Germany has held a disc with data on dozens of Israeli clients at Bank Leumi's Swiss arm for the last four years. The politically-charged tale of how Germany tackled its alleged tax dodgers and cheats in Israel.
Under finance minister Norbert Walter-Borjans, Germany state North Rhine-Westphalia has been a voracious acquirer of Swiss bank data proffered by whistleblowers in recent years.
Four years ago, Borjans ordered investigators to buy data containing several dozen names of wealthy Jewish clients of Bank Leumi in Switzerland, Germany's «Handelsblatt» (behind paywall) reported on Tuesday.
Leumi's «clean» accounts were snapped up by Julius Baer three years ago, and the Israeli bank shut its doors in Switzerland.
History's Burden
Instead of charging ahead to follow up the leads provided by the Israeli data, German finance officials pondered the moral conundrum it presented. The data appears to have been a worthwhile purchase for Borjans: the Leumi clients are said to be very wealthy across the board.
The overarching issue is the massive historical baggage between the two countries: Germany systematically seized assets from wealthy Jews during the second World War. To then turn the tables and pursue alleged Israeli tax dodgers little more than 50 years later would be an issue of the highest political sensitivity.
Thus, Germany's pursuit of Israeli money needed to be conducted with the utmost discretion. «Handelsblatt» reported that German tax officials visited Israel to investigate a Tel Aviv-based former Leumi client in Switzerland who is alleged to have hidden as much as 100 million euros from Germany's inland revenue.
«Sensation in Politics»
One academic who spoke to the newspaper called it a «sensation in politics» – German tax officials even entering Israeli territory, not to mention investigating, would have been unthinkable until very recently.
The moral conflict raised by Germany's Nazi past is understandable. The Leumi data contained data on people who endured unspeakable suffering at the hands of Germany's wartime regime. Germany claimed a victim role too: that it missed out on millions in tax income due to the offshore funds.
Swiss Banks' Role
The role of Swiss private banks and Leumi in particular is a distinctive one: persecuted by the Nazis, victims and their descendants hid money from German tax authorities by stowing it in Swiss offshore accounts.
«The collective memory of these people says that they cannot trust the German state,» as one lawyer quoted by «Handelsblatt» put it.
«This was imprinted into their conscience and passed on to later generations. The sense of security from a nest egg abroad was immeasurable.»
Mistrust of Germany
One tax advisor detailed a surge of Nazi victims with Swiss accounts who were seeking to come clean on their offshore accounts. Delicate discussions which inevitably reopened old wounds: «these people have deep mistrust of the German state due to historical reasons.»
One Leumi account holder had been imprisoned at Auschwitz, the largest of Germany's wartime concentration and extermination camps.
Germany has concluded these tax evasion cases out of public view. A German tax lawyer with many Jewish clients told «Handelsblatt» that Germany was very nervous about potential fallout from pursuing the undeclared accounts.
«You don't know what will happen once a discussion of this sort about «rich Jews» hiding millions is unleashed,» the lawyer said.
Naked and Defenseless
The voluntary disclosures from these bank clients were often distressing: those coming clean are forced to disclose absolutely everything to tax officials, one advisor said.
«It's total disclosure. I had a 95-year-old client who now fears even walking by a police station. It's not something you or I can understand rationally, but it's nevertheless the way it is. The man felt naked and defenseless.»
The former Leumi client who was visited by German officials refused to reach a settlement. Since he has lived in Israel for several years, his case is also of interest to the domestic tax authority, which had agents present as part of the legal assistance to Germany.
If the client agrees a settlement with Germany, Israel's inland revenue would also benefit from a multi-million euro windfall.
