experienceof handling stolen information from other sources. In 2008, itemerged that the state's tax inspectors had obtained data stolenfrom LGT Group, a Liechtenstein bank, from a thief whooriginally sold it to Germany's federal intelligence service,the BND.
That year, North Rhine-Westphalia officials commissioned alegal opinion from the regional prosecutors to determine if theywere within their rights to buy stolen data from Lapour. Theprosecutors found in their report that for civil servants,dealing with LGT data did not amount to handling stolen goods -the theft happened in Liechtenstein, to a foreign company. Theyalso said "emergency measures" are justified if tax claimscannot be enforced by other legal means: Authorities inLiechtenstein had not cooperated with requests for legalassistance.
Tax authorities at three German states would go ahead withdeals, buying at least five sets of data since 2008 according tomedia announcements they made; the data was stolen from banksincluding UBS, Julius Baer and HSBC. The banks declined furthercomment or said they had resolved the issues.
THE UPDATED FILE
In Switzerland, Lapour was busy. The Swiss prosecutor sayshis data file was updated on July 21, 2008, four months afterUmfogl allegedly first met the German tax inspectors, to add thedates each account was opened.
This, the Swiss prosecutor asserts, suggests he was stealingto order: German tax authorities needed the dates to see howlong a client had evaded taxes. In the request for legalassistance, Lapour is cited as saying Umfogl asked him to getthat extra data: Umfogl had shown him a text message from June24, 2008 in which the tax inspectors purportedly demanded moreinformation. The alleged message's exact contents are notdescribed.
In May 2009, Umfogl and the German tax inspectors met again,at the Kronen Hotel in Stuttgart, the Swiss document says.There, prosecutors say, tax inspectors asked for a sample of thedata and for information beyond names and dates.
According to the Swiss prosecutor, Lapour confessed he stoleand sold a PowerPoint presentation that Credit Suisse made forstaff on how to handle German clients who were "non compliant" -evading German tax. The presentation told staff how to avoidimplicating themselves or the bank in aiding tax evasion. TheSwiss say the Germans wanted to use it as evidence Swiss bankshad a strategy to look after foreign tax-evading clients.
Credit Suisse would eventually pay 150 million euros to thestate of North Rhine-Westphalia to end an investigation intoallegations it helped German citizens evade taxes. Neither thebank nor North Rhine-Westphalia would comment further.
Back in 2009, after another meeting in the German lakesidecity of Konstanz, Umfogl handed tax inspectors a USB stickcontaining a sample of 10 percent of the data, according to theSwiss request for assistance. In mid-July, he purportedly handedover the PowerPoint presentation. It's not clear from thedocument when or how the rest of the information was handed overor paid for.
In all, Umfogl allegedly paid Lapour at least 65,000 eurosfor his information; Lapour later told Swiss prosecutors that heused most of the money to support his Czech girlfriend. Heshowered her with gifts including a car, paid for vacations toItaly, Spain and Egypt, and helped her to pay off a mortgage inthe Czech Republic. She was not accused of wrongdoing and couldnot be reached for comment.
Germany's legal machinery continued to gather opinions onhow far tax inspectors could go. In 2010, the NorthRhine-Westphalia inspectors got some legal reassurance.
A CHANGE OF VIEW"With the LGT CD, many said it's a one-off, but then came 2010,"said Borjans, the finance minister of North Rhine-Westphalia.
On Feb. 23, representatives from the Federal Central TaxOffice, an authority under the jurisdiction of the GermanMinistry of Finance, contacted officials from what is nowBorjans' ministry and decided to coordinate bank data purchasesso different states would not all buy the same set,parliamentary questions show.
Days later, Borjans' predecessor, a member of ChancellorAngela Merkel's CDU party, announced he had struck a deal to buya "client data CD" - the Lapour data - for 2.5 million euros.
In November, a legal opinion from Germany's FederalConstitutional Court added weight to that plan. The court foundthat if data had been "received" rather than actively solicited,then those who used it were not guilty of abetting the theft.Whether it was legal to buy stolen data was a question itreferred to other courts.
