‘It is a spider web’

Introduction

Liechtenstein residents are amazed at what dubious financial transactions can be found in the their tiny country, if one only looks closely enough. A special investigator had seven suspect financiers arrested, including one politician. Even the president of the national judiciary is under suspicion of misuse of power.

The prince and princess had good news: It was with “great joy” that the Prince of Liechtenstein — who is also the Duke von und zu Liechtenstein, Duke von Troppau und Jaegerndorf, Count zu Rietberg, and Ruler of the House von und zu Liechtenstein — announced to his subjects that his daughter, Princess Tatjana von Lattorff, had given birth to a son and heir, Lukas Maria.

But what should have been a joyful occasion for the inhabitants of the valley was not to be on this day. The citizens were preoccupied less with the birth of an heir to the principality, than with questions of justice. The police had surrounded the parliament, while representatives on the inside had called a special hearing on the revoking of the immunity of one of their own for the first time since 1870. This had hardly been put into effect that the former speaker for the Fortschrittliche Buergerpartei [Progressive Citizens Party], Gabriel Marxer (40), was arrested. Marxer comes from a prominent family — his brother Benedikt is the president of the national judiciary.

Other high officials in the principality had to endure similar fates: deputy head of government Michael Ritter, who is also the finance minister, can also only see his brother in prison these days. Not even nobility is spared — the adopted Eugen von Hoffen was arrested. He is known by his common name Eugen Heeb and was previously convicted of fraud.

Along with these three prominent figures, four other individuals were arrested for playing with finances. They were accused of crimes that had rarely been enforced previously: investment fraud, money laundering, betrayal of confidence, and organized crime. All seven of the accused are trustees who create anonymous foundations, and manage millions of currency like other people manage their pencils.

This historic dent in the armor of the principality comes from the work of foreigners. The German Bundesnachrichtendienst (BND), an Austrian special state attorney, and Der Spiegel brought Liechtenstein’s seemingly tight-knit world of finance into turmoil. In November, Der Spiegel reported on a secret BND dossier that depicted Liechtenstein as a veritable el dorado for money-launderers: Mafia business was being protected through a “a network of connections among high-ranking government officials, judges, politicians, bank directors, and investment consultants, who support each other in their illegal financial services for international criminals.” (Der Spiegel, 45/1999)

“You can’t throw a country into the fire like this,” chief of state Mario Frick thundered at the time. The Prince, too, was outraged (“These are methods like those of the Third Reich”), but at the same time put pressure on the cabinet to appoint Kurt Spitzer (52), a state attorney from Innsbruck in Austria, as a special investigator. Naturally it was hoped that little would result from the investigation.

Last week the prince tried to put a good spin on the unexpected bad news. He was “thankful to Der Spiegel and the BND.” For they had created a “healthy panic.”

Spitzer, having been briefed by the BND, set off to Liechtenstein to investigate, and finally drafted a dozen indictments. Almost all of the arrested parties appear in the BND dossier. Though some of deeds outlined in the report have proven either false or not documented, the BND by no means had only innocent victims in their sights.

Trustees Heeb and Ritter, who by the BND’s Pullach headquarters’ reckoning helped South American drug cartels invest their millions, are only accused, for the time being, of massive investment fraud. According to Spitzer, they caused 100 million dollars in damages, including damages to 400 German victims. The politician Marxer, who in his private life is an attorney, is also said to be involved — Heeb and Ritter were only able to strike their deals through a concession that they had received from Marxer.

Meanwhile, special investigator Spitzer suspects that claims made by the BND that criminals are protected from justice in the principality are not entirely untrue. The Mannheim (Germany) state attorney’s office had been researching this case for years, but to this day they had not received documents seized from Ritter’s chancellery in 1995, and the proceedings have stalled.

Spitzer accuses the president of the national judiciary, Benedikt Marxer, who was responsible for the Mannheim legal requests, of an “unjustifiable delay of proceedings.” The special investigator also accuses politician’s brother of “a misuse of power violation.”

