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NY Times, Feb. 27 2015
In Greece, Bailout May Hinge on Pursuing Tycoons
By LIZ ALDERMAN
ATHENS — As he sifted recently through a sheaf of Greek bank accounts
held by executives, politicians and other members of the Greek elite,
Panagiotis Nikoloudis, the nation’s new anti-corruption czar, was struck
by some troubling numbers.
A man who was claiming unemployment benefits and declared zero income on
his taxes had more than 300,000 euros, or $336,000, stashed away at his
bank. Another, who told the tax authorities that his annual income was
just €15,000, turned out to have €1.5 million in various bank accounts.
Mr. Nikoloudis estimated that the men had bilked Greece’s Treasury of
thousands of euros in tax revenue, even as other Greeks struggled under
the government’s austerity budgets and embattled economy.
“I have nothing against rich people,” said Mr. Nikoloudis, a financial
crimes specialist, leaning into a table one recent afternoon in his
office in western Athens. “I’m against dishonest rich people. And I’m
here to get them.”
For years, Greece has been trying to attack corruption and tax evasion,
from the smallest taverna owner to the nation’s most powerful oligarchs.
Now, Prime Minister Alexis Tsipras is vowing to take far more action
than previous administrations in cracking down. He says his government,
led by his leftist party, Syriza, will succeed because having never held
power, it is not beholden to the entrenched interests that have long
fought to maintain the status quo.
But even Mr. Nikoloudis acknowledges that fixing Greece’s finances will
not be easy. Which throws into question how readily, or at least how
quickly, the government can fulfill its promise to its European creditors.
This week, in exchange for keeping Greece’s €240 billion financial
lifeline in place for at least four more months, Athens outlined a
two-pronged approach to battling corruption. The first involves going
after wealthy tax evaders.
The second promises a more herculean effort: reshaping a system in which
Greek tycoons dominate much of the economy and engage in sometimes murky
business practices — including, Mr. Tsipras asserts, tax evasion — that
analysts say deprive state coffers of billions in revenue.
Tax collection is the starting point for what will eventually become a
broader effort to make Greece a place where the rule of law, and the
civic duty to pay taxes, might finally take deeper root. Mr. Nikoloudis,
65, is the point man on that cleanup campaign.
As a former prosecutor for Greece’s Supreme Court, Mr. Nikoloudis has
spent decades pursuing cases on money laundering, oil smuggling and
corrupt contracts. Soon, he plans to set his sights on Greece’s oligarchs.
For now, though, he is focused on tax evasion more broadly, at a time
when the estimated total of unpaid taxes in Greece has soared to €76
billion. Only a small fraction of that is considered recoverable.
Mr. Nikoloudis said he had in hand 3,500 audits amounting to €7 billion
in back taxes, €2.5 billion of which he hopes will be collected by
summer. An additional 22,000 cases, worth several billion euros, will
soon be ready for pursuit, he said.
Frustratingly out of reach, he said, is considerable untaxable Greek
wealth outside the country. That includes more than 2,000 Swiss bank
accounts held by Greeks named on a list that Christine Lagarde, now the
head of the International Monetary Fund, sent to Greece in 2010 when she
was France’s finance minister. In all, an estimated €120 billion in
Greek assets are held outside of the country, mainly in investment
accounts that Mr. Nikoloudis said Greece cannot get its hands on.
But as Greece redoubles its tax efforts at home, the ineffectiveness of
the country's tax collection and justice systems could impede progress.
Harry Theoharis, who was appointed Greece’s top tax collector by the
previous government in 2013, recalled a case in which his office
assessed a €5 million fine on a wealthy Greek citizen who had evaded
taxes. The person took the case to court, where Mr. Theoharis said it
died after prosecutors did not show up for trial.
“The person was powerful enough to reverse it,” Mr. Theoharis said in an
interview. He resigned last year under what he hinted was political
pressure, after he pursued wealthy Greeks aggressively. He is now a
member of Parliament from To Potami, an opposition party.
Such influence-brokering is even more pervasive among Greece’s major
tycoons, whom Mr. Tsipras accuses of costing the government billions in
lost income over the years. Mr. Tsipras has vowed to “to clash with the
oligarchy that is evading taxes,” not only by stepping up the level of
tax scrutiny, but also by targeting what he says are corrupt business
practices among a number of the several dozen powerful families that
control critical sectors, including banking, shipping, oil and construction.
Although they are among the nation’s largest employers, Greek oligarchs
have historically presided over an opaque, closed economy and operated
with virtual impunity, thanks to intimate ties with politicians and
Greek banks. They are accused of helping their companies win state
contracts through uncompetitive tenders, taking ownership in Greek
television stations without paying for licenses, and thwarting
competition in various industries. The government claims that some have
also engaged in illicit activity like fuel and tobacco smuggling, at a
cost to the Greek Treasury.
Mr. Nikoloudis recalled a case he helped prosecute several years ago
against Lavrentis Lavrentiadis, a magnate under investigation for fraud
and tax evasion. Mr. Lavrentiadis was accused of embezzling money from a
bank he controlled in the mid 2000s in order to finance shell companies.
But he was able to avoid prosecution temporarily by simply paying the
money back, thanks to a law quietly passed while he was in trouble.
“I had to cry when I saw this case,” Mr. Nikoloudis said. “It was a can
of worms that involved crony loans and businesses with vast reach.”
Mr. Lavrentiadis, he said, was hardly the only Greek tycoon to be
involved in such schemes. “It shows that there is a very tight caste of
people with tentacles across the spectrum of the Greek economy,” he said.
Mr. Lavrentiadis was eventually arrested and jailed in 2012 after a new
law effectively voided his immunity. A trial is scheduled to begin in March.
One of the sectors Mr. Nikoloudis says the government wants to target
for corruption is energy, where a handful of firms hold sway. Fuel
smuggling has been rampant in the sector for years, costing an estimated
€3 billion annually in lost tax revenue.
Dimitris Mardas, Greece’s new deputy finance minister, said the
smuggling often involved the fictitious export of fuels through vast
illegal networks that enabled the companies to evade taxes in Greece.
Dismantling those networks could prove daunting.
Last year, the police broke up a fuel-smuggling ring of 15 people that
the authorities alleged was run by George Spanos, the president of
Eteka, a midsize Greek fuel company. The authorities said the Greek
state lost €3.5 million in taxes and duties when members of the ring
stole fuel for export with Eteka’s participation and resold it in the
Greek market.
Mr. Spanos denied the charges and was set free on €300,000 bail in April
pending trial.
But more influential oligarchs may be more difficult to confront, and so
far, the government has not disclosed the names of any it plans to
pursue. It is unclear whether cases have even been put together. For
now, the objective appears to be to undermine the ease with which they
have been able to function, for example by casting greater scrutiny on
privatizations and state contracts, or requiring the tycoons that hold
Greek television station permits to start paying for airwave licenses,
which the government thinks could eventually generate at least €500
million over all for the Treasury.
In the meantime, Mr. Nikoloudis is forging ahead to generate whatever
revenue he can quickly from the tax evaders he has identified.
Saying he was “not a miracle worker,” he acknowledged it would be wise
to remain realistic, but he offered a glimmer of optimism.
“If people see that I’m clean and the prime minister is clean, and that
those who are not clean will eventually go to jail, I like to hope it
will inspire a change in Greek society,” he said. “Our priority is to
collect more.”
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