"It's not like I commission a purchase, or people comedirectly to me," Borjans told Reuters this year. Tax inspectors,not politicians, are in the driving seat, he said. They act ontips and then ask him for resources. THE KEY OF KOENIGSTEIN By 2010, all Germany's tax collectors had reached agreement onhow to split the cost if the federal ministry decided to jointhe states in funding a purchase, parliamentary questions show.
Acquisitions of taxpayer names are funded using a formulaknown as the "Koenigsteiner Schluessel," which translates as"the key of Koenigstein." The formula, named after a wealthyFrankfurt suburb, was devised after World War Two to work outhow to spread the cost of funding scientific research inGermany.
"Should the Federal Ministry of Finance decide to make apurchase, it will contribute 50 percent of the acquisitioncosts," a spokesman for the ministry told Reuters. All 16 statestold Reuters they have helped pay for data: Berlin and Hamburgsay these purchases led to the recovery of more than 100 millioneuros each.
But not all are convinced the system is legal. Afterinitially joining in, one state - Brandenburg - said it wasopting out because of such doubts. Last June, when the draft lawon handling stolen data went to parliament, Brandenburg'sfinance minister issued a news release saying it would "providelong overdue legal certainty for our finance officials." Thestate which bought the material paid the shortfall, a spokesmanfor Brandenburg said.
Volker Kauder, head of the parliamentary group for the CDU,is still "highly critical" about buying such data, a spokesmantold Reuters. "In doing so the state is in danger of slippinginto the role of a dealer in stolen goods," he said. THE TELEVISION CABLEIn March 2010, Umfogl opened a bank account in Austria.According to the Swiss request for legal assistance, he wastrying to divide the 2.5 million euros he had received betweenbanks in Germany, Austria and the Czech Republic. Staff at asavings bank in Dornbirn, Austria, got suspicious about adeposit of 893,000 euros, and raised the alarm with police onMarch 25, 2010, believing Umfogl could be a money-launderer.
Austrian authorities froze Umfogl's funds that September,said the prosecutor's office in Feldkirch, Austria. SwissFederal Police were notified because Umfogl lived inSwitzerland. They arrested him at his work. A day later, Lapourwas tracked down and arrested in the Czech Republic where he wasvisiting his girlfriend.
Lapour was convicted in Switzerland's Federal CriminalCourt of economic espionage, violating bank secrecy andviolating trade secrecy, by passing client data outside thebank. Besides his 24-month sentence, he was fined 3,500 Swissfrancs.
At a house in a suburb on the outskirts of Winterthur, givenin the request for assistance as Lapour's parents' address, aman told a reporter he did "not know where Sina is."
At about 6.30 a.m. on Sept. 29 2010, just days after Umfoglwas arrested, he was found dead in his police cell in Berne. Hehad left a note before hanging himself with a television cable,according to a joint statement issued by the coroner and police.Both declined to reveal the note's contents.
That month, Switzerland's government said it had agreed toresolve the problem of untaxed money stashed away by Germans inSwiss accounts.
North Rhine-Westphalia's Borjans believes the purchase ofstolen names was crucial to that. "You could tell this was notonly a question of decency," he told Reuters. "It was also abouthardcore commercial interests. And that's why Switzerland wassuddenly willing to negotiate."
The Swiss finance ministry said it had been Swiss financialmarket policy since 2009 to seek international tax agreements.
By August 2011, Switzerland and Germany had reached anoutline deal on sharing tax information. But the pact failed towin political support within Germany and the upper house threwit out in November last year.
Borjans was one of the pact's opponents. He said he feltBerlin had sold itself short. "It left the door open to banksecrecy and tax evasion," he said.
Last month, Switzerland finally signed onto theinternational tax convention, giving Germany some of what itwanted. The Swiss request to Germany to arrest three taxinspectors has gone unanswered: Germany's finance ministry saidit is still evaluating it.
