"The scandal over misuse of political funds in Germany threatens to undermine the political development of Europe," said Lord Lamont, former British finance minister. "In 1997, French officials found oil giant Elf-Aquitaine had paid $37 million in murky ``commissions'' to middleman Andre Guelfi linked to the purchase of [East German] petrol station chains around the time of German reunification. Guelfi said both Kohl and French president Francois Mitterrand had known of the payments. "In December 1999, Germany's Social Democrat-led government said chancellery files on the [Elf purchase] had vanished. "Parliament then formed a commission to look into bribes in the [purchase] as part of its probe into secret donations amassed by Kohl for his Christian Democrats "The French weekly Paris Match published part of an original letter in which Kohl urged Mitterrand in 1994 to make sure Elf fulfilled the [pay-off] terms of the contract. "Germany's public television network ARD said on January 22 that Elf had made secret donations to the CDU at Mitterrand's behest to ensure Kohl's re-election in 1994 at a time when France was keen for Germany to seal European monetary union." "SPD parliamentary leaders accuse the Kohl-controlled CDU of money-laundering and behaving like a criminal gang in power. Kohl, dubbed "Don Kohleone" by German media drawing comparisons with the Italian mafia, apparently used the slush funds to reinforce his grip on the party." "Some of the slush funds were traced back to 1991-92, when Germany made a controversial sale of tanks to Saudi Arabia. "Witnesses being summoned include former foreign ministers Hans Dietrich Genscher and Klaus Kinkel, ex-finance minister Theo Waigel, and ex-defence minister Volker Ruehe Also included is Karlheinz Schreiber, a German arms dealer who lobbied for the Saudi Arabia tank deal and who is now fighting extradition from Canada." German Finance Scandal Could Taint Europe, UK's Lamont Says London, Jan. 25 (Bloomberg) -- The scandal over misuse of political funds in Germany threatens to undermine the political development of Europe, said Lord Norman Lamont, the former British finance minister. Lamont, who was chancellor of the exchequer from 1990 to 1993 under Conservative Prime Minister John Major, said he was concerned that closer political union in Europe would risk Britain becoming entangled in such scandals now surrounding former German Chancellor Helmut Kohl and the late French President Francois Mitterrand. The comments, in an interview with British Broadcasting Corp. radio, suggest the scandal over Kohl's alleged misuse of Kohl's Christian Democratic Union party could have broad implications for the effort to advance monetary union of the region under the single euro currency. ``It poses very serious problems because it is suggesting that corruption in Europe has a cross border dimension,'' Lamont said. ``These allegations are not just of concern to Germans but must be of concerned to anybody who is concerned about the development of Europe.'' His comments follow allegations that the former French state oil company, Elf Aquitaine SA, gave Kohl's government 85 million deutsche marks ($44 million) to win approval to build a new Leuna oil refinery in East Germany in 1992. German and French television stations ARD and France Deux reported Sunday those funds were found in a secret CDU account controlled by Kohl. That finding linked Mitterrand's government with the German scandal, which alleges Kohl had control of a series of secret accounts that were wrongly used to advance the CDU's own political aims. Maastricht Lamont questioned whether probes into Kohl's funding might uncover evidence that Kohl's CDU party supported Mitterrand in his efforts to win French support of the 1992 Maastricht Treaty, which created the European Union and proposed the single currency now shared by 11 European nations. ``The Maastricht election was a very close vote. It was decided by a handful of votes. How was that result achieved?'' Lamont asked. ``The relationship between Mitterrand and Kohl was extremely close. Kohl is accused of winning money in order to further his policies.'' Such a discovery could damage the credibility of the euro currency ahead of Britain's decision on whether to join the project. Currently, British Prime Minister Tony Blair's government's policy is to prepare to join after the next general election due by mid-2002 then decide later whether to go ahead with the plan. For Lamont, whose party opposes Britain's participation in the euro, the scandal suggests U.K. politicians might be corrupted by a closer economic union with German and France. ``There is a risk of contagion with Britain,'' Lamont said. ``We are a clean country compared with what has happened in Italy and