German Chancellor Olaf Scholz is to be questioned again for tax evasion at a Hamburg bank after police discovered nearly 215,000 euros in cash hidden by a political ally linked to the institution.
Two days after Mr Scholz’s election victory last September, Hamburg investigators found the money – of unknown origin – in a safe rented by Johannes Kahrs. A senior member of the Social Democratic Party (SPD) and a member of the Bundestag for 20 years, Mr. Kahrs was the head of the centrist-conservative camp in the party where Mr. Scholz is politically at home. Both are from Hamburg.
Mr Kahrs resigned from the party last year after failing to secure a senior government post. In recent months he has been accused of lobbying Scholz aides on behalf of the scandal-ridden MM Warburg bank.
In 2016, the owners of Warburg met Mr Scholz, then the ruling mayor of Germany’s second-largest city, to discuss a 47 million euro demand from the city-state’s tax authorities. The tax office said the bank owed money because of its involvement in a global tax scam known as ‘Cum/Ex’, which defrauded the German state of around 12 billion euros .
In Warburg’s case, the bank received tax credits that had not been paid on equity transactions with an estimated total value of 5 billion euros. When tax audits uncovered the activity, Hamburg tax officials told the bank to pay back what it owed or be barred from trading.
After a second meeting, Mr. Scholz asked the owners of Warburg to forward their arguments against the request to the Ministry of Finance. Eight days later, the Hamburg tax office, which depends on the Ministry of Finance, changed its mind and dropped the tax claim.
During last year’s election campaign, Mr Scholz denied helping the bank avoid its ruinous tax bill while simultaneously insisting he could not remember details of the meetings.
His selective memory will be put to the test at his first summer press conference in Berlin on Thursday, then two weeks from now when he appears for the second time before a Hamburg parliamentary inquiry into fraud.
It is not yet clear whether committee members have any new information about a case that an opposition politician in Hamburg called a “ticking time bomb” for Mr Scholz, but the revelations about Mr Kahrs have come to light. to be a political bomb.
“It is not at all clear where Mr. Kahrs got the money from and to what extent the SPD network in Hamburg benefited from it,” said Christoph Ploss, leader of the Hamburg opposition Christian Democratic Union (CDU). ). “This is where the SPD at the federal level has a duty to finally clear things up.”
During a search of Mr. Kahrs’ home, investigators found rental documents for the safe and obtained a court order to open it. It is not illegal in Germany to hold large sums of cash in a safe – once they have been declared to the tax authorities – but Mr Kahrs has reportedly not yet explained the source of the money .
Although no evidence has been produced that the money came from Warburg, Hamburg investigators say they have found clues of criminal behavior on the part of the suspect in connection with the “Cum/Ex transactions” of a bank based in Hamburg which are the object of the proceedings.
So far, the Hamburg parliamentary inquiry has already documented extensive lobbying by Mr Kahrs on behalf of the bank. The former German banking regulator confirmed he was contacted several times in 2016 to inquire about Warburg’s financial health.
In 2017, Mr Kahrs’ SPD office in Hamburg recorded a donation of €38,000 from the bank. A few weeks before the first Cum/Ex trials in Bonn in April 2019, Mr Kahrs arranged a meeting between the owners of the bank and a senior finance ministry official who then moved with Mr Scholz to the Chancellery.
A spokesperson for Mr Scholz insisted on Monday that the Chancellor knew nothing of the cash held by Mr Kahrs in his safe.
Investigative journalist Oliver Schröm, who has reported extensively on the Cum/Ex scandal, predicted that “for Scholz it will become very uncomfortable because it is only now that the parliamentary committee of inquiry is gaining momentum. magnitude”.
The owners of the Warburg bank, furious at the numerous leaks linked to their multi-million tax fraud and their lobbying, have filed a complaint against the Federal Republic of Germany before the European Court of Human Rights.