By now, I’m sure you’ve heard about the recent Lichtenstein affair. But just in case you missed it, here’s a quick summary.

Recently, the German government illegally bribed a disgruntled former Liechtenstein bank employee for confidential bank information stolen from LGT Bank in Liechtenstein. Since this bribery hit the press three weeks ago, I’ve spoken to many of my offshore contacts around the world about the matter.

In my many interviews, I received a particularly interesting observation from attorney Cathy Odgers, legal counsel and compliance officer for Global Consultants & Services Ltd. in Hong Kong. I am indebted to Cathy for her thoughts. In fact, allow me to paraphrase her informative comments in my own words:

According to Cathy, the central culprit in this plot is a crook named Heinrich Kieber.

Offshore’s Most Wanted Man: Heinrich Kieber

Herr Kieber worked for the LGT Group at LGT Treuhand (Bank) AG, in Vaduz, Liechtenstein until 2002. A man of questionable background, he allegedly has a 1997 international arrest warrant for a fraudulent real estate deal. He left Liechtenstein in November 2002, after stealing confidential data from his employer, LGT Bank, and making copies on a DVD disc.

The German secret police later paid Kieber €5 million (US$7.9 million) for the stolen data. The data, containing about 1,400 “client relationships,” 600 of them Germans, was a major haul for German tax collectors. Germany apparently also sold or gave the information to the governments of Britain, France, Italy, Spain, Norway, Ireland, Netherlands, Sweden, Canada, the USA, Australia and New Zealand.

Reports say that Kieber had access in 2001-2002 to the bank records because his job was to digitize the bank’s paper archives. Any LGT bank records on structures or other files from after 2002, were not compromised or stolen, according to the LGT Group.

Public Enemy #1

Kieber, currently in the German witness protection program, is public enemy number one in the Principality of Liechtenstein.

Liechtenstein’s billionaire royal family manages and controls LGT Bank and LGT Group. The nation’s financial services sector produces 30% of Liechtenstein’s gross domestic product and 14.3% of all people employed there work in the financial services sector.

Banking secrecy and the government’s refusal to share financial information, except in criminal cases, has been one of Liechtenstein’s leading selling points.

Denmark Respects the Law

While most governments have been happy to pay to receive stolen information in this case, Denmark is a notable exception. Its tax minister, Kristian Jensen, described the Liechtenstein affair as an “advanced form of handling stolen goods.” He added: “I think it’s a moral problem to reward a criminal for information that he stole. I don’t think this ethically is the best way to ensure that taxes are paid correctly.”

Germany, on the other hand, has threatened to extend its bribery and anti-privacy campaign to Switzerland, Luxembourg and Austria, each of which have some form of banking confidentiality guaranteed by law.

These Gung-Ho Tax Collectors Are Missing the Point

LGT Bank and Liechtenstein authorities rightfully have advanced the theory that high-tax governments are using misinformation to scare people away from the principality and the bank.

High-tax governments apparently are coordinating a “surrender now” phase in their years long anti-tax haven campaign. In all their loud anti-privacy propaganda these tax hungry politicians miss one basic point:

It is fully legitimate for free citizens to desire and establish confidential bank accounts for legal purposes.

As Cathy Odgers notes: “Indeed most of us like to believe that our bank accounts are private information, while even at a friendly local branch of Bank of America there could be a Kieber working overtime in the copy room, ready to sell your client data to the highest bidder, whether it be criminal gangs, or based on Germany’s unashamed recent conduct, arguably the biggest criminal gang of them all – the government.”

Not to Worry

As one who knows the principality and its professionals, I’ve been asked: “Is Liechtenstein still safe for banking and asset protection?”

My considered opinion: “Yes, now more than ever.”

The principality has been an established offshore financial center since the 1920’s – indeed, it was one of the first such havens in the world.

It still offers an impressive array of corporations, trusts, family and other foundations, as well as private banking in strict secrecy. No doubt its banking security will be increased greatly after this event.

Assuming that you honestly are complying with the tax and reporting laws of your nation, you need not worry about your name being revealed if you are doing business in Liechtenstein.

BOB BAUMAN, Legal Counsel

P.S. I’ll be commenting on this Liechtenstein affair further in my April article in our members-only newsletter, The Sovereign Individual. But for now, please rest assure that as long as you’re following the law, and meeting your tax requirements, this unfortunate incident will not affect you or your Liechtenstein holdings in the least.