Ireland and what seems to have happened in France and Germany. We ought to watch this very closely and see what the conclusions of the inquiry are.'' _______________________________ East German refinery in CDU funds scandal BERLIN, Jan 24 (Reuters) - When Communist East Germany collapsed into the arms of West Germany in 1990, its giant Leuna oil refinery loomed large in the planned sell-off of creaking state industry. But Leuna proved a poisoned chalice. French energy giant Elf Aquitaine bought a two-thirds stake in Leuna in 1992 in a deal involving a firm owned by Germany's privatisation agency, the Treuhand. But it delayed building a new refinery for years in a row over costs. The new plant finally came on line in 1997, only to be caught up in a scandal over alleged graft that has clouded the reputation of Helmut Kohl as the chancellor of unification. Here are highlights of Leuna's history: GERMANY'S BIGGEST Before World War Two the original Leuna complex, 20 km (12 miles) from Leipzig in eastern Germany's industrial heartland, was Germany's biggest chemicals plant, with 27,000 employees. It became one of the behemoths of Sovietised heavy industry in post-war East Germany. It had 18,000 workers by the time the Berlin Wall came down in 1989, paving the way for unification. As east Germany opened up for wholesale modernisation, the vast, rusting complex symbolised the gross obsolescence of communist industry and the disastrous air and water pollution inflicted by its untreated petrochemical waste. By 1994, two years after it was sold to Elf, its workforce had shrivelled to 4,200 under the rigours of market competition. That year Elf started to build a $2.6 billion refinery sprawling over 260 hectares (650 acres) on a site just west of the old one. The new refinery was to be Europe's most modern. At a groundbreaking ceremony, Chancellor Kohl hailed the new refinery as the most important Franco-German industrial project since World War Two. But Elf said it planned to employ only 700 workers, a big disappointment in depressed eastern Germany. Years of byzantine disputes between Elf and the Treuhand over funding for the new refinery were finally settled in 1998. A European Commission probe into whether investment costs for the new plant were exaggerated, allowing excessive subsidies to be paid, began in 1997 but has been stalled for some time. The Commission said on Monday this inquiry was on hold pending developments in graft investigations by Germany and France. COMMISSIONS PAID In 1997, French officials found Elf had paid $37 million in murky ``commissions'' to middleman Andre Guelfi linked to the purchase of Leuna and the Minol petrol station chain in the same deal. Guelfi said both Kohl and late French president Francois Mitterrand had known of the payments. Kohl denied it. In December 1999, Germany's Social Democrat-led government said chancellery files on the Leuna sale had vanished before it took office after Kohl's 1998 election defeat. Parliament then formed a commission to look into possible bribes in the Leuna sale as part of its probe into secret donations amassed by Kohl for his Christian Democrats (CDU). The French weekly Paris Match published part of an original letter in which Kohl urged Mitterrand in 1994 to make sure Elf fulfilled the terms of the Leuna contract. Germany's public television network ARD said on January 22 that Elf had made secret donations to the CDU at Mitterrand's behest to ensure Kohl's re-election in 1994 at a time when France was keen for Germany to seal European monetary union. Kohl has denied ever being corrupt and his spokesman denounced that report as ``character assassination.'' Elf refuses to comment while investigations are continuing. On Monday, French prosecutors said magistrates probing corruption at Elf had so far uncovered no link with illegal funding of the German Christian Democrats. But the chairman of the German parliamentary inquiry said his probe would look into the Mitterrand connection. _________________________________ Germany to probe Kohl's "French connection" By Alastair Macdonald BERLIN, Jan 24 (Reuters) - German parliamentary investigators widened an inquiry into ex-Chancellor Helmut Kohl on Monday after allegations he took secret campaign donations arranged by late French President Francois Mitterrand. Kohl dismissed it as a smear and officials in Paris said there was no evidence. Even Kohl's opponents -- who have tagged him with the mafia-style nickname "Don Kohleone" -- found the "French connection" report from German state television hard to credit. But it was a measure of how far his reputation has sunk that Kohl, a towering figure for two decades who steered Germany back to unity, could be accused of taking funds for his re-election campaign in 1994 