Judiciary President Marxer says that “the accusations are absurd,” and blames an “overwhelming work overload,” and asserts: “I am drowning in proceedings here.”

In light of the many connections in this mini-state, Spitzer had to take a cautionary approach to his special mission. In the meantime, Austrian officials have been clued in to the investigation, and 24 of Vienna’s 40 financial crimes enforcement experts have been delegated to Vaduz.

Such fervor is uncommon in the principality. Liechtenstein’s resources are relatively small for a major financial center. Only two of the country’s total of 15 criminal police officers are on the financial crimes beat.

Leichtensteiners are now amazed at what can be found in their country — if one only digs a little. The trails lead from the financial oasis out into the whole world. Even Vaduz police spokesman Hans Meier is amazed: “It is a spider web.”

Even the doyen of the bank secrecy, Herbert Batliner, from whom the CDU [Germany’s Christian Democratic Union party] once sought advice when it was trying to hide its millions in foreign countries, has come into the sights of the special investigator. His name was on the list provided in the BND dossier. During his visit to BND headquarters in Pullach, the BND had pressured him to look more closely into Batliner’s affairs. Now Spitzer suspects the prince’s commerce consultant and the hiking-companion of former Chancellor Helmut Kohl of “money laundering crimes.”

Batliner is suspected of having laundered over $17 million through a number of Liechtenstein foundations for the Ecuadorian drug baron Jorge Hugo Reyes Torres. When Torres was arrested in 1992, Batliner quickly withdrew from the foundations after some consultations. He had only taken part in them because they had been “sent to us by two large European banks,” including Dresdner Bank (Der Spiegel, 8/2000).

Spitzer’s research leads him to believe that Batliner knew from the very beginning that the millions from Ecuador were not clean. For his own protection, evidently, upon founding the foundations in 1989, Batliner had Dresdner Bank verify: “that the new clientele is well known in business matters and that they engage in a wide range of cattle-breeding and farming in Ecuador.” But this was, according to Spitzer, just a “complementary verification,” that Batliner “had obtained knowledge of the dubious origins of the fortune.” Spitzer is also at odds with Batliner’s withdrawal from the foundations. The dissemination of his “declaration of withdrawal” after the arrest of Torres “visibly had the sole purpose of demonstrating more distancing from the now more clear origin of the fortunes. But in reality, this distance did not exist.”

An attorney from Batliner’s office had, according to Spitzer, charged the forced disbanding of the foundations to the drug baron’s “Liquidator” bill. In this function, he assigned his cohort Batliner to prevent by all means the deposit of the millions of cocaine dollars.

The “generous awarding of mandated commissions,” within the same office, according to Spitzer, had allowed partial fee payments “made up of the drug-moneyed foundation endowment to be transferred into Batliner’s attorney’s office.” Batliner calls these accusations “defamatory.” It would have been “utterly impossible” to siphon the foundation endowment into his own accounts, as the endowment had been seized by the courts. Batliner also argued that Dresdner Bank had not vouched for the Ecuadorian money as a favor to him.

The president of the judiciary also appears to be a stonewaller in the Torres case. Spitzer accuses the justice of an “unbelievable delay of due process.” In what has drawn out to “eight years (!),” Marxer, as the responsible judge, had not made “even a preliminary judgment.” One would have to ask oneself whether the president of the judiciary “had not willfully brought this situation about in order to facilitate the unblocking of Batliner’s dubious foundation endowment.”

Marxer, who was questioned by an Austrian investigative judge for the first time last week, says that in this case it would be “deceitful to accuse me of illegal behavior.” His recent court inspection had, after all, just certified his work as “qualitatively outstanding.”

The spectacular arrest in Liechtenstein will in all probability come too late to fix the declining reputation of the principality. This week, government officials of Western industrialized countries discussed which countries would be determined to be “not cooperative” in the fight against money laundering. Liechtenstein still stands on that list of countries.