from French oil company Elf Aquitaine <ELFP.PA> after his government had sold it a major east German refinery. Kohl's successor at the head of the opposition Christian Democrats published an audit acknowledging some $6 million of unexplained funds on party books. CDU Chairman Wolfgang Schaeuble added testily that damaging talk would thrive so long as Kohl continued to defy colleagues and the law by refusing to name his secret benefactors. Kohl says he gave his word to protect their identities, even though an anti-graft law he himself introduced obliges parties to identify donations above $10,000. He faces a criminal as well as a parliamentary inquiry and the CDU fears heavy fines, on top of the damage to its credibility, could cripple it for years. EFFORTS TO AVOID SPLIT Having turned on their former chief last week, forcing him to give up an honorary post, the party's leadership held back from a complete split on Monday by refraining from pressing their own legal case against Kohl to force him to name names. He remains popular with many activists and some leaders fear a split. One official from formerly communist East Germany, where disillusion with Kohl is acute, announced plans for a breakaway party, accusing his colleagues of "organised crime." Schaeuble said the party would pursue legal action against Horst Weyrauch, who played a key role behind the scenes in managing funds with which Kohl, 69, maintained an authoritarian grip. The hope is Weyrauch may reveal more than Kohl. The report by auditors Ernst & Young was part of efforts by Schaeuble to own up to lapses during Kohl's 16 years in power and so begin to stem a slump in support that the CDU chief said threatened the party's "very existence." But aside from confirming the extent of dubious donations, party officials admitted it left more answers than questions. It found that, as Kohl has confessed, some $1 million in donations were unexplained between 1993 and 1998, when Kohl was defeated by Social Democrat Chancellor Gerhard Schroeder. A further $5 million came in from mysterious sources before then, in line with figures already given by party officials. The report did not take account of $7 million unearthed in foreign bank accounts by the Hesse state branch of the party. ELF PAID "COMMISSIONS" French judicial authorities have said Elf, then a state-owned concern, paid $37 million in commissions to a middleman to buy the vast Leuna refinery in eastern Germany in 1992. The middleman has said Mitterrand and Kohl knew of the payments. Kohl has flatly denied ever taking bribes. State-owned ARD television at the weekend quoted an unnamed aide to Mitterrand as saying the Socialist president, who was concerned to maintain German support for European monetary union at the time, had prompted Elf to boost Kohl's 1994 campaign. Kohl's spokesman said it was "character assassination." Schaeuble separately told a news conference: "There is not a scrap of evidence for this." But CDU General Secretary Angela Merkel added pointedly in a remark clearly aimed at Kohl: "So long as the source (of the funds) is unclear, speculation will continue." The Social Democrat chairman of the German parliamentary inquiry into Kohl's slush funds said he found it far fetched and had no evidence but said his panel would look into it. "We will expand the focus of the inquiry," Volker Neumann told Reuters. "We must investigate this." In another twist to the Leuna affair, Schroeder, whose aides have searched in vain for missing files relating to the sale since taking over the chancellor's office from Kohl, said he would appoint an independent investigator to find them. "We will get to the bottom of this," Schroeder said. _____________________________________ Liechtenstein bank accounts in Elf affair unblocked VADUZ, Jan 21 (Reuters) - A Liechtenstein judge said on Friday that bank accounts believed to be tied to a bribery scandal involving French oil firm Elf Aquitaine (ELFP.PA) were frozen by a court last year, but the order had now been lifted. His comments contradicted some media reports that the tiny principality has currently frozen a number of bank accounts believed to be linked to German investigations into whether Elf paid bribes to Helmut Kohl's then-ruling Christian Democrats (CDU). French authorities are also investigating possible illegal payments connected with Elf's purchase of the former state-owned east German oil refinery Leuna, in 1992. Speaking to Reuters, Benedikt Marxer, head judge of Liechtenstein's lower court (Landgericht), confirmed that the accounts were once blocked, but had since been freed again on order of the principality's highest court, the Oberlandgericht. French authorities and Swiss legal authorities in the canton of Geneva had submitted five requests for legal assistance to Liechtenstein. ``It is correct that the justice authorities in Paris and in Geneva requested that the accounts be frozen. It is also correct that the Landgericht ordered various accounts to be frozen. It is also correct that the Obergericht, on grounds of complaints submitted by the parties involved, lifted the order again,'' Marxer said. He said it was ``entirely possible'' that the accounts could be frozen again, although he did not know when. The legal process took place already last year, he said. He added the complaints were admitted by the Obergericht for formal, legalistic reasons. He declined to say who the account holders were, given that the case was pending. In view of the high court's decision, he said it was possible that the account holders could dispose of the funds in their accounts, providing money was there. ________________________ German CDU aide kills himself, probe opened By Mark Heinrich BERLIN, Jan 20 (Reuters) - A senior finance official in Germany's Christian Democratic Union committed suicide on Thursday in the heat of a slush fund scandal battering the party of former chancellor Helmut Kohl. CDU officials said the death appeared to have nothing to do with the affair but a well-informed newspaper quoted prosecutors as saying a fraud inquiry had been launched. "We're investigating based on a preliminary suspicion of breach of trust. This is based on passages in Huellen's suicide note," the unidentified prosecutor told the Bild daily. Police said Wolfgang Huellen, 49, the head of the CDU parliamentary faction's budget unit since 1984 but not a member of parliament himself, hanged himself in his Berlin home. "According to the information we have so far, the motives for the suicide were of a personal nature," CDU chief whip Joachim Hoerster told reporters. Nevertheless, the timing was chilling enough for parliamentary proceedings to be suspended to allow the CDU faction to hold an emergency meeting. Some of the money under investigation passed through the CDU's parliamentary faction. Kohl's admission to receiving $1 million in secret gifts for the party, his refusal to name the donors and the discovery of at least $4 million more in murky cash has stunned Germany and mauled Kohl's reputation as the father of German unification. The party which Kohl ran for 25 years, 16 of them as chancellor, has sunk to a historic low in polls. CDU officials are asking how Kohl can put donor confidentiality above the law. APOLOGY TO PARLIAMENT Kohl is under criminal investigation for suspected breach of trust, an offence carrying a maximum five years in prison. Current CDU leader Wolfgang Schaeuble apologised to parliament for what looked to be systematic violations of party financing laws and pledged to clear the air to head off a dangerous erosion of trust in Germany's post-war democracy. An 11-member parliamentary committee of inquiry met for the first time on Thursday and announced it would question at least 26 people, starting with Kohl and including a "Who's Who" of prominent politicians who served under him. The panel will ask whether any of the funds that have come to light, plus possibly much more surfacing in secret Swiss accounts held by the CDU branch in Hesse state, amounted to bribes for government largesse. Some of the money was accumulated in 1991-92, when Germany made a controversial sale of tanks to Saudi Arabia and sold the Leuna refinery to French energy giant Elf Aquitaine <ELFP.PA>. The Leuna deal figures in French and Swiss inquiries into suspect commission payments worth tens of millions of dollars. GENSCHER ON WITNESS LIST The witnesses being summoned by the parliamentary inquiry, chaired by the SPD, include former foreign ministers Hans Dietrich Genscher and Klaus Kinkel, ex-finance minister Theo Waigel, ex-defence minister Volker Ruehe and Schaeuble, who was interior and chancellery minister. Genscher and Kinkel are Free Democrats who were in coalition governments with the SPD and CDU from 1969 to 1998. Current and former CDU treasurers and the party's former tax adviser will be summoned as well, committee chief Volker Neumann said: "Everyone in the CDU who has been responsible for breaches of the law on party financing should be given a hearing." The committee will also try to question Karlheinz Schreiber, a German arms dealer who lobbied for the Saudi Arabia deal and is now fighting extradition from Canada on suspicion of bribery and tax evasion, as well as former Elf Aquitaine executives. A timetable for committee sessions was not given. The CDU, wary of coming elections, wants swift hearings. The SPD says they are likely to drag on -- possibly for up to two years. SPD parliamentary leader Peter Struck accused the CDU of money-laundering and behaving like a criminal gang in power. Kohl, now dubbed "Don Kohleone" by German media drawing comparisons with the Italian mafia, apparently used the slush funds to reinforce his grip on the party. He denies ever selling government favours. ____________________________- FACTBOX-Key elements in German political scandal BERLIN, Jan 20 (Reuters) - The financial scandal engulfing Germany's Christian Democrats is based on their admissions of a systematic failure to declare political donations as required by a law former CDU chancellor Helmut Kohl himself introduced. The parliamentary inquiry that got under way on Thursday potentially takes the affair into a new realm by seeking to establish whether the practice led to actual corruption within Kohl's governments, for which there has so far been no proof. Here is a resume of the key elements of the scandal so far: THE UNDECLARED MILLIONS: CDU officials receive one million marks ($520,000) cash donation from arms dealer Karlheinz Schreiber in a car park in Switzerland in 1991. The donation, from a German defence firm which has gained government approval to export 36 armoured cars to Saudi Arabia, does not appear in official CDU accounts. According to his own statements, Kohl takes $1 million in anonymous donations between 1993 and 1998 and places them in secret accounts for party use. CDU officials say they have unearthed further funds worth $4 million pre-dating 1993. Wolfgang Schaeuble, Kohl's successor as CDU chief, admits to receiving a 100,000 mark cash donation in 1994 from Schreiber that went undeclared. Schaeuble also reveals a transfer of one million marks from the parliamentary group he chaired in 1997 to party headquarters, another possible breach of funding laws. Local CDU leaders in Hesse state admit regular large "donations" received from abroad are not, as earlier explained, legacies from grateful Jewish Holocaust suvivors but stem from other mysterious assets. Secret accounts set up in Switzerland and Liechtenstein in the early 1990s with some eight million marks from party accounts in Germany. Former Hesse CDU leader quits parliament. Successor says more money may be involved. ALLEGATIONS OF CORRUPTION: Parliament will now probe allegations that the undeclared donations were linked to bribes to the Kohl government. It will take the following separate developments into account: French officials discover in 1997 that former state-owned oil firm Elf Aquitaine ELFP.PA paid $39 million in commissions to middle-man Andre Guelfi in connection with its 1992 purchase of east German refinery Leuna and the Minol gas station chain. Guelfi says both Kohl and late French President Francois Mitterrand knew of the payments. Kohl denies all wrongdoing. His former chief-of-staff Friedrich Bohl denies taking Elf bribes. Former Elf executive Alain Guillon is detained in January by French officials investigating possible payments over Leuna. German public prosecutors says they were denied access to files in Kohl's private office in 1997 while investigating background to Schreiber's 1991 donation. It further emerges that chancellery files on the sale of Leuna have disappeared. Swiss prosecutor conducting money-laundering probe over sale of Leuna says it requested help in its investigation from German authorities in December 1999. Prosecutor declines, however, to comment on possible links to party funding scandal. Schreiber says his 100,000-mark donation to Schaeuble in 1994 was intended to smooth the way for the sale of armoured cars by German firm Thyssen to the Canadian army. Thyssen confirms a business relationship with Schreiber but denies it was involved in bribery. The sale did not take place. German parliamentarian says also questioning Schreiber's efforts to sell Airbus airliners and German combat helicopters to Canada in the 1990s. THE OTHER PARTIES: While overshadowed by the CDU's woes, doubts have surfaced about the funding arrangements of other German parties: Chancellor Gerhard Schroeder's successor as state premier of Lower Saxony, Gerhard Glogowski, resigns in November 1999 after being accused of accepting favours from local companies. SPD officials in North Rhine-Westphalia state, including now federal President Johannes Rau, face allegations that they wrongly accepted free air flights from regional bank WestLB. The Christian Social Union, the CDU's Bavarian sister party, says in January it will stop its practice of taking donations from firms part-owned by Bavaria state government. The CSU confirms a former deputy defence minister and CSU parliamentarian declared a campaign donation from Schreiber. Schroeder's coalition partners the Greens say the party will end its policy of taking donations from its parliamentary deputies, accepting it does not conform to party funding laws.
